RANCHO-CUCAMONGA, Calif.—Consumer spending across credit and debit continued to fluctuate throughout April, according to CO-OP Financial Services, which detailed recent consumer spending activity—and listed three payment trends to watch.
“Stay-at-home guidelines have caused a surge in digital payments; inside the CO-OP credit portfolio, card not present transactions jumped 30% year-over-year, while card-present spending was down 41%. Spending across certain categories increased over the second half of April, likely as more members began receiving their stimulus checks; however credit unions can continue to expect lower payments volume as consumer spending patterns continue to shift,” CO-OP said.
Looking at spending within CO-OP’s own credit and debit portfolio data, the company is seeing the following trends inside these essential categories (data comparing April 1 – 30, 2020 with April 1 – 30, 2019):
Online Bookstores (Amazon)
Debit: Up 33%
Credit: Up 55%
“Online bookstores purchases, namely Amazon, continued to see a significant increase across credit and debit in April. This indicates a strong opportunity for credit unions to begin promoting their card to the top of the Amazon wallet in order to not only capitalize on this spending trend, but also hold on to transactions at this popular merchant for the future,” CO-OP stated.
Grocery Stores/Supermarkets
Debit: Down 15%
Credit: Down 15%
“In-person transactions at grocery stories continued to decline as more members shifted over to online grocery shopping in April. The dollar amount of those purchases did increase, however, indicating a shift in consumer behavior towards more bulk shopping for food essentials,” CO-OP stated.
Hardware Stores
Debit: Up 28%
Credit: Up 21%
“Hardware stores remain open as essential businesses and have seen a generous increase in sales during April. As more members are confined to their homes, they are using the opportunity to do more DIY projects and home improvements,” CO-OP stated.
Freezer and Meat Locker Provisioners
Debit: Up 17%
Credit: Up 13%
“Concerns around a nationwide meat shortage appear to have driven more members to stock up on frozen meats. Popular supermarkets like Costco and Kroger have begun enforcing limits on the amount of meat customers can purchase; therefore we may see this trend reverse in the coming weeks,” CO-OP stated.
Department Stores
Debit: Down 46%
Credit: Down 29%
“Department stores sales continued to suffer in April. As more states begin relaxing their shutdown orders store owners are hopeful they can begin opening back up in the coming weeks. However, many are reducing inventory and shifting to in-store pickups as they anticipate lower store traffic volume,” CO-OP stated.
Discount Stores
Debit: Up 9%
Credit: Up 14%
“Continuing a trend we saw in the first half of April, discount stores appear to be faring better than other retail businesses during COVID-19. Both credit and debit transactions increased during April compared to the previous year,” CO-OP stated.
CO-OP is further proposing three payment trends are on the horizon CUs need to be aware of:
Payments Volume and Lending Will Remain Low
“As more non-essential businesses remain closed and members shift into savings mode, credit unions can expect transaction volume to remain low. It is important to note that mortgage and auto-lending are also experiencing sharp declines throughout COVID-19 which is why focusing on increasing your share of payments volume will be critical. Credit unions should look out for the potential shift to credit as more members experience financial hardships,” CO-OP said, adding the following recommendations:
- Offering temporary interest and fee relief or allowing members to skip credit card payments is an effective way to incentive members to continue using your cards throughout COVID-19.
- Look closely at which merchant categories are producing the highest interchange growth within portfolios and consider running rewards promotions for those categories.
Contactless and Mobile Wallet Adoption is Rising
“Concerns around the physical safety of POS transactions will drive rapid adoption of digital and contactless payments. Already 27% of small businesses have reported an increase in mobile wallet transactions over the last few weeks. A Mastercard global study found that 46% of consumers have swapped out their top-of-wallet card for a card that provides contactless functionality and 74% of consumers will continue using contactless payments post-pandemic,” CO-OP said, adding the following recommendations:
“Now is the time to reassess your mobile wallets and contactless payments offerings, as well how you’re promoting them to your members. As more members adopt digital payments into their daily lives, it will be vital for credit unions to secure top-of-digital-wallet.”
Increased Payments Fraud and Delinquency
“As online transactions continue to rise, credit unions should remain vigilant about an uptick in card-not-present (CNP) fraud. At the same time, be prepared to see an increase in declined payments. Within the CO-OP debit portfolio for instance, online debit transactions denials jumped nearly 91% in March alone,” CO-OP said, adding the following recommendations:
- “Encourage your members to actively monitor and control their payments activity using card controls and by signing up to receive fraud text alerts.”
- “Remain proactive in your credit union’s risk mitigation efforts and financial wellness communication outreach with your members.”