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  • Writer's pictureRoy Urrico

Velera Payment Report Shows Debit Spending Accelerating and EV Cars Presenting Credit Union Opportunities

By Roy Urrico

 


Consumer spending in debit accelerated in May 2024 while credit spending softened, yet remained positive. Those are two of the findings in the June 2024 edition of the Velera Payments Index, which also featured a “Deep Dive” into the gasoline sector.

 

The St. Petersburg, Fla.-based Velera – formerly PSCU/Co-op Solutions – the nation’s premier payments CUSO and an integrated financial technology solutions provider – designed the Velera Payments Index to help credit unions make strategic, data-informed decisions on behalf of their members.

 

Mike Bell, vice president, Insights at Velera.

“Consumer spending throughout the month of May 2024 showed an increase in debit card activity, while credit activity softened,” said Mike Bell, vice president, Insights at Velera. “In this month’s Deep Dive, we revisit the gasoline sector, where the replenishment of the U.S. Strategic Petroleum Reserves has helped stabilize fuel prices since the peak in 2022. As the electric vehicle market has grown in recent years, we also take a first look at spending in the Electric Vehicle Charging merchant category.”

 

Economic News


The Velera  Payments Index looked at the overall monthly economic picture. It found after three months of decline, the Consumer Confidence Index increased in May to 102.0 from a slightly upward revised April result of 97.5. “While encouraged by the labor market, consumer confidence in current business conditions dropped. Conversely, the University of Michigan Index of Consumer Sentiment decreased 8.1 points to 69.1 for May, following three months of very little change,” reported the Index. The drop in sentiment, said the Index, was primarily attributable to consumer outlook on the labor market (with an expected increase in unemployment) and slowing income growth. “Sentiment on personal finances was mainly unchanged for the month.”


Jobs grew more than expected in May with 272,000 jobs created, higher than the monthly gain over the past 12 months of 232,000 jobs, and considerably higher than the expected growth of 185,000 jobs for May. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate for May changed little at 4.0%, or 6.6 million people. Job gains occurred in healthcare, government, leisure and hospitality and professional, scientific, and technical services.


Source: Velera Payments Index.

The Velera Payments Index also noted in the Labor Department’s June 12 update, the Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May, bringing the cumulative 12-month rate of inflation to 3.3%. Shelter was up 0.4 percent, more than offsetting a decline in gasoline sales. Additionally, the food index increased 0.1% in May. Core CPI, which excludes the food and energy sectors, increased 0.2% for May and brings the 12-month Core CPI rate to 3.4%.


“While there have been mixed signs the economy is cooling, there is little interest in rate reductions, at least in the very near term,” said the Index. It added in the Fed’s June 12 update, 11 of 19 policymakers felt no more than one rate cut is possible for the remainder of 2024.

 

Other Key Takeaways:


·         Debit purchases were up 6.4%, with a third of the debit growth coming from money services, while credit purchases were up 0.1%. Debit transactions were up 4.5% and credit transactions were up 1.8% year over year.

·         Growth in the gasoline sector (this month’s Deep Dive), with debit purchases up 2.4% and credit purchases up 0.3%, was mainly attributable to service station activities – which may include non-fuel purchases. Growth in true gasoline purchases at automated fuel dispensers (AFDs) was modest, with debit AFD purchases up 0.7% and credit AFD purchases up 0.1% year over year.

·         The credit card delinquency rate was unchanged in May compared to April, finishing at 2.34%. Year-over-year, the percentage of balances delinquent was up 48 basis points from 1.86%.

 

Deep Dive: Gasoline

 

“Since the summer of 2022 – when gas prices experienced peaks of up to $5.00 per gallon – there has been a notable softening and stabilizing of prices,” noted the report’s Deep Dive section. It noted, despite seasonal fluctuations in the average price for gasoline, the average price over the past 18 months has trended between $3.05 and $3.88, with no significant spikes. “While the United States has become the largest worldwide producer of gasoline, concerns persist over potential impacts to U.S.”

 

Electric vehicles continue to gain in popularity. With these vehicles comes the opportunity to charge at home, or at charging stations away from home that are critical to the growth of the industry.


“While total purchases for both credit and debit cards in the unique merchant category of ‘Electric Vehicle Charging’ currently represents a fraction of one percent of comparable gasoline sales, the volume of activity is rapidly accelerating in our dataset,” the Index’s Deep Dive section reported.

 

What Should Credit Unions Do Now?


The Velera Payments Index made three recommendations for credit unions:


  1. Automotive fuel (gasoline and electric charges) is a core category of non- discretionary spend. As summer travel peaks in June and July, so do fuel purchases. With travel promotions and other reminders of card benefits, credit unions can capitalize on spend opportunities within their members’ wallets.

  2. Electric vehicles have grown in popularity and the infrastructure for charging continues to build out. Identifying members with specific charging activities may allow for targeted communications and deeper personalization of messages in the quest for one-to-one marketing.

  3. For credit unions offering different reward amounts assigned to different merchant groups, be sure to include electric vehicle charging, along with gas purchases, in the overall “fuel” category.

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