By: Mike Bell, Vice President – Insights, PSCU
As we mark one year of tracking the economic impact of the COVID-19 pandemic, year-over-year debit and credit performance trends will now be influenced by the significant shifts in consumer behavior from the past 12 months. Accordingly, PSCU issued its final weekly edition of our consumer spending and transactional trend analysis on March 15, and a library of our weekly Transaction Insights will soon be available on the PSCU Insights page. We have learned so much about how the pandemic has reshaped consumer payments over the past year, and that data will continue to be useful as we navigate the new normal.
In the final weekly installment of our Transaction Insights, PSCU compared transactional trend analysis provided by Owner credit unions on a same-store basis from the tenth week of 2021 (the week ending March 7, 2021) with the tenth week in 2020 (ending March 8, 2020) to identify the year-over-year impact of COVID-19 on payment preferences and purchasing behaviors. Below are some notable observations from the past 12 months.
Consumers Continue to Prefer Debit
Consumers continue to choose debit as the most preferred payment method. After an initial drop, year-over-year debit transactions returned to positive growth in June 2020. For the June 2020 through mid-March 2021 timeframe, debit transactions were up 3%. Debit purchases over that time span increased 17%. During the peak of the pandemic in 2020, year-over-year debit purchases were negative for only three weeks in total.
Credit transactions came close to being flat year over year back in October 2020. Since that time, credit transactions are down 2%. Credit purchases are up 4% year over year since October 2020.
Spending Shifted from Travel and Entertainment to Consumer Goods and Grocery
Purchases in the travel and entertainment sectors have experienced the largest adverse impact, reaching a low point in April 2020. For travel, debit purchases were down 68% and credit purchases were down 85% at that time. For entertainment, debit purchases were down 68% and credit was down 76%. From June 2020 through mid- 2021, debit purchases are down 23% and credit purchases are down 54% for travel. For the same timeframe in the entertainment sector, debit purchases are down 28% and credit purchases are down 48%.
Spending has shifted to the consumer goods and grocery sectors. Debit and credit purchases have been positive in these sectors since April 2020. For consumer goods, debit purchases are up 34% and credit purchases are up 20%. For groceries, debit purchases are up 11% and credit purchases are up 15%.
Amazon was a major beneficiary of the shift to online buying and card-not-present (CNP) transactions. Debit experienced a monthly peak in May 2020, with purchase volume up 126% and averaging +73% since that time. Credit also experienced a peak in May, with purchase volume up 58% and averaging +47% since then.
Home supply, including stores such as Home Depot and Lowe’s, were also beneficiaries as consumers focused on spending for their homes. Debit experienced a peak with purchase volume up 65% in January 2021 – when the second round of stimulus payments were disbursed – and has averaged +49% since May 2020. Credit experienced a monthly peak with purchase volume up 39% in October 2020 and has averaged +33% since May 2020.
The gasoline sector has seen an increase in spending. This comes from higher gas prices per gallon, as overall gasoline consumption is still down year over year with many people continuing to work remotely. From June 1, 2020 through mid-March 2021, gasoline purchases on debit cards are down 8% and purchases on credit are down 19%.
Growth in Card-Not-Present Activity and Contactless Payments
Card-not-present (CNP) activity began experiencing good growth at the start of last year. In the January to March 2020 timeframe, debit CNP transactions were 25% of total debit transactions. In the weeks after the declaration of the pandemic and resulting store closures, online purchases and CNP activity quickly increased and have remained elevated. From April 2020 through mid-March 2021, debit CNP purchases are 31% of all debit transactions. Similarly, credit CNP transactions were 37% of all credit transactions for the first three months of 2020. From April 2020 through mid-March 2021, credit CNP transactions are 45% of total credit transactions.
Contactless transactions on dual interface cards have shown strong consumer adoption. For debit, contactless tap-and-go transactions have more than doubled from 8% in January 2020 to 17% in March 2021. For credit, contactless tap-and-go transactions have also more than doubled from 6% in January 2020 to 13% in March 2021.
Decrease in ATM and Cash Usage
Overall ATM usage and demand for cash remains down. At the start of 2020, ATM transactions were up 7% through March 2020. From April 2020 through mid-March 2021, overall ATM transactions are down 17% and total cash withdrawn in the same timeframe is down 12%. Increases in ATM cash withdrawals were seen with the release of the U.S. Government coronavirus relief funds in April 2020 and January 2021.
PSCU’s Advisors Plus, Data Science & Analytics and Marketing teams will continue to bring you valuable thought leadership and the latest trends in consumer spending on a monthly basis beginning in April. Stay tuned for the next evolution of our payment transaction analysis and insights.
Mike Bell is vice president of Insights at PSCU. He leads a team that produces analysis and reporting on competitive intelligence, CRM and member sentiment (surveys) and all of the PSCU RFP responses. Mike has been with PSCU almost 10 years with his start in contact center operations leadership. His background includes extensive operations management, process improvement, quality assurance and analytics.