By Roy Urrico
In July, consumer spending slowed and year-over-year growth rates continued to soften for debit and credit. Those are some of the findings in August 2024 edition of the Velera Payments Index, which also featured a “Deep Dive” on the spending activity surrounding Amazon Prime Day sale event on July 16 and 17, 2024, heralded by Amazon as their biggest shopping event since the sale started in 2015.
St. Petersburg, Fla.-based Velera – formerly PSCU/Co-op Solutions – which describes itself as the nation’s premier payments CUSO and an integrated financial technology solutions provider – designed the Velera Payments Index to help credit unions and other financial institutions make strategic, data-informed decisions on behalf of their members and customers.
“Despite a slowdown in overall spending growth, consumers in our Payments Index data set maintained steady year-over-year purchase volumes during a successful Amazon Prime Day sale, which saw a 12% overall increase year over year, driven by discounts and continued adoption of BNPL (buy now, pay later). Prime Day highlights Amazon's integral role in consumers' lives, and the growth in July's performance indicates our credit unions have effectively positioned their cards in members' wallets,” said Ryan Myers, senior vice president, consulting at Velera. “As we approach the holiday shopping season and Amazon’s next big sale – Prime Big Deal Days in October – credit unions should stay vigilant with competitive card products and marketing to minimize the impact of growing BNPL (buy now pay later) purchases.”
Checking Out the Economic Indicators
The Velera Payments Index reported for the past three months that the University of Michigan Index of Consumer Sentiment remained virtually unchanged, with July down 1.8 points. The Consumer Confidence Index stayed virtually unchanged for July at 100.3. With relatively positive sentiment on the job market, high interest rates, elevated prices and election uncertainty continue to be top consumer concerns in the near-term outlook.
In July, jobs grew much less than expected, with 114,000 jobs created – below the average gain of 215,000 over the past 12 months. Job gains occurred in government, healthcare, construction and transportation and warehousing, while the information sector lost jobs in July. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate for July increased by 0.2 percentage point to 4.3%, or 7.2 million people.
In the Labor Department’s Aug. 14 update, the Consumer Price Index (CPI) increased 0.2% in July, bringing the cumulative 12-month rate of inflation down to 2.9% – the smallest 12-month increase since March 2021. Decreases took place for used cars and trucks, medical care, airfares and apparel. Shelter, which rose 0.4 percent in July, accounted for 90% of the monthly increase. The energy index, which includes gasoline, was unchanged after two months of declines. Core CPI, which excludes the food and energy sectors, decreased to 3.2% for the 12-month Core CPI rate through July.
The Index conveyed following the Federal Reserve’s meetings ending July 31 an increasing number of analysts predicted a half-percentage-point rate reduction could come next month – or even sooner. The Fed’s policy rate is currently 5.3%, with the next Federal Open Market Committee (FOMC) meeting scheduled for Sept. 17-18.
Key Takeaways for July
While debit purchases were up 3.2%, half of the debit growth came from money services (Cash App, Venmo, Zelle, etc.). Credit purchases were up 0.2%, with the service sector keeping growth in positive territory. Debit transactions were up 1.6% and credit transactions were up 0.8% year-over-year.
The 2024 credit card delinquency rate remains elevated compared to the past few years, as well as when compared to the pre-pandemic patterns of 2019. While the seasonal pattern of increasing as the end of the year approaches is apparent, the July delinquency rate was up 45 basis points compared to July 2023.
Growth in year-over-year total credit card balances was up 4.9% for July. While total balances continue to increase, the rate of growth is slowing with July being the low point for 2024, so far.
Deep Dive: Amazon, Target and Walmart Sale Days
Payments Index data shows positive growth in credit and debit purchases for the Amazon Prime Day event. Target and Walmart both held their competing events during the week prior to Amazon’s event, with each retailer also posting positive growth in purchases.
For the two-day year-over-year Amazon Prime Day sales comparison to 2023, overall growth in credit purchases was up 2.0% and debit purchases were up 7.3%. Credit transactions were down 1.9% and debit transactions were up 1.7% year over year. For the seven-day year-over-year sales comparison for the week ending July 20, 2024, overall growth in credit purchases was up 5.3% and debit purchases were up 9.3%. Credit transactions were up 0.3% and debit transactions were up 2.9% year over year. The average credit purchase was $57.18, up 5.1% from the same week in 2023. The average debit card purchase was $46.11, up 6.2% for the same comparison.
For Target Circle Week: The seven-day year-over-year comparison for the week ending July 13, 2024 showed overall growth in credit purchases was up 6.6% and debit purchases were up 9.8%.
For Walmart Deals Event: For the four-day July 8-11, 2024 year-over-year sales comparison, overall growth in credit purchases was up 0.9% and debit purchases were up 4.5%. Credit transactions were up 2.8% and debit transactions were up 4.2% year over year. As a reminder, the comparison July sale for Walmart in 2023 was referred to as Walmart+ and was also four days.
What Should Credit Unions Do Now?
The Velera Payments Index made several other recommendations:
The placement of debit and credit cards in digital wallets and shopping apps remains a key point of opportunity. “Continue to focus on ensuring your credit union cards are positioned in these services.”
“As credit card balances and delinquencies continue to rise, ensure your credit union is effectively contacting and managing past due accounts as they enter past-due status.” A greater focus is likely to be required in the coming months approaching the holiday shopping season.
With overall spending growth for debit and credit softening, the key to continued volume growth for credit unions is account growth. “A stronger focus on acquisition strategies is important.”
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