By Roy Urrico
PSCU/Co-op Solutions, payments credit union service organization (CUSO) and an integrated financial technology solutions provider, continues to integrate two organizations. The new combined entity announced it is combining two separate monthly payment trends analyses into a single monthly publication to provide credit unions with a consolidated report and an optimal experience. PSCU/Co-op Solutions explained the report now incorporates content from Co-op Solutions’ monthly Payment Trends report into the Payments Index, which will continue to be published monthly.
The April 2024 edition of the Payments Index reports consumer spending, mainly with debit cards over credit cards, remained steady for March 2024 amidst other strong economic indicators that may dampen near-term Fed rate cuts. The Index also took a close look at digital payments in its monthly “Deep Dive” section.
“Consumer spending remained steady in March, in line with other strong economic indicators,” said Jeremiah Lotz, SVP, product experience, PSCU/Co-op Solutions. He added, “In this month’s Deep Dive, we revisit digital payments, where contactless and tokenized credit transactions continue to rise, along with contactless debit transactions.”
Lotz added, “These increases can be attributed to the higher quantity of contactless cards being issued, coupled with greater merchant acceptance, resulting in consumers becoming more accustomed to ‘tapping’ their cards. As we reach the three-year anniversary of the Payments Index, we continue to evolve the report’s data view and analysis to provide relevant insights in the changing financial landscape.”
Economic Overview
The report showed the Consumer Confidence Index was mainly unchanged in March, at 104.7, from a downwardly revised February result (104.8); and the University of Michigan Index of Consumer Sentiment increased 2.5 points to 79.4 for March, which marked a 3.3% month-over-month increase. Both surveys showed positive consumer sentiment about the current economic conditions.
The Index also conveyed job growth remained brisk in March, with 303,000 jobs created – well above the expected 200,000. The U.S. Bureau of Labor Statistics reported the overall unemployment rate for March dropped slightly to 3.8%, or 6.4 million people. Job gains trended up in healthcare, government and construction.
The Index also noted, “With March inflation higher than expected and the strong jobs report, there are now increasing doubts about the potential for an interest rate cut in the June timeframe. This comes after Federal Reserve officials were anticipating slowing inflation this year following their March meeting.”
Key Takeaways
A selection of key takeaways from the April report includes:
· For March, growth rates for debit activity continued to remain stronger than growth in credit activity. Debit purchases were up 6.6%, while credit purchases were down 0.3%. Debit transactions were up 5.8% and credit transactions were up 2.2% year over year.
· The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4% in March, while the 12-month rate of inflation was 3.5%. Shelter and gasoline again contributed to more than half of the increase. Excluding the volatile energy and food sectors, the core CPI index increased 0.4% from February, putting the 12-month Core CPI index at 3.8%.
· As digital payment transactions continue to grow, digital payment purchases represented over half of overall purchases for both credit (54%) and debit (51%) cards. While physical card activity softened, contactless cards “tap and go” activity continued to grow, now representing 19% of all credit card transactions and 14% of all debit card transactions, up from 12% and 9%, respectively, in 2023.
· Apple Pay is maintaining its market share dominance in the digital wallet space, representing 93% of digital wallet debit transactions and 89% of digital wallet credit transactions.
· Balance transfer usage was down during what is traditionally the seasonal peak month of March. The growth in the number of balance transfers was down 41% year over year, impacted by factors including rising credit card delinquency rates, liquidity concerns and higher interest rates. The average balance transfer amount rose 6%, or $236, to $4,187.
Digital Payments
In the “Deep Dive” section, the report examined the primary use of credit and debit cards and provided insight on digital payments, which it says represent the alternative ways of card use without a physical card required to facilitate the transaction. This includes all card not present (CNP) and tokenized transactions.
While the Index recognized most tokenized transactions as CNP, the report includes card present (CP) tokenized activity associated with digital wallets, namely the “Pays” (Apple Pay, Google Pay, etc.). In February 2024, digital transactions accounted for 44% of all credit card transactions and 39% of all debit card transactions.
“Digital purchases represented a greater share of overall purchases and now represent more than 50% of purchases,” noted the report. In addition, for February 2024, digital credit purchases represented 54% of all credit purchases and digital debit purchases represented 51% of all debit purchases. “Noteworthy is the continued shift, with credit transactions up four percentage points since 2022 (from 35% to 39%) and debit transactions up two percentage points (from 42% to 44%).”