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September Spending Trends: Inflation, Supply Issues Push Up Holiday Season

October 19, 2022 – As the leaves begin to turn, the economy is chugging along. Unfortunately, it’s chugging too fast for the Federal Reserve’s comfort.

Employers have continued to add jobs at a strong clip, with non-farm payrolls growing by 263,000 in September, edging the unemployment rate down to 3.5%. The biggest gains were found in the leisure and hospitality sectors, along with healthcare.

Meanwhile, inflation continues its year-long hot streak. The producer price index, a measure of wholesale prices, posted a 0.4% gain for September, doubling consensus estimates of 0.2%. This doesn’t bode well for a relaxing of consumer prices and is likely to keep the Federal Reserve committed to its strategy of raising rates in an effort to cool what it sees as a too-hot economy.

Indeed, the Fed raised its benchmark rate by 75 basis points at its September 21 meeting, and Chairman Jerome Powell has signaled plans to bump it another 1.25% by the end of 2022. The stock and bond markets have not reacted well to these aggressive measures, with major indexes down by nearly 25% for the year.

Co-op Solutions’ September credit union card portfolio data showed generally flat to declining month-over-month results in both credit and debit. The Campers & Camping and Sport/Recreation categories were particularly hard hit this month with Entertainment (movie theaters, tourist attractions, museums, etc.), Lodging, Auto Rental, Airlines and Retail also showing moderate declines.

No need to hit the panic button yet, as categories displaying small to moderate declines are in line with prior years’ MoM trends from August to September as transaction counts tend to decline as summer travel ends, back-to-school shopping declines, and consumers start pulling back spend in preparation for the holidays.

Here are some of the key spending trends Co-op’s SmartGrowth consulting team are watching closely this month:

#1: Early Holiday Shopping Begins Now

The combination of continued supply chain issues and rising inflation is pushing the holiday shopping season up in the calendar cycle. Major retailers including Amazon, Target and Kohl’s are all promoting major sales in October, as a way to manage supply concerns and ensure they hit their holiday sales targets amid significant uncertainty.

“With inflation at the top of consumers’ minds, we anticipate many will do their holiday shopping a bit earlier and put their gifts away in their closets for a few months,” said John Patton, Senior Payments Advisor, for Co-op. “I do think that retailers are doing a better job of managing their stock levels than they did a few months ago. They are better prepared.”

#2: Entertainment, Travel Spending are Softening

While the Entertainment and Travel spending categories have shown strong increases throughout the year, as inflation has continued its sharp rise, consumers have begun pulling back on such discretionary spending.

Year over year, the Entertainment category is up a massive 40% in debit and nearly 62% in credit. Travel spending has shown similar growth of 18% in debit and nearly 50% in credit. But in September, Entertainment fell in both debit and credit by 11%, while Travel was down a few percentage points, led by double-digit declines in debit spending on Lodging.

#3: Shift to Credit is Slowing Down

Over the past year there has been a broad shift in spending from debit to credit. Credit is up by 12.4% year over year, while debit has remained virtually flat over the same period. But in recent months that narrative has begun to change. In September, debit was down by -4.0% and credit was down by -3.6% month over month. Households are carefully choosing to use debit or credit based on the context of the individual purchase and their own financial circumstances.

“Part of the reason why credit transaction volume is so inflated over the past year is that consumers are using credit more for everyday purchases,” says Beth Phillips, Director, Coop Solutions. “Consumers have traditionally used debit for such purchases, so a relatively small increase in such usage on the credit side can have an outsized impact on the relative percentage change.”

Month-Over-Month Category-Level Spending (Comparing September 2022 to August 2022)

Please note that the category spending below reflects month-over-month comparisons (rather than year-over-year) – i.e., compares September 2022 with August 2022, rather than September 2022 to September 2021.

