RANCHO CUCAMONGA, Calif.–Credit unions are being urged to prepare now for “strong payment portfolio growth,” with one person saying spending on credit cards is “on the cusp of a run.”
Those predictions are being offered by CO-OP Financial Services, which said it’s clear more consumers are getting out of the house and spending based on payments data for May, which show travel-related categories such as lodging, camping and fuel continue their upward swings.
Key payment trends, according to CO-OP:
1: Travel, Dining, Home Improvement Lead May Payments Growth Trends
“Over the past three months, those spending categories associated with in-person experiences, such as dining/entertainment, lodging, travel and camping have all stayed hot, and have been joined by fuel and home improvement,” CO-OP said.
Meanwhile, the big winners from the pandemic period, including bookstores (consisting largely of Amazon.com sales), digital goods, computers and office have cooled off, CO-OP stated.
2: Rising Inflation Boosts Transaction Amounts and Interchange Income
For the first time since August 2008, inflation growth has topped 5% over a 12-month period, with CO-OOP noting the U.S. Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers increased 0.6% in May on a seasonally adjusted basis after rising 0.8% in April.
“The question is yet to be answered as to whether this recent inflation growth signals a long-term trend or just a short-term spike caused by temporary supply shortages in sectors like energy and used cars,” the company said. “Still, it’s a trend that warrants careful attention. For the moment, inflationary pressures are driving faster growth in average transaction amounts and monthly interchange, especially in debit.”
3: Debit Spend Paces Credit…For Now
Debit spend has been growing faster than credit through the first half of 2021, particularly in non-traditional debit categories like lodging, where members are typically reluctant to have temporary holds placed on their checking accounts, observed CO-OP.
“One possible reason for debit’s dominance is that members’ deposit accounts have been flush with cash due to federal and state pandemic unemployment and stimulus payments,” the CUSO said.
‘On the Cusp of a Run’
But despite this imbalance, CO-OP said its analysts expect credit spend to catch up over the next few months.”
“Credit is at the cusp of a run,” said John Patton, CO-OP senior payments advisor. “People will start using credit for rewards again, and it will resurge this summer, in June and July. It will also be interesting to see how cardholders redeem their rewards points, if not for travel.”
Added Beth Phillips, CO-OP director of strategic portfolio growth, “We will learn a lot in the coming months. Will the debit dominance persist? People have not had the influx of true cash since the stimulus payments ended. Have their mentalities and behaviors shifted?”
Both Patton and Phillips said now is the time for credit unions to prepare for strong payment portfolio growth, as consumers venture out of their homes in greater numbers to shop, dine and travel.
“With new stimulus money ending and employment picking up, credit unions should go back to the business of getting their members a card,” Patton said.
Month-Over-Month Category-Level Spending (Comparing May 2021 to April 2021)
Amazon/Bookstores
Transaction Volume (#):
- Credit: Down 10%. Debit: Down 5%.
Transaction Amount ($):
- Credit: Down 10%. Debit: Down 6%.
Interchange ($):
- Credit: Down 11%. Debit: Down 5%.
Digital Goods
Transaction Volume (#):
- Credit: Down 7%. Debit: Up 1%.
Transaction Amount ($):
- Credit: Down 8%. Debit: Down 1%.
Interchange ($):
- Credit: Down 7%. Debit: Unchanged 0%.
Dining and Entertainment
Transaction Volume (#):
- Credit: Down 2%. Debit: Up 5%.
Transaction Amount ($):
- Credit: Up 2%. Debit: Up 9%.
Interchange ($):
- Credit: Up 2%. Debit: Up 8%.
Education
Transaction Volume (#):
- Credit: Down 5%. Debit: Down 2%.
Transaction Amount ($):
- Credit: Up 3%. Debit: Up 2%.
Interchange ($):
- Credit: Up 3%. Debit: Up 2%.
Gas
Transaction Volume (#):
- Credit: Up 1%. Debit: Up 8%.
Transaction Amount ($):
- Credit: Up 4%. Debit: Up 10%.
Interchange ($):
- Credit: Up 5%. Debit: Up 9%.
Grocery
Transaction Volume (#):
- Credit: Unchanged 0%. Debit: Up 7%.
Transaction Amount ($):
- Credit: Unchanged 0%. Debit: Up 6%.
Interchange ($):
- Credit: Unchanged 0%. Debit: Up 7%.
Lodging
Transaction Volume (#):
- Credit: Up 2%. Debit: Up 8%.
Transaction Amount ($):
- Credit: Up 3%. Debit: Up 6%.
Interchange ($):
- Credit: Up 3%. Debit: Up 7%.
Medical
Transaction Volume (#):
- Credit: Down 8%. Debit: Down 4%.
Transaction Amount ($):
- Credit: Down 10%. Debit: Down 7%.
Interchange ($):
- Credit: Down 10%. Debit: Down 7%.
Retail
Transaction Volume (#):
- Credit: Down 2%. Debit: Up 3%.
Transaction Amount ($):
- Credit: Down 4%. Debit: Up 1%.
Interchange ($):
- Credit: Down 4%. Debit: Unchanged 0%.
Travel
Transaction Volume (#):
- Credit: Up 4%. Debit: Up 9%.
Transaction Amount ($):
- Credit: Up 7%. Debit: Up 7%.
Interchange ($):
- Credit: Up 8%. Debit: Up 7%.
Computers
Transaction Volume (#):
- Credit: Down 8%. Debit: Down 5%.
Transaction Amount ($):
- Credit: Down 7%. Debit: Down 6%.
Interchange ($):
- Credit: Down 7%. Debit: Down 5%.
Office
Transaction Volume (#):
- Credit: Down 5%. Debit: Up 4%.
Transaction Amount ($):
- Credit: Down 15%. Debit: Down 8%.
Interchange ($):
- Credit: Down 13%. Debit: Down 9%.
Campers & Camping
Transaction Volume (#):
- Credit: Up 4%. Debit: Up 19%.
Transaction Amount ($):
- Credit: Down 7%. Debit: Up 5%.
Interchange ($):
- Credit: Down 6%. Debit: Up 7%.
Home Improvement
Transaction Volume (#):
- Credit: Up 5%. Debit: Up 12%.
Transaction Amount ($):
- Credit: Up 2%. Debit: Up 8%.
Interchange ($):
- Credit: Up 2%. Debit: Up 8%.
More information on the CO-OP SmartGrowth Consulting Team can be found here.