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May Payments Trends Stay on Track, But Summer Heralds Rapid Growth

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

7/1/21 – The major payments trends of 2021 continued in May, with travel-related categories like lodging, camping and fuel showing a sustained upward swing alongside other hot segments like dining and home improvement. With more retail stores, dining establishments and other in-person experiences reopening as more people get vaccinated, consumers are eagerly embracing the return to pre-pandemic “normalcy” – escaping the confines of lockdown to pursue travel, shopping and other activities they missed over the last year. Credit unions should take advantage of these trends and prepare now for new payment portfolio growth opportunities.

Check out the trends in payments we’re watching this month:

#1: Travel, Dining, Home Improvement Lead May Payments Growth Trends

Over the past three months, those spending categories associated with in-person experiences, like dining/entertainment, lodging, travel and camping have all stayed hot, and have been joined by fuel and home improvement. Meanwhile, the big winners from the pandemic period, including bookstores (consisting largely of Amazon.com sales), digital goods, computers and office have cooled off.

#2: Rising Inflation Boosts Transaction Amounts and Interchange Income

For the first time since August 2008, inflation growth has topped 5 percent over a 12-month period. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in May on a seasonally adjusted basis after rising 0.8 percent 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. 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

Interestingly, 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. 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. But despite this imbalance, CO-OP’s experts expect credit spend to catch up over the next few months.

“Credit is at the cusp of a run,” says 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.”

“We will learn a lot in the coming months,” agrees Beth Phillips, CO-OP Director of Strategic Portfolio Growth. “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?”

What CUs Should Do Now

Both Patton and Phillips say that 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 says.

“With categories like gas, grocery and lodging all up, it’s a positive story,” Phillips adds. “It’s time to push your contactless usage and promotions in those categories.”

 Month-Over-Month Category-Level Spending (Comparing May 2021 to April 2021)

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

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.

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.