 September MoM % Difference (Trans Count)
CategoryDebitCredit
Amazon/Bookstores-6.0%-7.4%
Campers & Camping-31.5%-28.2%
Computers-4.6%-3.1%
Digital Goods-3.1%-2.5%
Dining & Entertainment-4.1%-3.9%
     Entertainment-11.5%-11.0%
     Fast Food, Restaurants, Bars-4.0%-3.6%
     Government/Gambling+16.3%+18.5%
Education+27.6%+18.9%
Gas-4.8%-3.5%
Grocery-3.9%-3.7%
     Grocery-3.8%-3.7%
     Wholesale-4.6%-3.8%
Home Improvement-6.2%-4.8%
Medical-2.6%-1.9%
Office-2.1%-1.5%
Other-1.9%-1.4%
     Auto Dealers/Services/Parts-5.5%-3.6%
     Cable, Satellite and Other+0.2%-0.1%
     Furniture-4.4%-4.4%
     Government/Postal Services-10.9%-10.5%
     Professional Services+2.9%+1.7%
     Real Estate-3.6%-3.0%
     Self-care-5.1%-4.6%
     Subscription Services-2.4%-2.0%
     Utilities-2.4%-3.2%
Retail-7.5%-6.7%
     Department Stores-9.0%-8.4%
     Discount Stores-6.9%-6.8%
     Retail-7.8%-6.3%
Specialty Retail-2.1%-1.8%
     Florists, Antiques, Jewelers, Cigars, Stamps, Etc.-2.1%-1.8%
Sport/Recreation-17.2%-19.4%
     Golf Courses-26.0%-25.4%
     Sport/Recreation-15.6%-18.3%
Travel-3.8%-1.8%
     Airline-7.7%-1.4%
     Auto Rental-7.6%-8.2%
     Lodging-12.9%-8.6%
     Other Travel (Railroad, Taxi, Cruise Lines, Etc.-2.4%-0.3%
Grand Total-4.0%-3.6%


What CUs Should Do Now

With the holiday shopping season upon us, it’s a great time for credit unions to activate “spend and get” campaigns to keep their cards top of wallet for spending in the hottest merchant categories, such as Department Stores, Discount Stores and Digital Goods. Also, make sure members can easily access their preferred forms of payment, whether shopping in-store or online.

Leading into the holidays, credit unions should focus on providing exceptional member experiences. With the spirit of the holidays, this time of year can also bring financial stressors to members. Hosting lunch-and-learns and staff trainings to acknowledge the challenges this time of year may bring members can be a hugely beneficial opportunity to encourage (or better yet – incentivize) employees to keep their credit union values top of mind in trying situations to provide exceptional member experiences. Experience that will exceed client expectations and assist members with their financial journey.

More information on the Co-op SmartGrowth Consulting Team can be found here.


About Co-op Solutions

Co-op Solutions is the market-leading financial technology platform whose mission is to connect credit unions to the technology, strategic partnership and scale they need to best serve their members now and into the future. Co-op partners with credit unions to unlock their potential so they can compete; does the hard work of innovation, creating a one-stop opportunity to help credit unions grow; and offers knowledge and expertise in a world where everything must be integrated. For more information, visit coop.org.

Contact:
Bill Prichard, APR
Director, Public Relations
Co-op Solutions
(909) 532-9416
Bill.Prichard@coop.org

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PSCU Payments Index – October 2022 Edition

October 18, 2022 –

Today, PSCU – the nation’s premier payments credit union service organization (CUSO) – published the October edition of the PSCU Payments Index, the goal of which is to provide information and insights to help financial institutions make informed, strategic decisions on the road ahead.

As the fall season begins and we enter the last quarter of 2022, the U.S. economy continues to face persistently high inflation, a looming recession and rising energy prices. Yet consumer purchasing activity showed continued resilience in both credit card and debit card volume in September. In our October 2022 edition of the PSCU Payments Index, our Deep Dive looks into the Utilities sector as energy forecasts become top of mind heading into the winter months.   

In the Labor Department’s Oct. 13 update, the Consumer Price Index (CPI) was up 0.4% for the month of September, bringing the 12-month rate of inflation to 8.2%. Increases in shelter, food and medical care were largely offset by a 4.9% decrease in the gasoline index. The Bureau of Labor Statistics (BLS) reported in its September 2022 jobs report that 263,000 jobs were added for the month – fewer than August (315,000 jobs) and below the pace of the first half of 2022 (approximately 400,000 jobs per month).

