By Roy Urrico
Finopotamus aims to highlight white papers, surveys and reports that provide a glimpse as to what is taking place and/or impacting credit unions and other organizations in the financial services industry.
Summarized here are August 2023 payments reports from Co-op Solutions and PSCU. Both reports reflect and acknowledged steady job growth statistics from the Labor Department in July, as employers added 187,000 jobs, and unemployment declined to 3.5%. The health care, social assistance, wholesale trade and financial sectors were the top job gainers for the month.
Both reports also touch on the Bureau of Labor statistics regarding inflation, which ticked up slightly in July, to 3.2% over the prior year, with core Consumer Price Index (CPI) up by 4.7% over July 2022.
Here is a further breakdown of respective report findings:
Co-op Solutions Payments Trends Report
In its latest spending Payments Trends Report, which covers spending data from July 1 to July 31, 2023, Rancho Cucamonga, Calif.-based Co-op Solutions found summer spending peaking, with a slight increase in spending on consumer credit but debit volume lower when compared to a year ago.
Co-op Solutions’ SmartGrowth consultants unit, which contributed to the Trends Report, focused on some key spending trends:
· Online discount days. Among the biggest headlines in July was Amazon’s record-breaking Prime Day, which saw shoppers worldwide purchase over 375 million items on the first day of the sale, a notable jump from 2022’s 300 million items sold. According to Adobe Analytics, the event held July 12 and 13 drove U.S. online sales up by 6.1% for the 48-hour period. Not to be outdone, Amazon’s biggest retail competitor scheduled its “Walmart Plus Week” to coincide with Prime Day. Target and Best Buy held their own July sales events, as well.
· ‘Barbenheimer’ and Taylor Swift tantalize. Movie blockbusters flexed their power with “Barbie” and “Oppenheimer,” which opened simultaneously on July 21, earning $351 million and $174 million respectively during July in North America. (Both films continued to show earning power with “Barbie” earning $594.8 million and Oppenheimer $300.02 million through Aug. 25).
The Co-op report also noted consumers returned to live concerts and events this season, as highlighted by the success of Taylor Swift’s Eras concert tour. “American households have returned in force to live and in-person events this summer,” said John Patton, Co-op Senior Payments Advisor. “This is a positive sign that the consumer is feeling optimistic about the economy and their own personal financial position as we move into the fall.” Per Co-op’s credit union data, transaction volume within the Movie Theaters merchant category was up 16.5% in credit, and 7.1% in debit year over year in July. Overall, the Dining & Entertainment category was up 5.7% in credit and down -2.8% in debit for the period.
· Migration from debit to credit intensifies. Co-op pointed out the year-long trend of consumers’ spending preferences shifting from debit to credit continued in July. Credit transaction volume rose 3.4% month over month versus June, while debit volumes declined by -3.4%. “If you look at debit and credit transaction volumes overall, credit spending is on an upward trajectory while debit is headed down or basically flat,” said Beth Phillips, director, Co-op Solutions. “Consumers’ spending habits are shifting from debit and toward credit, with the shift from debit to credit highlighted most when it comes to recurring monthly expenses such as utilities and subscriptions.”
Overall, credit union spending data shows that June year-over-year transaction volume rose by 4.6% in credit while falling by -4.5% in debit, the report noted. “Some of the categories like Auto, Movies, Sports, Grocery suggest that consumers are lightly transitioning to credit due to the cash in hand is depleting finally,” said Patton. “It's not a big move but the data confirms more consumers are transitioning to credit from debit.”
Co-op Solutions’ report recommended credit unions should make sure to activate their loyalty rewards program and incent members to use cards within the most popular shopping categories this autumn, such as retail, education and business travel. Credit unions should also provide members with a full portfolio of convenient digital payment options.
PSCU Payments Index
In the August edition of the PSCU Payments Index, the St. Petersburg, Fla.-based payments credit union service organization (CUSO) revealed consumers continued to show resiliency in July, highlighted by steady purchase volumes and another successful Amazon Prime Day event.
In its monthly “Deep Dive” section, the PSCU Payments Index also highlighted the annual Amazon Prime Day sales event, along with competing events from Target and Walmart.
“Consumers continued to show resiliency in July, highlighted by steady purchase volumes and another successful Amazon Prime Day event. The success of the annual Prime Day event underscores the central role that Amazon plays in the lives of consumers and, given the growth we saw in this month’s performance, our credit unions have also been successful in having their cards in the wallets of their members,” said Tom Bennett, manager, Advisors Plus Consulting at PSCU. “We’ll closely monitor the upcoming Amazon Prime Big Deal Days event in October, which has helped essentially add another
month to the traditional holiday spending period over the past few years, especially against the backdrop of the inflationary environment.”
A sampling of key takeaways from the August PSCU Payment Index includes:
· Purchase growth from Amazon Prime Day was up 9% for credit and 3% for debit for the period (July 12-13) when the sale occurred. Walmart and Target each held competing sales during the same week in 2023 with differing results. Walmart posted growth in credit purchases of 4.5% and 7.4% in debit purchases, while purchase growth at Target was down 9.3% for credit and 5.1% for debit. Amazon also announced a “Prime Big Deal Days” sale for October 2023.
· Consumers remained resilient in July, with strong overall purchase volumes. Year-over-year growth in credit purchases was up 2.1%, while debit purchases grew 3.2%. Transaction growth continued to be stronger than growth in purchases, with credit and debit each up 4.7% in July. For credit and debit purchases, the largest contributor to growth in July was restaurants.
· The credit card delinquency rate increased again in July and finished at 2.08%, above the July 2019 pre-pandemic level by 29 basis points. Total credit card balances were up 12.6% for July compared to a year ago, while the average credit card balance for active accounts was $2,996, up 8.2% (or $227) year over year. Notably, Americans’ credit card debt levels surpassed $1 trillion for the first time in history, according to data released by the Federal Reserve Bank of New York.