By: Jeremiah Lotz, MVP, Digital and Data at PSCU

The April edition of the PSCU Payments Index marks the two-year anniversary of our monthly report. We hope the evolution of these ongoing monthly insights continue to help our credit unions navigate the ever-evolving financial landscape. This month’s report found signs of softening in consumer purchasing, with spending growth remaining in the low single digits. 

Key Takeaways

In this month’s Deep Dive in the Payments Index, we explore the ongoing growth in Digital Payments versus traditional Physical Card payments. Some key takeaways include:

• Transactions grew at a higher rate than purchases for both credit and debit cards in March compared to a year ago, showing further evidence of temperance in consumer spending in the market. This resulted in a drop in the average purchase amount for both credit and debit cards. The phenomenon last occurred on credit cards in May 2020, when both transaction growth and purchase growth were negative. This result has not occurred on debit cards in PSCU Payments Index reporting or weekly transaction trends reporting since PSCU began this reporting in early 2020.
• For March, both credit and debit transactions were up 5% year over year. Credit purchases were up 3% and debit purchases were up 4% for March. This was the lowest year-over-year growth for credit card purchases since August 2020, when it was -1%. The average purchase amount for credit was $73.63, down 2.2% year over year, and debit was $46.49, down 0.8%.
• The Consumer Price Index (CPI-U) decreased on an annual basis from 6.0% to 5.0% in March. Shelter again accounted for the majority of the all-items inflationary increase and offset the decline in the energy index. Grocery prices fell on a monthly basis for the first time since September 2020. The Fed increased rates by 25 basis points on Mar. 22 and will meet again on May 2-3.
• Growth in discretionary spending on credit cards (transactions up 4% and purchases up 6%) is slowing at a greater rate than non-discretionary spending. For debit cards, March growth improved for discretionary and non-discretionary transactions, up 8% and 4% respectively. For debit purchases, discretionary spending was up 8% and non-discretionary spending was up 3% for March. Softer growth was observed in purchases for the Entertainment and Travel sectors, with year-over-year growth in the Entertainment sector dropping to 9% for credit in March compared to 13% in February. Similarly, year-over-year travel sector credit purchases dropped to 8% in March compared to 18% in February. 
• Digital Payments (defined as all Card Not Present, Mobile Wallets and tokenized activity) were significant and represented 44% of all credit transactions and 58% of all credit purchases in March 2023. For debit, Digital Payments made up 37% of all debit transactions and half of all debit purchases. For March, year-over-year growth in Digital Payment transactions and purchases outpaced growth for Physical Card activity. This growth was fueled by the expansion of tokenized and Mobile Wallet transactions. The average Digital Payment purchase ($93.13 credit, $62.36 debit) was larger than the average Physical Card purchase ($58.31 credit, $37.01 debit), attributed to the single largest segment of the payment types – card on file and eCommerce, which includes more Travel sector purchases that tend to be larger on average. Within Mobile Wallets, Apple Pay maintains dominance for market share for both credit and debit transactions. 
• Credit card balance transfers generally peak in both the number of transactions and the transferred amount in March of each year. This is likely attributed to cardholders addressing their finances after the last year’s holiday spending. Total balance transferred dollars were up 13% compared to March 2022 and the average balance transfer was $4,414, up 14% year over year.
• The credit card delinquency rate for March finished at 1.82%, above the March 2019 prepandemic level by 0.09%. Total credit card balances were up 13.2% for March compared to a year ago, while the average credit card balance for active accounts was $2,917, up 8.3% (or $223) year over year. The delinquency rate continues an upward climb, likely due to a combination of job loss, inflation and the shaky economy.

Looking Ahead

As federal income tax returns were due on April 18, next month’s Payments Index report will look into growth in activity of tax preparations and actual income tax payments. The United States Government has authorized three companies to process credit card payments on their behalf, with each charging a processing fee of at least 1.85%. 

The Consumer Confidence Index increased slightly to 104.2 (1985=100) in March, due to an improved outlook from participants under the age of 55 and households earning over $55,000. Last month, the Consumer Confidence Survey posed a special question, asking consumers about spending plans over the next six months. The survey found that consumers expect to spend less on discretionary categories like travel and entertainment over the next few months, despite a slight increase in confidence in the economy. Consumers are still being cautious amid the uncertain economy. 

As we embark on our third year of the PSCU Payments Index, we hope it continues to bring about greater clarity on trends in payment preferences and consumer sentiment, especially with the uncertain state of the economy. As we recently expanded our reporting to include payment trends in discretionary and non-discretionary buckets, we hope this refinement continues to help our credit unions make informed, strategic decisions. 

Jeremiah Lotz is Managing Vice President of Digital and Data at PSCU where he directs initiatives to empower the company’s Owner credit unions with innovative and engaging payment solutions. With a focus on creating exceptional digital experiences based on data-driven intelligence, Lotz leads an experienced team dedicated to delivering PSCU’s data insights, analytics and digital experience solutions.