The Federal Reserve will meet on Nov. 1-2 with subsequent interest rate hikes likely, influenced by factors including inflation, jobs and the housing market. An interest rate increase in November would mark the sixth increase this year, with the previous five increases raising rates by a total of three percentage points. The Consumer Confidence Index increased for the second consecutive month in September, following three consecutive months of declines.

“This month’s Deep Dive in the PSCU Payments Index highlights the dramatic impact of inflation within the Utilities sector,” said Leanne McGuinness, chief financial officer, The Summit Federal Credit Union (Rochester, New York). While telecommunications and cable/internet remained strong, purchases and transactions remained largely flat. At the same time, purchases and transactions in the electric/gas/water/sanitation portion of the sector were up substantially year over year, signaling the inflationary effects that our members will be faced with to heat and maintain their homes as the winter months arrive. We appreciate PSCU’s analysis of these trends and assisting us to help our members with options to plan for and meet their monthly obligations.”

A sampling of key takeaways from the October report includes:

  • Consumer spending on cards remains strong, with credit cards continuing to outpace debit cards. For September, credit purchases were up 13% and debit purchases were up 6% year over year. Year to date through September, credit purchases were up 18% and debit purchases were up 6%. Current inflationary pressures continue to drive growth in purchases, outpacing growth in transactions. For September, growth in overall transactions was up 11% for credit and 3% for debit.
  • The Consumer Price Index (CPI-U) decreased on an annual basis to 8.2% in September, influenced by lower prices in Gasoline and higher prices in Shelter, Food and Medical Care. The Fed meets next on Nov. 1-2, with another large interest rate increase anticipated.
  • In this month’s Deep Dive on Utilities spending, the two main components of the sector detail the inflationary impacts of energy costs and potential concerns of “fuel poverty” as we transverse the winter months. Growth in purchases for electric, gas (propane and home heating fuel), water and sanitation was up 29% for credit and 15% for debit for September 2022. For transactions, credit was up 13% and debit was up 5% for September. The second half of the Utilities sector, comprised of telecommunications and cable/internet access, saw year-over-year purchases up 9% for credit and up 1% for debit. For transactions, credit was up 10% and debit was down 2% for September.
  • The September average credit card balance per active account was $2,797, up 6.1% (or $160) year over year. Credit card balances surpassed the September 2020 results of $2,787 for the first time since the decline in card balances that began in early 2020. The credit card delinquency rate for September was 1.74%, 16 basis points lower than pre-pandemic September 2019 levels.

The full report is available for download here or can be shared as a PDF upon request. Additionally, feel free to subscribe here to receive updates when the PSCU Payments Index is published each month.

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Advantis Credit Union leans in on payments innovation, renews partnership with Co-op Solutions for Zelle, debit and credit processing

October 12, 2022 – One of Oregon’s largest credit unions has extended its partnership with Co-op Solutions. In addition to relying on Co-op for the processing of its growing debit and credit card portfolios, Portland’s $2 billion Advantis Credit Union is leveraging the Co-op payments ecosystem to bring Zelle and other digital-first services to its more than 87,000 members.

Among the benefits of the partnership is speed to market for in-demand consumer banking products. “We value a partner that can help us bring new and enhanced services to our members in a timely and reliable manner,” said Jason Werts, President/CEO of Advantis. “Co-op has been that partner, helping us launch several big projects over the past few years. We do not see that slowing down.”

Co-op Full-Service Credit combines analytics, fraud reduction, risk management and loyalty in a highly integrated, fully managed card processing solution. Co-op Debit offers a suite of reporting solutions to help credit unions better analyze and respond to meaningful daily behaviors. Co-op can also help credit unions make the Zelle P2P payments network available to their members efficiently, easily and affordably.

“Every person has value at Advantis, and it shows in our rich history of passionately serving members, caring for our employees and giving back to our community,” said Werts. “With Co-op on our side, we are living out our vision to be the best financial services provider our members can choose. Delivering meaningful, relevant experiences through products is an important part of our commitment to people.”

