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One Year Later: A Glimpse at Post-COVID Spending

CO-OP Payments Trends Report (Spending Data from February 1-28)

March marked the one year anniversary since the first COVID-19 lockdowns went into effect. After months of unpredictable spending across credit and debit, we appear to be moving towards normalcy; as of last month, transaction volumes climbed back to pre-COVID levels, but with a few caveats:

#1: Members Shifting from Essentials Spending to “Lifestyle” Purchases

While overall payments volume is back up, major spending categories like air travel, restaurants and hotels have still not fully-recovered to pre-COVID levels. However, when we look at credit and debit activity month-over-over month, we can see that trend is slowly changing.

“Full recovery is going to be slow,” says Beth Phillips, CO-OP Director of Strategic Portfolio Growth. “However, comparing January and February data we’re seeing increases across dining, entertainment, lodging, medical and travel – all positive indicators that members are conducting more select life-style related purchases.”

“People are prioritizing getting back together with family and friends through small gatherings,” said CO-OP Senior Payments Advisor John Patton. “At the same time, people are still making those ‘lifestyle upgrades’ with their cars and living space.”

Phillips adds, “As more people receive the vaccine, we’re going to see more regular lifts in category-level spending, which is why it is important to pay close attention to month-over-month category spending lifts in order to spot top of wallet opportunities.”

Month-Over-Month Category-Level Spending (Comparing Feb 2021 to Jan 2021)

NOTE: The below reflects month-over-month comparisons (rather than year-over-year) – i.e., compares February 2021 with January 2021, rather than February 2021 and February 2020.

Amazon/Bookstores
Transaction Volume (#):
Credit: Down 24%. Debit: Down 20%.
Transaction Amount ($):
Credit: Down 26%. Debit: Down 23%.
Interchange ($):
Credit: Down 25%. Debit: Down 22%.

Digital Goods
Transaction Volume (#):
Credit: Down 4%. Debit: Down 4%.
Transaction Amount ($):
Credit: Down 7%. Debit: Down 5%.
Interchange ($):
Credit: Down 8%. Debit: Down 4%.

Dining and Entertainment
Transaction Volume (#):
Credit: Down 1%. Debit: Down 1%.
Transaction Amount ($):
Credit: Down 1%. Debit: Up 3%.
Interchange ($):
Credit: Unchanged 0%. Debit: Up 2%.

Education
Transaction Volume (#):
Credit: Up 7%. Debit: Up 10%.
Transaction Amount ($):
Credit: Up 7%. Debit: Up 7%.
Interchange ($):
Credit: Up 4%. Debit: Up 8%.

Gas
Transaction Volume (#):
Credit: Down 5%. Debit: Down 4%.
Transaction Amount ($):
Credit: Down 1%. Debit: Unchanged 0%.
Interchange ($):
Credit: Down 2%. Debit: Down 2%.

Grocery
Transaction Volume (#):
Credit: Down 8%. Debit: Down 8%.
Transaction Amount ($):
Credit: Down 12%. Debit: Down 11%.
Interchange ($):
Credit: Down 11%. Debit: Down 9%.

Lodging
Transaction Volume (#):
Credit: Up 8%. Debit: Up 12%.
Transaction Amount ($):
Credit: Up 10%. Debit: Up 15%.
Interchange ($):
Credit: Up 10%. Debit: Up 16%.

Medical
Transaction Volume (#):
Credit: Down 2%. Debit: Unchanged 0%.
Transaction Amount ($):
Credit: Down 1%. Debit: Up 2%.
Interchange ($):
Credit: Down 1%. Debit: Up 2%.

Retail
Transaction Volume (#):
Credit: Down 13%. Debit: Down 19%.
Transaction Amount ($):
Credit: Down 16%. Debit: Down 21%.
Interchange ($):
Credit: Down 15%. Debit: Down 20%.

Travel
Transaction Volume (#):
Credit: Up 2%. Debit: Up 1%.
Transaction Amount ($):
Credit: Up 4%. Debit: Up 9%.
Interchange ($):
Credit: Up 4%. Debit: Up 9%.

Campers & Camping
Transaction Volume (#):
Credit: Unchanged 0%. Debit: Up 1%.
Transaction Amount ($):
Credit: Up 10%. Debit: Up 12%.
Interchange ($):
Credit: Up 11%. Debit: Up 11%.

#2: The Arrival of Stimulus Checks Could Lead to Lower Balances

Millions of Americans are now starting to receive their stimulus checks, which Phillips believes they may use to pay down their existing card balances and other financial obligations. Patton adds that they may allocate that money away from spending and more towards investing in their retirement plans.

“Members are starting to plan for the future outside of COVID,” says Patton. “In the short-term this may impact interchange but ultimately it will help put credit union members in a better place financially and potentially drive greater spending later in the year.”

#3: COVID Has Permanently Changed the Way We Shop

It’s important to recognize that buyer behaviors have changed dramatically over the last year. We saw that with the 50-75 percent jump in mobile wallet and contactless payments volume between the first and second half of 2020. As a result we can expect to see a rapid shift towards contactless payment acceptance among retailers and merchants as well as accommodation of the buy online pickup in-store (“BOPIS”) model.

“As brick-and-mortar businesses start to open back up, it will be really interesting to see how contactless and mobile wallet usage grow,” says Phillips. “It also reinforces the fact that being top of digital wallet with your members is going to be essential to payments growth.”

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.co-opfs.org.