Today, Velera – formerly PSCU/Co-op Solutions, the nation’s premier payments CUSO and an integrated financial technology solutions provider – published the October edition of the Velera 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.

Consumer spending further softened in September, with decreases for both debit and credit. Influencing these lower consumer spending were regional impacts from Hurricane Helene in the southeastern states, namely Florida, North Carolina, South Carolina, Tennessee and Georgia, and the continued impact of lower gasoline prices. In much anticipated news, the Federal Reserve cut interest rates by a half-percent in September and may be close to delivering an “economic soft landing.” In our October 2024 edition of the Velera Payments Index, we revisit a Deep Dive on Money Services, which includes mostly peer-to-peer (P2P) payments.

The Consumer Confidence Index fell in September to 98.7 (from an upwardly revised 105.6 in August), dropping toward the bottom of the narrow range for the past two years, with all five areas of the index declining. The largest drop in consumer confidence comes from the 35- to 54-year-old segment, while the most confidence comes from those under 35. When asked about plans to buy more goods or services over the next six months, there is a slightly greater preference for purchasing goods over services. Delinquency expectations continued to increase in the survey and are at their highest point since April 2020. Following two months of gains, the University of Michigan Index of Consumer Sentiment decreased in October by 1.2 index points to 68.9. Long-term economic trajectories are now less clear with elections on the near-term horizon.

In September, jobs increased by 254,000, with gains occurring in food services and drinking places, healthcare, government, social assistance and construction. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate changed little for September, down by 0.1 percentage point to 4.1%, or 6.8 million people.

In the Labor Department’s Oct. 10 update, the Consumer Price Index (CPI) increased 0.2% in September, bringing the cumulative 12-month rate of inflation down to 2.4%. Three-quarters of the increase in September came from two areas, as shelter rose 0.2 percent and food increased by 0.4 percent. The energy index dropped 1.9 percent, after a 0.8 percent decline in August. Core CPI, which excludes the Food and Energy sectors, increased to 3.3% for the 12-month Core CPI rate through September.

The Federal Reserve cut interest rates by a half-point on Sept. 18 and hinted that two additional quarter-point cuts could come by the end of 2024. While the next Federal Open Market Committee (FOMC) meeting concludes on Nov. 7, influence from the stronger-than-expected jobs report could put a damper on near-term reductions.

"P2P payments have experienced tremendous growth over the past several years, initially spurred by the pandemic as consumers moved away from cash and physical transactions,” said David Albertazzi, director of Retail Banking & Payments at Datos Insights. “We now see that many consumers have permanently shifted their purchasing habits, including the adoption of digital wallets. While platforms like Venmo, Zelle and Cash App are not true digital wallets, their rising usage closely mirrors the growth of digital wallets. Also significant is that this trend isn't limited to younger demographics; according to a recent Datos Insights survey, more than half of consumers under age 57 have adopted digital wallets and engage in P2P payment transactions."

Key takeaways for September include:

• For September, year-over-year growth rates were at their lowest levels for 2024. Debit purchases were up 1.3%, with two-thirds of the growth coming from Money Services (Cash App, Venmo, Zelle, etc.). Credit purchases were down 1.6%, with half of the reduction coming from the Gasoline sector (0.9%). Debit transactions were up 1.5% and credit transactions were up 0.6% year over year.

• Multiple survey measures reported declines in consumer confidence, increases in delinquencies and overall consumer stress, which may potentially constrain spending during the upcoming 2024 holiday period.

• Money Services, mainly comprising P2P payments, continued to provide strong growth for debit card purchases, resulting in an increase as a percentage of overall debit card purchases. For September, growth in Money Services debit purchases was up 9.6% year over year. As a percentage of overall debit card purchases, Money Services represented 12.2% for September 2024, up from 11.2% a year ago.

• The September delinquency rate was up 15 basis points compared to August 2024, reversing its August improvement and resuming a multi-month trend of increases. Delinquencies are now at their highest point since January 2024.   

• Contactless transactions on dual interface cards continued to show significant growth. As of September, almost one out of every two Card Present transactions were tapped (50% for debit and 47% for credit). 

The full report is available for download here or can be shared as a PDF upon request.