By Roy Urrico
Strategic consultants with Velera's Advisors Plus group shared insights in a blog on how payment portfolios are evolving and what credit unions should expect in the new year.
Among the areas covered by advisors with St. Petersburg, Fla.-based Velera – which describes itself as the nation’s premier payments CUSO – are debit card growth, rewards, digital presence, capturing balances, business accounts, alterative payments, regulatory outlooks and operational efficiency.
Highlights from Velera's Advisors Plus Observations
Checking accounts are driving debit volume growth. “After a period of higher-than-average debit growth driven by stimulus funds during COVID, debit card volumes have settled back into a steady 4-5% growth range, which is what we anticipate continuing in 2025,” said Tom Bennett, manager, payments and deposits consulting. “We see usage per debit account trending flat, so additional checking accounts are the largest driver of volume growth.” Bennett added credit unions that do not focus on this area in 2025 should expect volume growth to be nominally lower or even decline. “Most transaction growth is occurring in lower interchange merchant categories, so anticipate debit interchange rates to decline two to three basis points year over year.”
Debit competition heats up. Kari Anne Arnosk, senior strategic consultant noted Velera has observed a significant increase in competition within the debit card market. “Fintechs and financial institutions excelling in this area are offering ‘checking account’ value propositions that appeal to younger generations, who primarily use debit cards for their payments. Credit unions that have embraced these strategies are experiencing exceptional growth in their debit card and checking account portfolios.” Arnosk noted leading credit unions, with a targeted approach, are achieving annual growth rates of 5-7% in these areas. “If your growth rates are lagging behind the industry average, it's crucial to set ambitious goals and prioritize debit and checking as a core growth strategy for your credit union.”
Competitive rewards will drive portfolio growth. Rewards programs, such as cash back, travel points or personalized incentives, encourage members to consolidate their financial activities, increasing deposits and credit product utilization, suggested Jason Hortiz, senior strategic consultant. “Coupled with an effective sales strategy, a credit union can maximize the impact of these offerings by training staff to highlight card benefits and leveraging data to identify cross-selling opportunities. Credit unions should strengthen their portfolios by offering competitive rewards products that drive member engagement and enhance loyalty.” Hortiz said positioning rewards programs as valuable financial tools will allow credit unions to deepen member relationships, increase transaction volumes and boost fee income.
Digital presence is key to growth. Consumer credit card originations were down, and account attrition was up in 2024 — a trend that will likely continue in early 2025 due to economic uncertainty, held Shannon King, senior strategic consultant. “Slow growth in new accounts will have an impact on volume and balance growth. To combat this, credit unions will need to refine their acquisition strategies by updating products and targeting low credit risk populations, especially those in younger generations. A credit union’s product page should clearly list the product value proposition, as well as provide educational videos about ways to manage credit. Younger generations value long-term relationships with their financial institution and may require specialized account management strategies.”
The opportunity to capture balances awaits. “2024 was a challenging year for credit card volumes, but as the Fed (Federal Reserve) continues to reduce rates in 2025, look for balances and spending to gradually increase on credit cards,” said Chaun Heywood, senior strategic consultant. “As rates decrease, credit unions have an opportunity to capture balances from other credit cards by offering balance transfers at special rates and by offering big-ticket promotions or extra reward points for using their credit union's credit card.” In addition, Heywood suggested 2025 will also be a good time for credit unions to evaluate members’ credit limits to ensure they are within reason and can support additional balances and transactions.
Discover the hidden potential of business accounts. Business credit cards remain an untapped growth opportunity for most credit unions., according to Brad Wylie, senior strategic consultant. “These cards generate higher spending, produce more revenue and rely upon many of the same capabilities required to be successful with consumer cards, including product design, pricing and promotion. Our analysis indicates there is a high probability of some accounts in your consumer portfolio that are being used for business purposes.”
Alternative payments are gaining momentum. Credit unions should observe member usage of alternative payments, including buy now, pay later (BNPL) and pay-by-bank options, said Paige Watkins, senior strategic consultant. BNPL, she noted, has seen incredible growth in the last few years and is expected to continue into 2025 and beyond. Pay by bank, which allows customers to pay for goods and services directly from their banking account, “is in its infancy, but major retailers like Walmart are evaluating the economics, including lower transaction costs,” said Watkins. “To offset the impacts of BNPL and pay by bank, credit unions should constantly communicate the value of their card offerings, including zero liability, rewards and convenience. Additionally, credit unions should optimize card integration into digital banking, leverage the usage of mobile wallets and consider the addition of installment options on their credit card products.”
Regulatory outlook is likely to be a roller coaster. “With changes in the executive branch, the CFPB is expected to shift focus from aggressive policy making to enforcement instead,” suggested Chris Joy, senior strategic consultant. “Interchange rate reductions remain a risk for issuers in the coming years, with potential legislative, regulatory and technological actions likely to put downward pressure on rates. There has been some bipartisan support for lowering interchange rates and temporarily capping credit card interest rates, though details are still unclear. A more favorable regulatory outlook on cryptocurrency and an increase in financial institution mergers and acquisitions are also anticipated.”
Operational efficiency will be crucial. “As we embark into the new year, the banking and credit card sectors face a transformative era marked by evolving consumer expectations, regulatory demands and competitive pressures,” said Katie Kean, manager, payments and deposits consulting. Kean added efficiency is no longer a back-office metric — “it is the cornerstone of leadership and growth and starts with understanding and meeting consumer needs. Digital-first consumers demand faster, frictionless experiences. AI-driven chatbots, real-time credit approvals and predictive financial tools are no longer optional — they are expected.” Kean recommended, “Leaders, must prioritize investments in technology that streamline the member journey while reducing operational overhead. Leadership will mean driving efficiency at every level by fostering a culture of continuous improvement, investing in forward-thinking technology and remaining adaptable in the face of disruption — without sacrificing innovation or member experience.”