Despite Growing Uncertainty, July Payments Trends Show Robust Growth

CO-OP Payments Trends Report (Spending Data from July 1-31)

8/19/21 – RANCHO CUCAMONGA, California – As it has been for much of the past year and a half, the U.S.’s path to economic recovery in the wake of COVID-19 can be described as uncertain and tenuous, at best.

Although CO-OP Financial Services has been tracking several positive spending trends among member credit union portfolios, including an anticipated resurgence of credit spending, big increases in the grocery category and a red-hot back-to-school shopping season, there are reasons to be cautious.

The Delta variant has led a new wave of coronavirus cases worldwide and across the U.S., a worrisome factor that is not fully captured in July’s spending data. As federal, state and local governments consider reestablishing mask mandates and other social distancing measures, it is still to be seen what dampening effect this may have on in-person schooling and work, as well as leisure activities like dining, entertainment and travel this fall.

For now, consumers have extra cash on hand, thanks to a rebounding jobs market and expanded federal child tax credit payments, which began hitting share accounts in July. That has translated to a month-over-month boost in both credit and debit spending in categories like dining and entertainment, education, gas, lodging, medical and travel.

Keeping uncertainty in mind, here are some of the key spending trends CO-OP’s SmartGrowth Consulting Team members are watching closely this month:

#1: Big Jump in Grocery Credit Spend
One of the biggest surprises in July spending was the growth in credit transaction volume within the grocery merchant category, both on a month-over-month and year-over-year basis.

Month-over-month, grocery rose by 61% in transaction count and 54% in transaction amount, resulting in a whopping 133% increase in interchange revenue. Year-over-year, the results were similar, with increases of 54%, 41% and 109%, respectively.

“This has been the big story of the summer so far,” said John Patton, CO-OP Senior Payments Advisor. “As consumers got back to throwing July 4th barbecues and graduation parties with family and friends, it led to bigger grocery shopping bills. We’re looking for this trend to peak in August and September, with Labor Day festivities and football tailgating coming back into favor for now.”

#2: Travel and Lodging Remain Hot
Consumers took to the roads and the skies in July, as they activated long-dormant travel and recreation plans. The travel, lodging, gas and dining/entertainment categories all enjoyed double-digit month-over-month credit spend growth in July, and smaller single-digit increases in debit.

Interestingly, while camping and home improvement credit spend also grew strongly in July, both categories trended down in debit. This may simply reflect a natural pull-back from the unprecedented growth seen in these categories last summer, when coronavirus lockdowns spurred a rise in “staycation” and “nearcation” activities, trends that have decreased as the economy has reopened this year.

#3: Strong Back to School Portends Early Holiday Season
According to Mastercard’s July SpendingPulse report, U.S. retail sales jumped by nearly 11% year-over-year in July, led by department stores with 44.8% growth. The report also showed that in-store purchases excluding auto accounted for more than 4 out of 5 retail sales in July – a 15% increase as compared with July 2020.

Within CO-OP’s portfolio, July debit interchange revenues within the retail merchant category jumped by 16% year-over-year. Meanwhile, credit retail interchange fell year-over-year by -17%, illustrating how credit is still trending behind debit overall, although the gap is starting to narrow.

Retail spend has been helped by the expanded child tax credit along with an early, supercharged back-to-school shopping season. The National Retail Federation predicts consumers will spend a record $37 billion on back-to-school shopping for K-12 students, along with $71 billion for back-to-college, also a record.

“As we move fully into the back-to-school shopping season, and what we anticipate being an early holiday shopping season, we’re looking for a notable strengthening in credit spend over the next several months,” said Patton.

What Credit Unions Should Do Now
According to Beth Phillips, CO-OP Director of Strategic Portfolio Growth, now is the time for credit unions to capitalize on these strong growth trends, while keeping an eye on how members will likely behave come fall.

With credit trending up after being overshadowed by debit over the past year and a half, credit unions have an opportunity to focus on cardholder incentives across various categories, including travel, grocery and retail, in order to get their cards top-of-wallet and capture maximum interchange revenue growth.

“Given supply chain interruptions and shortages across toys and other retail categories brought on by COVID, most experts are predicting an early holiday shopping season this year,” said Phillips. “For credit unions, it’s important to start ramping up their credit incentives early. Get in front of it now – don’t wait until October, as that may be too late.”

