Changing cardholder purchasing trends
PSCU uses its Member Insight suite of analytic tools to analyze credit and debit card transactions conducted during the holiday period by members of its Owner credit unions each year. The analysis looks closely at transactions conducted during this two-month period to gather insights on how cardholder purchasing trends are changing.
Data from 2017 showed the industry as a whole experienced 5 percent growth in overall spend from the previous year. PSCU Owner credit unions saw an increase in more than 10 percent over this same time frame, more than double the industry growth rate. Credit and debit card purchase growth was driven by two factors: growth in the number of cards purchasing and average purchase spend per card.
Drivers of Spending Growth
Credit and debit had healthy growth in cards actively purchasing during the 2017 holiday period (versus the same time the previous year) — almost 6 percent for credit and 5 percent for debit. Average debit spend (per card purchase spend) drove overall debit growth higher than credit spend for this holiday period.
PSCU’s average ticket size remained flat for credit ($65.89) and grew by just over 1 percent for debit ($37.71). The low growth in ticket size was due to the consistency of cardholders using their cards for staple items instead of luxury items and could also be due to lower credit limits than the industry. Spend at grocery stores and fast food restaurants remained steady during this period, increasing 1.6 percent and 3.7 percent, respectively.
While average ticket spend remained flat, solid transaction growth pushed debit per account spend up over 6 percent (equating to a $100 increase in spend per account). This trend could be discounted due to lower overall revenue yield from debit. However, while credit interchange is higher than debit, credit continues to experience interchange rate compression. For debit, there was actually a small uptick in interchange yield due to a change in the transaction mix — from in-store to eCommerce and card-not-present transactions.
Increasing eCommerce
Like other high-spend periods, the holiday period amplifies spending behavior changes that indicate an existing trend. In 2017, the same top 15 merchant categories for holiday spend were essentially the same as during the non-peak spend period. There were only slight changes in rank due to more non-discretionary spending during the holiday period. The more noteworthy shift was the persistent and emerging preference toward eCommerce. Card-not-present holiday spend was up 16 percent over the previous year for PSCU Owners, which aligns with Mastercard’s 18 percent reported growth rate. Debit eCommerce spend alone increased by over 22 percent. The data also started to show a downward movement in brick-and-mortar and card-present spend, with only 2.5 percent growth in 2017, down from 8 percent in 2016.
With the eCommerce share of total spend now over 30 percent — and up from the previous year — the growth differential in this space has increased significance.
Interchange Compression
PSCU saw continued interchange compression in credit, but not as drastic of a change as seen in previous years. The rate decreased only 1 bps from 2016 to 2017, but it has decreased 5 bps since 2014. It is important to continue monitoring this trend closely.
While card-present and card-not-present transactions are showing compression, the interchange rate for eCommerce/card-not-present transactions is 12 bps higher than card present.
The increase in eCommerce/card-not-present transactions has offset credit interchange compression a bit, but compression is expected to continue as larger merchants negotiate better terms with networks. Debit interchange rates are relatively stable right now, and the average rate is actually up 1 bps from 2014. These rates have stayed relatively flat due to the mix of transactions, but more complexities in debit interchange analysis are expected in the coming years.
