The Payments Index: April 2024
Welcome to the three-year anniversary edition of the Payments Index! Following the success of our weekly Transaction Insights during the first year of the COVID-19 pandemic, our first monthly edition of the Payments Index was published in April 2021. Since that time, the Payments Index has continued to grow and evolve into a key resource for our credit unions and our industry. Thank you to all of our subscribers and readers!
As we continue to integrate PSCU/Co-op Solutions, we are combining our monthly payment trends analysis into a single monthly publication for our credit unions starting this month. To provide our credit unions with a consolidated report and an optimal experience, we will incorporate content from Co-op Solutions’ monthly Payment Trends report into the Payments Index, which will continue to be published monthly.
We hope that the insights from the Payments Index continue to help our financial institutions make informed decisions. Please note that when our credit union populations are reviewed and updated each year for this publication, some metrics may have nominal changes from previously posted results.
Consumer spending, mainly with debit cards over credit cards, remained steady for March 2024 amidst other strong economic indicators that may dampen near-term Fed rate cuts. In the April 2024 edition of the Payments Index, we also revisit a Deep Dive into Digital Payments.
The Consumer Confidence Index was mainly unchanged in March, at 104.7, from a downwardly revised February result (104.8). The University of Michigan Index of Consumer Sentiment increased 2.5 points to 79.4 for March, which marked a 3.3% month-over-month increase. Both surveys showed positive consumer sentiment about the current economic conditions.
Job growth remained brisk in March, with 303,000 jobs created – well above the expected 200,000. The U.S. Bureau of Labor Statistics reported the overall unemployment rate for March dropped slightly to 3.8%, or 6.4 million people. Job gains trended up in healthcare, government and construction.
In the Labor Department’s April 10 update, the Consumer Price Index (CPI) increased 0.4% in March, bringing the 12-month rate of inflation to 3.5%. For the past two months, the increase has been 0.4% with Shelter and Gasoline contributing to more than half of the increase when combined. Core CPI, which excludes the Food and Energy sectors, is up 0.4% for each of the past three months and rose 3.8% year over year.
With March inflation higher than expected and the strong jobs report, there are now increasing doubts about the potential for an interest rate cut in the June timeframe. This after Federal Reserve officials were anticipating slowing inflation this year coming out of their March meeting. The next Federal Open Market Committee (FOMC) meetings conclude on May 1 and June 12.
With the upcoming presidential election, there will be additional scrutiny on economic perceptions and actions as approach election day on Nov. 5. As an example, while there is normal seasonal growth in average gasoline prices, the year-to-date increase for 2024 was higher (14%) compared to the same year-to-date increase for 2023 (8%). Separately, the White House is proposing new legislation to reduce or eliminate student loan debt for an estimated 30 million Americans. We will continue to monitor these trends – and their impact on consumers – throughout the year.
Consumer spending remained steady in March, in line with other strong economic indicators,” said Jeremiah Lotz, SVP, Product Experience, PSCU/Co-op Solutions. “In this month’s Deep Dive, we revisit Digital Payments, where contactless and tokenized credit transactions continue to rise, along with contactless debit transactions. These increases can be attributed to the higher quantity of contactless cards being issued, coupled with greater merchant acceptance, resulting in consumers becoming more accustomed to ‘tapping’ their cards. As we reach the three-year anniversary of the 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:
For March, growth rates for debit activity continued to remain stronger than growth in credit activity. Debit purchases were up 6.6%, while credit purchases were down 0.3%. Debit transactions were up 5.8% and credit transactions were up 2.2% year over year.
The Consumer Price Index (CPI-U) increased 0.4% in March, while the 12-month rate of inflation was 3.5%. Shelter and Gasoline again contributed to more than half of the increase. Excluding the volatile Energy and Food sectors, the core CPI index increased 0.4% from February, putting the 12-month Core CPI index at 3.8%.
As digital payment transactions continue to grow, digital payment purchases represented over half of overall purchases for both credit (54%) and debit (51%) cards. While physical card activity softened, contactless cards “tap and go” activity continued to grow, now representing 19% of all credit card transactions and 14% of all debit card transactions, up from 12% and 9%, respectively, in 2023.
Apple Pay is maintaining its market share dominance in the digital wallet space, representing 93% of digital wallet debit transactions and 89% of digital wallet credit transactions.
Balance transfer usage was down during what is traditionally the seasonal peak month of March. The growth in the number of balance transfers was down 41% year over year, impacted by factors including rising credit card delinquency rates, liquidity concerns and higher interest rates. The average amount of balance transfers was up 6%, or $236, at $4,187.