With more uncertainty on the horizon, credit unions should also make it easy for members to access their card accounts through their preferred digital wallet apps. CO-OP Digital Card Issuance allows members to access their digital credit and debit credentials instantly, providing a seamless, touchless and secure process through the credit union’s mobile app. And with CO-OP Digital Wallets, credit unions can enable members to use their debit and credit cards with most popular wallet apps, including Google Pay, Apple Pay, Samsung Pay, Fitbit Pay and Garmin Pay.

Month-Over-Month Category-Level pending (Comparing July 2021 to June 2021)

Please note that the category spending below reflects month-over-month comparisons (rather than year-over-year), i.e., compares July 2021 with June 2021, rather than July 2021 and July 2020.

Amazon/Bookstores
Transaction Volume (#):
Credit: Up 11%. Debit: Down 6%.
Transaction Amount ($):
Credit: Up 6%. Debit: Down 12%.
Interchange ($):
Credit: Up 20%. Debit: Down 8%.

Digital Goods
Transaction Volume (#):
Credit: Up 21%. Debit: Up 3%.
Transaction Amount ($):
Credit: Up 21%. Debit: Up 3%.
Interchange ($):
Credit: Up 23%. Debit: Up 3%.

Dining and Entertainment
Transaction Volume (#):
Credit: Up 24%. Debit: Up 5%.
Transaction Amount ($):
Credit: Up 22%. Debit: Up 5%.
Interchange ($):
Credit: Up 24%. Debit: Up 5%.

Education
Transaction Volume (#):
Credit: Up 14%. Debit: Down 2%.
Transaction Amount ($):
Credit: Up 22%. Debit: Up 4%.
Interchange ($):
Credit: Up 22%. Debit: Up 2%.

Gas
Transaction Volume (#):
Credit: Up 65%. Debit: Up 5%.
Transaction Amount ($):
Credit: Up 56%. Debit: Up 8%.
Interchange ($):
Credit: Up 106%. Debit: Up 7%.

Grocery
Transaction Volume (#):
Credit: Up 61%. Debit: Up 4%.
Transaction Amount ($):
Credit: Up 54%. Debit: Up 3%.
Interchange ($):
Credit: Up 133%. Debit: Up 4%.

Lodging
Transaction Volume (#):
Credit: Up 29%. Debit: Up 6%.
Transaction Amount ($):
Credit: Up 31%. Debit: Up 8%.
Interchange ($):
Credit: Up 29%. Debit: Up 7%.

Medical
Transaction Volume (#):
Credit: Up 17%. Debit: Up 4%.
Transaction Amount ($):
Credit: Up 15%. Debit: Up 2%.
Interchange ($):
Credit: Up 16%. Debit: Up 3%.

Retail
Transaction Volume (#):
Credit: Down 24%. Debit: Up 2%.
Transaction Amount ($):
Credit: Down 18%. Debit: Up 1%.
Interchange ($):
Credit: Down 23%. Debit: Up 1%.

Travel
Transaction Volume (#):
Credit: Up 26%. Debit: Up 8%.
Transaction Amount ($):
Credit: Up 16%. Debit: Up 1%.
Interchange ($):
Credit: Up 16%. Debit: Up 1%.

Computers
Transaction Volume (#):
Credit: Up 73%. Debit: Down 6%.
Transaction Amount ($):
Credit: Up 47%. Debit: Down 8%.
Interchange ($):
Credit: Up 77%. Debit: Down 7%.

Office
Transaction Volume (#):
Credit: Up 24%. Debit: Up 7%.
Transaction Amount ($):
Credit: Up 8%. Debit: Down 2%.
Interchange ($):
Credit: Up 8%. Debit: Up 7%.

Campers & Camping
Transaction Volume (#):
Credit: Up 17%. Debit: Down 4%.
Transaction Amount ($):
Credit: Up 7%. Debit: Unchanged 0%.
Interchange ($):
Credit: Up 12%. Debit: Down 1%.

Home Improvement
Transaction Volume (#):
Credit: Up 22%. Debit: Down 5%.
Transaction Amount ($):
Credit: Up 13%. Debit: Down 6%.
Interchange ($):
Credit: Up 21%. Debit: Down 6%.

More information on the CO-OP SmartGrowth Consulting Team can be found here.

About CO-OP Financial Services

CO-OP Financial Services is a payments and financial technology company whose mission is ensuring the success of the credit union movement. CO-OP payments solutions, engagement services and strategic counsel help credit unions optimize member experiences to consistently provide seamless, personalized multi-channel offerings, while delivering secure, sophisticated fraud mitigation service. For more information, visit www.coop.org.