“Payments are the gateway to deeper member relationships,” said Matt Kardell, Chief Revenue Officer for Co-op. “Credit unions like Advantis really understand that and are leaning in on their payments strategy. We’re proud to partner with them as they continue to improve these high-value daily touchpoints, like Zelle and digital payments, for their members.”

Werts expects the partnership with Co-op will allow Advantis to continue offering members convenient, personalized access to their money. “We look forward to further leveraging Co-op innovation and fast integration to provide members with reliable, best-in-class products and services,” he said.

About Co-op Solutions

Co-op Solutions is the market-leading financial technology platform whose mission is to connect credit unions to the technology, strategic partnership and scale they need to best serve their members now and into the future. Co-op partners with credit unions to unlock their potential so they can compete; does the hard work of innovation, creating a one-stop opportunity to help credit unions grow; and offers knowledge and expertise in a world where everything must be integrated. For more information, visit coop.org.

Contact:

Bill Prichard, APR
Director, Public Relations
Co-op Solutions
(909) 532-9416
Bill.Prichard@coop.org

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Inflation has personal loan balances surging

As consumers adjust their household budgets and living expenses to counter the effects of high inflation, recent findings show such rising economic costs are contributing to the increased balances for unsecured personal loans.

According to CUNA Mutual Group, credit union members are borrowing at record numbers, especially unsecured personal loans. In May of this year, credit union loan balances increased 14.6 percent, the fastest yearly rate since May 1995. Unsecured loan balances grew by 3 percent in the same period while other types of loan balances increased 2.3 percent, per the report. 

Kenny Cooper, vice president of lending at Neighborhood Credit Union, said the cooperative experienced significant growth in unsecured loans year-over-year and foresaw that it would continue as consumers find solutions to negotiate rising costs. 

“If a consumer is looking to take out unsecured debt, a credit union is the best option,” Cooper explained to Fox Business. “Not only do credit unions cap their interest rates . . . the personal relationship credit union members have with their credit unions can make it easier to secure loans. Credit unions tend to provide loans to those individuals who may have been underserved or overlooked by larger financial institutions.”

Many financial institutions were already under interest rate pressure on personal loans from such personal finance companies like SoFi, and new data reveals that credit unions are taking a larger section of that lending pie. 

“Many credit union members are taking on debt before interest rates rise further [to combat inflation] and to consolidate other loans,” said Steve Rickchief economist for CUNA Mutual Group. “We expect this trend to continue for the next six months before slowing in 2023. when interest rates will be reaching their peak.”

Consumers called, personal loans delivered in response to inflation

Personal loan debt reached $192 billion in the second quarter of 2022, according to TransUnion, a 31 percent increase since 2021. Consumers also took out larger amounts of money in response to rising inflation, the average loan amount totaling just over $8,000, compared to $7,000 at the same time last year. 

One significant driver of loan activity over the last three years was the increased number of fintech companies like QCash Financial that answered the call after the COVID pandemic made in-person banking inaccessible. The pace of innovation mixed with the effort among fintech companies is reinventing the necessity to increase access to personal loans whenever and wherever the consumer needs it.

Credit unions, particularly, offer inherent and unique organizational features that offer a much more personal member experience while saving capital by partnering with a fintech like QCash that can provide an easy onboarding experience. The process requires minimal maintenance while giving members a near-instantaneous mobile application experience that can literally change the trajectory of their lives and the lives of their families during these unpredictable and inflationary times.

If your credit union member experience finds itself considering an easy-to-manage, easily implementable small dollar lending platform, we invite you to go to our website and view a demo of the QCash Life Event Lending platform. 

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Zelle® Helps Your Members Transact Remotely, While Staying Connected

In the wake of the COVID- 19 pandemic and an increased reliance on digital and contactless payment options, person-to-person (P2P) payments technology continues to be more valuable than ever. Members need a safe and secure way to receive or send money, whether it is sending money to friends or family members or sending their share of the rent to a roommate.

In the universe of P2P, Zelle® has become the preferred way for many consumers to easily send and receive money. According to Aite-Novarica, Zelle® has rapidly grown to become the largest U.S. P2P payments network by total payments value sent since its launch in 2017, with payment flows that are now twice the size of the next largest standalone competitor.

