PSCU – the nation’s premier payments CUSO and an integrated financial technology solutions provider – published the April edition of the PSCU Payments Index, the goal of which is to provide information and insights to help financial institutions navigate the evolving financial landscape to make informed, strategic decisions for their organizations and members.

 

Throughout the month of March, slowing economic growth was prevalent in multiple key indicators, including consumer purchasing behavior. March 2023 data revealed softening consumer spending and lower average purchases for both credit and debit cards. The year-over-year growth rate in transactions was greater than the growth rate in purchases for both credit and debit cards, resulting in a drop in both average purchase amounts. In this month’s Deep Dive, we explore the ongoing growth in Digital Payments versus the more traditional Physical Card payments.

 

In the Labor Department’s Apr. 12 update, the Consumer Price Index (CPI) increased by 0.1% in March. Despite the increase, the annual rate of inflation experienced a full percentage point drop from February, to 5.0%. This is the ninth consecutive monthly drop from the peak of 9.1% in June 2022. The largest contributor to inflation was again shelter, which offset the decline in the energy index. For the first time since September 2020, grocery prices fell on a monthly basis during March. The Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures price index (PCE), increased in February to 5.0%.

 

The Bureau of Labor Statistics (BLS) reported in its March 2023 jobs report that 236,000 jobs were added for the month, with the continued trend of increased jobs in leisure and hospitality, government, professional and business services and health care. After recent revisions, weekly initial jobless claims reached 246,000 in March, an increased level that is signaling reduced demand for workers. The overall unemployment rate for March finished at 3.5% or 5.8 million people. The slowing job growth and increased initial jobless claims provide evidence that the rate hikes by the Federal Reserve are having an effect. The Federal Reserve’s next meeting is scheduled for May 2-3.

 

The Consumer Confidence Index increased slightly in March to 104.2 (1985=100). The 0.3 increase in March comes from an improved outlook from participants under the age of 55 and households earning over $55,000. In a special question posed last month, the Consumer Confidence Survey surveyed consumers about spending plans over the next six months. The survey found that, despite the slight increase in confidence, consumers expect to spend less on discretionary categories like travel and entertainment.

 

“March revealed further signs of softening in consumer purchasing, with spending growth remaining in the low single digits. For the first time since 2020, transaction growth for credit and debit surpassed purchases,” said Jeremiah Lotz, Managing Vice President, Digital and Data at PSCU. “In this month’s Deep Dive, we provide a new perspective on the primary ways credit and debit cards are used by defining Digital Payments compared to Physical Card payments or true ‘card in hand’ uses. As we reach the two-year anniversary of the PSCU Payments Index, we continue to evolve the report’s data view and analysis to provide relevant insights in the changing financial landscape.”

 

A sampling of key takeaways from the April report includes:

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 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 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. 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.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.Credit card balance transfers generally peak in both the number of transactions and the transferred amount in March of each year. 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 pre-pandemic 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.