By: Tom Gandre, EVP, Chief Operating Officer, PSCU
In this month’s edition of the PSCU Payments Index, PSCU focuses on the various factors impacting the payments industry as we find our country at a key inflection point in the battle against the COVID-19 pandemic – and its long-reaching effects on the U.S. economy. After many parts of our nation had seemingly turned a corner and began to emerge from the pandemic, slowing vaccination rates could lead to regional pockets of increases in COVID cases. The Delta variant looms large as children prepare to return to school and many workers prepare to return to offices. At the same time, employers are grappling with “The Great Resignation,” labor shortages and rising wages.
Despite these challenges, we continue to see positive signs of economic recovery and increased consumer spending and confidence. This month’s index looks at the impact of these forces and takes a deep dive into this year’s Amazon Prime Day event, as well as the competing events from major U.S. retailers Target and Walmart. Some key takeaways from our July report include:
- While June CPI-U jumped to an annual rate of 5.4%, its largest increase since 2008, assistance from the U.S. Government – approaching nearly $6 trillion since the start of the pandemic – has fueled demand and put substantive impacts on supply chains.
New and used vehicle pricing continued to surge, while other categories – including hotels, car rentals, apparel and airfare – notably contributed to the increase.
- No dramatic fluctuations in consumer behavior were seen in June, although consumer spending continues to show strength. Continuing uncertainty around the pandemic and the expiration of several pandemic-related benefits have some consumers taking a more cautious, “wait-and-see” approach.
As of July 13, the seven-day average of daily COVID-19 cases in the U.S. has increased to nearly 15,500, a sizeable uptick from the previous month. While the Bureau of Labor Statistics reported job creation rose by 850,000 in June, the June unemployment rate showed little change at 5.9%.
- Card payments growth remains strong, supported by large retailer summer savings events. Of the three large retailer summer savings events in June (Amazon Prime Day, Target Deal Days and Walmart Deals for Days), Target posted the biggest percentage of growth in year-over-year purchases over the comparative two-day Prime Day event period.
Compared to past Prime Day events, this year yielded slower growth for Amazon. However, Amazon has maintained significant growth rates throughout the pandemic, so these results should be tempered in context. For Target, across Card Present (CP) and Card Not Present (CNP) channels, debit purchases were up 22% and credit purchases were up 17%.
- Across all three merchants (Amazon, Target and Walmart) by age demographics, we see year-over-year purchases for the summer savings events strongest for Young Millennials (ages 23-30) and Gen Z (ages 18-22).
Year-over-year purchases were up for Young Millennials by 21% for debit and 18% for credit, and up for Gen Z by 38% for debit and 45% for credit. Baby Boomers posted modest growth in purchases, up 7% for debit purchases and 4% for credit purchases compared to 2020.
- Card Present volume continues to improve, most notably in the Goods and Restaurant sectors, when compared to the start of 2021 for both credit and debit – but still continues to trail Card Not Present growth.
June 2021 Card Not Present (CNP) debit purchases represented 42% of all purchases, up eight percentage points from June 2019. CNP credit purchases represented 51% of overall credit purchases in June 2021, up six percentage points from June 2019. As the number of fully vaccinated Americans continues to rise, state restrictions are lifted and mask mandates are rescinded, we continue to see increases in Card Present (CP) activity, with CP debit transactions for June 2021 up 14% compared to 2020 and up 3% compared to 2019. CP credit transactions were up 37% for June 2021 compared to 2020 and up 2% compared to 2019.
- Credit card portfolio balances (for our same-store population) in June 2021 held relatively steady, with just a 0.3% drop. These balances are down 14% compared to the pre-pandemic June 2019 timeframe.
A major factor for lower credit card balances in 2021 continues to be the record-setting pace at which consumers are paying off credit card debt, with the average debt per household down 13.5% in Q1 2021 compared to Q1 2020, according to a WalletHub study.
Twenty-six states have announced an early end to pandemic-related federal unemployment benefits as of July 12. While it is too soon to see the economic impacts, we will continue to monitor the effect of this and other employment trends on consumer behavior, including labor shortages, rising wages and slower hiring rates. We will also continue to watch the impact of the recently instituted Child Tax Credits provided by the IRS, as well as the ending of the CDC’s moratorium on evictions, which is now set to end on July 31.
With over 25 years in the payments industry, Tom Gandre has built a solid reputation for results-driven leadership and a commitment to integrity and talent development. He has served as PSCU’s chief operating officer since 2008, leading the strategic direction of PSCU’s operations, including oversight of the company’s Information Technology, Product Development, Innovation, Fraud, Collections and Contact Center functions. He has a keen ability to recognize market trends and opportunities in service delivery and technology, creating a shared vision that delivers success for both PSCU and the financial institutions we serve.