Navigating payment trends: How credit unions can earn top-of-wallet status

The payments industry has experienced significant transformation in recent years, driven by changing consumer preferences and economic factors like inflation, labor market shifts, and potential regulatory changes. But which preferences are taking center stage, and what trends are emerging? More importantly, how can credit unions continue to meet member expectations?

Data-driven insights

Velera’s 2024 Eye on Payments study, which surveyed a diverse sample of 1,850 credit union members and other financial institution (FI) customers (“non-members”) across the United States, uncovered valuable insights into the factors that shape consumer payments preferences. Now in its seventh year, this research reveals how different generations, the state of the economy and other factors influence payments behaviors.

Credit outranks debit as preferred payment method

The 2024 survey revealed a notable shift, with 37% of consumers now preferring credit as their top payment method—up from previous years. Additionally, 31% of consumers applied for a new credit card within the last 12 months, compared to 25% in 2023. This trend is even more pronounced among credit union members, 40% of whom sought a new credit card in 2024.

Younger generations are leading this overall shift, with Gen Z, younger millennials and older millennials all reporting they prefer credit, while debit reigns supreme among those ages 44 and above in the Gen X and Boomers+ generations. In fact, although there was a shift in overall preference, debit remains a close second with 35% of consumers reporting it as their preferred payment option.

Even as plastic payments dominate, cash has held its place: Sixteen percent (16%) of consumers say cash is their first pick, and it is the go-to method of choice for most people at coffee shops and when paying for services or small purchases under $10. More than one-quarter of credit union members (26%) use an ATM at least a few times a week, and most report cash withdrawals as the reason (70%).

Card characteristics and capabilities matter

With credit and debit cards being the top payment choices, the design and features of these cards have become increasingly important. More than half of credit union members (55%) say that card design—ranging from type of card material (like metal) to whether it is produced sustainably, among other attributes—influences which card they choose to use, up from 39% in 2023. This is especially true for younger consumers: 82% of Gen Z and 83% of younger millennials now agree card design impacts their selection, up from 63% and 70% last year.

In addition, 79% of credit union members report they now a have contactless card, up from 58% in 2021. When asked how they prefer to conduct a transaction at the point-of-sale with a card, the majority of credit union members (68%) would like to tap-and-go using a contactless card, mobile wallet or wearable. This is up from 52% in 2023. Those that would prefer to insert their EMV chip into a point-of-sale device declined from 38% in 2023 to just 26% in 2024.

Safety and security make a difference

Security has reemerged as a top concern, with 83% of credit union members reporting they are worried about identity theft—which is understandable given fraud has been on the rise since 2021. This year, 10% of credit union members experienced identity theft, and 14% were victims of card fraud, up from 4% and 8% in 2021, respectively. Most card fraud incidents (75%) occurred online. Coincidentally, credit union members are also reporting an uptick in using credit cards to make online purchases, as well as payments for their monthly subscription services. Although debit cards remain the second preferred option, mobile wallet comes in as the third most popular pick this year for online purchases, with usage growing from 3% in 2020 to 11% in 2024. This could be due in part to the additional layers of security that credit cards inherently hold and that tokenization provides to mobile wallets. In fact, eight in 10 (82%) credit union members report they make a decision about how to pay for something based on which is the most secure, up from 73% in 2023.

Applying insights for future planning

With credit now the preferred payment method, credit unions must focus on developing and customizing card products. Offering tailored rewards, digital issuance and mobile wallet integration is essential, especially for younger, tech-savvy members. Credit unions must also strengthen fraud prevention tools and educate members on detection to ensure security and peace of mind. To that end, it is clear that tried-and-true credit union payments offerings—including credit and debit cards, along with access to cash—will continue to be the options that members turn to most frequently. To maintain growth and achieve success, credit unions should strive to have their members using credit union-issued payments methods in every scenario. Dominating the overall payments game is critical for credit unions to achieve or maintain top-of-wallet status, as members do not need to look any further for the payments they prefer, want or need. Gaining top-of-wallet status will be critical for credit unions to remain competitive and meet member needs in the ever-evolving payments landscape.