COVID-19 Impact: A Look at Member Transactions in April and May

Consumer experiences and attitudes around the U.S. about COVID-19 were mixed this spring as the pandemic stretched into its second full month.

Some parts of the country focused on reopening their economies in later weeks, while harder-hit metros maintained stronger restrictions. Though unemployment remained high and many still face serious economic hardship, a survey by management consulting firm McKinsey showed signs that discretionary spending is starting to rebound in some areas.

CU Rise Analytics aggregated data from credit union clients serving approximately 1 million members across the U.S. The following transactional spending patterns were observed in April and May.

New Accounts

The mixed bag of the pandemic’s impact was evident in the varied behaviors across new accounts. Uncertainty and hardship have led some to reduce spending, while others are capitalizing on opportunities around low interest rates.

• Newly originated auto loans slowed down during month of April but gained momentum in month of May, with an 11% increase as compared to March. This may be due to competitive financing offers and incentives from auto dealerships.
• After growing 15% in March, new credit card accounts were down in April and May from 2019, -25% and -16% respectively.
• New mortgages were up in both April and May, rising 63% in April over 2019, and 38% in May.
• Personal lines of credit went down in May, a 33% decrease from 2019.
• HELOCs were also down in May, decreasing 28% from 2019.

Unemployment

Between April and May, national unemployment declined a little from 14.7% to 13.3%. But with many sectors of the economy depressed, it was no surprise that member unemployment data spiked across all metrics.

• The number of members receiving unemployment benefits grew six-fold from March to May.
• Total unemployment benefit dollars were 17 times higher in May compared to March.
• The average unemployment benefit per member was three times higher in May than March.

U.S. Treasury Payments

The IRS began distributing much-anticipated stimulus payments to qualifying citizens on April 13. Additionally, those that filed their taxes by the traditional April 15 deadline and were eligible received tax refunds. In the data analysis, all payments from the U.S. Treasury (stimulus payments + tax refunds) are combined.

• Around 25% of members received a direct deposit payment from the U.S. Treasury during the month of April, with an additional 8% receiving direct deposit payment in May. Note that the total number of deposits is likely higher, as these numbers do not reflect stimulus payments received by debit card or check.
• The average payment was $1,700 per member in April, and $1670 in May.

Deposits

Credit unions saw deposits increase in both April and May, due in part to the influx of unemployment and stimulus payments hitting members’ accounts.

• Average deposit size rose 13% month-over-month in April and another 10% in May.
• Total deposits grew by 11% month-over-month in April and 10% in May.

Recommendations

Here are five key recommendations for credit unions based on our latest data analysis:

1. Members who received stimulus payments may be receptive to offers to save deposits in interest-bearing investments like long-term certificates. By the end of May, savings rates hit a record-high 33% as Americans stashed cash in the face of uncertainty.
2. Develop a proxy risk segment using triggers such as receiving unemployment funds. This will help credit unions to identify which members may benefit from outreach with resources for assistance while pausing promotional marketing offers. Payment patterns can be tracked to monitor for increases in risk, which may be offset with early interventions.
3. Continue offering a full spectrum of member assistance. Unemployment remains high and so does overall anxiety about the future. Help members care for their financial well-being with skip-a-pay, deferrals, balance consolidation and reduced interest rates during these unique circumstances, and cement strong bonds for the long-term.
4. Even as the economy moves further into reopening, invest more in online acquisition channels. What lies ahead is still very uncertain, and another wave of the coronavirus this fall could reintroduce restrictions. As people continue to adapt to new ways of doing business, be prepared with a robust set of digital tools that maximize the user experience.   
5. Invest in real-time business intelligence reporting to quickly access actionable insights. With a dynamic and evolving set of circumstances facing the country, credit unions will benefit from enhancing their ability to be nimble and responsive. Business intelligence systems help to synthesize complex sets of data in order to quickly identify and strategically act on patterns and trends.

Karan Bhalla is the CEO of CUES Supplier member CU Rise Analytics, Vienna, Virginia, a leading data analytics CUSO. CU Rise’s team of skilled data scientists helps credit unions employ predictive models, business intelligence and custom analytics strategy. Learn more at www.cu-rise.com.