Early Warning Services, LLC, the network operator behind Zelle®, reports that consumers and businesses sent 1.8 billion payments through the Zelle Network® during 2021, an increase of 49% from a year earlier. Those payments totaled $490 billion, up 59%1.

To support members with their P2P needs now and in the future, Co-op offers credit unions in the Co-op ecosystem a way to integrate Zelle® into their mobile banking solution. Credit union clients need only have Co-op account-based technology in place (widely supported by thousands of credit unions and all major processors) and the ability to offer Zelle® within their mobile banking solution.

Offering Zelle® at your credit union allows your members to quickly send or receive money directly from one U.S. deposit account to another, typically within minutes*. And because access to Zelle® is offered within your credit union’s online and/mobile experiences, members will appreciate the security and financial peace of mind.

Staying Connected to Members While Driving PFR Status

Staying connected to members and improving their daily lifestyle is key to becoming their primary financial relationship.

“As we learn more about what members expect from their primary financial relationship, it’s becoming clear that lifestyle, not just life stage, is at the heart of member loyalty,” said Co-op Chief Product Officer Bruce Dragt. “More than just a mobile payment solution, Zelle® is a powerful branding and engagement tool that allows credit unions to be there for members during common everyday moments — from splitting the cost of a lunch tab with friends to paying the sitter or paying the rent.  The member-facing technology of Zelle® furthers a credit union’s digital maturity while providing a payments experience that is fast, safe, and easy every day.”

A Zelle® Success Story for Credit Unions

Launching in 2020 with just a few beta clients and one digital provider, Co-op has grown its Zelle® offering to include more than 100 credit union partners and integrations with 13 digital providers. To date, nearly $3 billion has been transacted by more than 800,000 credit union members using Zelle® through Co-op, with enrollment and usage continuing to climb at an average of 7% per month. In an ongoing effort to provide solutions that evolve to meet member needs, Co-op plans to rollout support for small businesses in 2023.

“Our differentiator is our integration both in volume of partners and ease of install,” added Dragt. “We have already surpassed the usage volumes for all of last year in just the first six months of 2022. Co-op works with all the major digital providers and integrates with any core processor, making it fast and efficient for credit unions to engage their members by offering Zelle®. ”

One success story from the Co-op network, Las Vegas-based Clark County Credit Union, which serves more than 50,000 first responders, medical workers, and local government employees. The credit union was looking to replace its legacy P2P payment solution, which was not meeting member expectations. Implementing Zelle® through Co-op was the top option to deliver a superior member experience by offering a best-in-class solution and delivering it quickly and efficiently.

“We wanted to be part of that market and offer our members what they had been asking for, which is a fast, safe and easy way to send money. Since we have been live, we’ve seen tremendous growth,” said Zia Ibrahim, Digital Product Manager for Clark County Credit Union.

“The pace of growth is fascinating,” added Matt Becker, Chief Technology Officer for Clark County Credit Union. “In a year, Zelle® has achieved active usage numbers equivalent to those earned by online bill pay – a technology that’s been around for 20 years. Zelle® is a product that in some ways sells itself. Zelle® just works, and it works for the masses. It’s easy, and almost anyone in the U.S. can utilize it.”

Getting Started

Zelle® can be enabled at your credit union through a variety of integration options, including:

  • Pre-integration via credit union’s digital solution provider
  • Credit union-initiated digital provider integration
  • In-house integration for credit unions with a homegrown digital banking solution.

To make implementation of Zelle® easy and efficient for our clients, Co-op has partnered with multiple digital banking solutions to enable pre-integration with 13 digital platforms and continues to work with additional digital banking providers to enable this same level of pre-integration.

To request more information on Zelle® please contact your Co-op Client Business Executive, call 800.782.9042 or email solutions@coop.org.

1Source: Zelle® press release Nearly Half a Trillion Dollars Sent by Consumers and Businesses with Zelle® in 2021

* U.S. checking or savings account required to use Zelle®. Transactions between enrolled consumers typically occur in minutes.

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