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  • Writer's pictureRoy Urrico

Continued Credit Growth Wave Highlights Summer Payment Reports from PSCU and Co-op Solutions

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. Highlighted here are two summer 2022 payment reports.


Highlighted here are two summer payment reports.


PSCU

Source: PSCU Payments Index


St. Petersburg, Fla.-based payments CUSO PSCU in its August edition of the PSCU Payments Index reported purchasing activity remains resilient, with credit card volume growth continuing to outpace growth in debit cards. In its Deep Dive section, the analysis looked at results from the Amazon Prime Day and related big-box store sales in July.


The Payments Index reported the Consumer Confidence Index decreased in July to 95.7 (1985=100), and dropped for the third consecutive month. Recent interest rate increases will have a slowing effect on purchase intentions for large-ticket items (e.g., homes, cars, major appliances, etc.). The average national gasoline price dropped to $3.94 per gallon on Aug. 15, down $1.06 per gallon or 21% from the peak in June 2022. Current per gallon prices are up 24% or $0.76 from a year ago.

Yvonne Stelpflug, Advisors Plus at PSCU

“Consumer spending remained resilient in July 2022, with credit continuing to drive the largest growth. While inflation softened slightly this month, growth in purchases continued to outpace growth in transactions,” said Yvonne Stelpflug, senior vice president, Advisors Plus at PSCU. “As we look at Amazon Prime Day in this month’s Deep Dive, year-over-year purchase growth yielded modest increases compared to Prime Day dates in June 2021, but drove significant double-digit growth against comparable July 2021 dates. Amazon is rumored to be launching a second Prime event in October, which would align nicely with the kickoff of the holiday shopping season.”


Some key takeaways from the report includes:


· Consumer spending on cards remained resilient, with growth on credit cards outpacing growth on debit cards. Credit purchases were up 13% and debit purchases were up 4% year over year. Current inflationary pressures continue to help growth in purchases outpace growth in transactions. For July, growth in overall credit transactions were up 10% and debit transactions were up 1%.

· The Consumer Price Index for All Urban Consumers (CPI-U) decreased on an annual basis to 8.5% in July, influenced by lower prices in gasoline and higher prices in food and shelter. The Federal Reserve will not meet again until Sept. 20-21, following the next CPI-U update on Sept. 13. “While another large interest rate increase is possible, the encouraging news from the lower CPI could warrant a less aggressive increase next month,” observed the PSCU report.

· When compared to last year’s Amazon Prime Day sale (June 21-22, 2021), this year’s event (July 12-13, 2022) showed modest growth in overall purchases, with credit and debit both up 4%. “However, the event still moved the needle – when comparing this year’s Prime Day sale event to the same dates in July 2021, credit purchases were up 55% and debit purchases were up 68%,” the report noted.

· The credit card delinquency rate for July was 1.61%, 18 basis points lower than pre-pandemic July 2019 levels. The average credit card balance for July 2022 was $2,769, up 4.7% (or $123) year over year. July marked the fifth consecutive month in which year-over-year growth was over 2%.


PSCU’s report also revealed Target held its rival three-day 2022 Deal Days on July 11-13, starting one day earlier than Amazon, as in previous years. Overall growth in credit purchases was up 7% and debit purchases were down 0.2% for Target. Walmart, which has typically held a four-day event starting one day earlier than Prime Day and ending one day later, chose not to hold its Deals for Days (formerly known as “Big Save”) event in 2022. Instead, Walmart held its inaugural Walmart+ Weekend, a subscriber-only savings event, on June 2-5, 2022. “Of the three large retailers, Walmart (excluding gasoline sales) posted the overall largest increase in purchases for both credit (up 15%) and debit (up 5%),” PSCU reported.


Co-op Solutions

Source: July Payment Trends Report from Co-op Solutions.

The July Payment Trends Report, from Rancho Cucamonga, Calif.-based Co-op Solutions, which provides a financial technology ecosystem for credit unions, disclosed July credit union card portfolios took advantage of credit’s growth year-over-year at a 42.8% increase in purchase counts, while debit remained flat year-over-year at a mere 1.6% increase.


Co-op held credit’s growth highlighted the shifting of consumers’ spending in most categories, with computers, gas, grocery, retail, primarily discount stores, medical and travel, showing modest to significant increases.


Month-over-month results from June 2022 to July 2022 across most categories in both credit and debit showed very little change. However, some exceptions included strong growth in campers and camping, gambling and entertainment, and sports and recreation, with declines in education, home improvement, auto rental, airline, medical and political giving.



Co-op Solutions Senior Payments Advisor John Patton

Co-op suggested as interest rates rise, it is a great time for credit unions to dust off their balance transfer campaigns. “Members are starting to feel the effects of rising rates on their wallets, so reward cardholders and entice non-cardholders to open a card with a low-rate balance transfer offer,” said Co-op Solutions Senior Payments Advisor John Patton. He added, in addition to a compelling offer, credit unions should remind members they offer competitive rates, low fees and exceptional service. “A well-timed balance transfer campaign will help to grow a credit union’s portfolio balances and burnish their primary financial relationships.”


In addition, as spending picks up going into the fall back to school season, Patton noted rewards become increasingly important. “Make sure to offer a compelling loyalty rewards program to compete with the leading programs on the market and to keep cards top of wallet.”


Below are key spending trends Co-op’s SmartGrowth team is watching in August 2022:


· Staycations are here to stay.

According to Co-op’s month-over-month credit union portfolio data for July, overall travel spending was up modestly at just over 3% in debit and credit. But a deeper data look shows that airline and auto rental spend were down for the month. Meanwhile, the camping and campers category, according to Co-op’s trending analysis, showed strong double-digit increases in both debit and credit for the month, the largest among any major classification code. Spending at golf courses was also up by around 9% for the month. These trends indicate that in light of rising inflation, consumers continue to stay close to home, forgoing longer vacations to cross-country and international destinations.


“More people are headed to the golf course and campsite due to the pandemic-induced changes in habits over the past three years,” said Patton. “These experiences represent freedom, but with a dose of budget consciousness. We see spending in travel categories like airline and lodging up significantly year over-year, but the staycation habits developed over the past few years remain strong."


· Furniture spending jumps up as supply worries ease.

“Although supply chain issues have been a constant source of frustration for consumers and retailers alike over the past year, they are finally beginning to ease, as July saw a marked shift in spending in the furniture category,” the report determined. Following double-digit declines in June, spending grew by nearly 8% in both debit and credit in July, in a possible nod to back-to-school spending as retailers tightened their focus on capturing these transactions. Another category to come out ahead with back-to-school mindsets taking hold were computers with a modest increase in July from the prior month, after several months of depressed spending. Discount stores also saw a modest uptick in spend in July, as rising costs and fears of recession are driving more consumers to these less-expensive outlets.


· Home improvement off from spring.

The home improvement category showed a gradual month-over-month increase over the previous quarter. However, since June 2022, spending in this category started to decline. Co-op indicated consumers typically do most of their renovation projects in the winter and spring.


“Home improvement has a seasonality to it,” said Patton. “As kids are getting ready to go back to school, their parents are reprioritizing their budgets from home improvement over to books, supplies and other necessities.”

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