Today, PSCU – the nation’s premier payments credit union service organization (CUSO) – published the January edition of the PSCU Payments Index, the goal of which is to provide information and insights to help financial institutions make informed, strategic decisions on the road ahead.
In this month’s iteration, strong consumer purchasing continued through the extended holiday shopping season (October through December), with the strongest share of weekly purchases – similar to previous years – during the four weeks beginning with Thanksgiving week. The Consumer Confidence Index increased in December with optimism on short-term business conditions and labor markets, yet uncertainty remains as inflation continues to rise. In addition, the Omicron variant has taken center stage in the fight against the COVID-19 pandemic. This month, we present the final installment of our three-part Deep Dive into 2021 Holiday Spending.
“While 2021 proved difficult to predict the direction of card and other payment types, 2022 could similarly present the industry with some disruptive surprises,” said Sarah Grotta, director, Debit and Alternative Products Advisory Service for Mercator Advisory Group. “Data in the latter part of 2021, including the all-important holiday shopping period, saw consumers reverting to more typical levels of credit card usage, reversing the trend that we saw over the prior two years in which more transactions were processed on debit cards. As the average consumer savings rate begins to decline and there is an increased return to old habits like dining out and traveling, credit cards will be the payment type of choice. PSCU’s Payments Index data shows that the pandemic is still front and center, driving greater use of contactless transactions in the form of contactless cards, mobile wallets and merchant wallets. Looking ahead, three of the biggest influencers on the payments landscape will be the rate of inflation, regulatory changes, and, unsurprisingly, the evolving path of the pandemic.”
A sampling of key takeaways from the January report includes:
- Credit card usage continues to rise. Consumer spending was very strong for both credit and debit purchases in December, with growth in credit continuing to outpace debit. Transactions grew at a slower rate than purchases, providing a slight improvement to average purchase sizes.
- With the growth in credit card purchases, average credit card balances increased in December by 1.4% to $2,724. December 2021 results were 3% lower than 2020, closing the gap from the pay-downs over the past 18 months.
- Contactless tap-and-go transactions continue to gain traction. For December 2021, one in five CP transactions on contactless debit cards were tap-and-go. For credit contactless cards, this also hit a new high at 19%.
- In Part III of our Deep Dive on 2021 Holiday Spending, growth in our same-store population of credit unions outpaced market predictions, with purchases in the Goods sector up 13.7% for credit and 8.8% for debit over the cumulative three-month holiday season. While retailers started holiday sales in early October, the strongest period for purchases remained Thanksgiving week through the week before Christmas. Notably, consumers resumed in-person holiday shopping, with Goods sector Card Present (CP) credit purchases up 21% and CP debit purchases up 9% compared to 2020.
- The CPI-U for December increased to 7.0%, the largest yearly increase since June 1982. The ‘core’ PCE (Personal Consumption Expenditures) price index, which excludes food and energy prices due to their volatility, rose to 5.5% in December – the largest 12-month increase since February 1991. Interest rate changes could come as early as March.
- The unemployment rate fell to its lowest point since the onset of the COVID-19 pandemic, registering at 3.9% in December with 199,000 jobs created. Prior to the pandemic in February 2020, the unemployment rate was 3.5% with 5.7 million unemployed. Sourcing employees remains a top concern.
As we enter 2022, we will continue to evolve the PSCU Payments Index to deliver timely, relevant insights into consumer spending trends. As consumer preferences and behaviors continue to shift and evolve, the Payments Index will include greater focus on year-over-year changes and fewer comparisons to pre-pandemic 2019.
The full report is available for download here or can be shared as a PDF upon request. Additionally, feel free to subscribe here to receive updates when the PSCU Payments Index is published each month.