Today, Velera published the June edition of the Velera Payments Index, which includes a deep dive into digital payments:
Consumer spending for May suggests continued momentum, albeit at a slower pace than prior years. Growth in year-over-year purchases and transactions was positive, with debit results stronger than credit. Part of this is supported by low unemployment and steady job growth, which aids consumer confidence. Consumer goods again had the highest contribution to growth in May 2025 for credit and debit purchases. And while inflation has been trending downward, worries over the impact of tariffs have created anxiety that has been somewhat suppressed in the near-term. In our June 2025 edition of the Velera Payments Index, we explore rewards and loyalty program results and the need to understand consumer preferences for credit unions to remain top of wallet.
After five months of consecutive declines, the Consumer Confidence Index increased in May, up 12.3 points to 98.0. All three expectation components – business conditions, employment prospects and future income – improved from the April low. While the Expectations index, which considers consumers’ short-term view of income, labor market and business conditions, increased 17 points to 72.8 in May, it remains below what has been the recession threshold of 80. The May 2025 University of Michigan Index of Consumer Sentiment remained unchanged from April at 52.2. While the current outlook on the economy is unchanged, potentially influenced by the temporary pause in tariffs, concerns about the future remain top of mind for consumers.
In the Labor Department’s June 11 update, the Consumer Price Index (CPI) increased 0.1% in May, bringing the cumulative 12-month rate of inflation up to 2.4%. Shelter, which continues to account for a significant portion of the monthly increases, is up 0.3% in May. The food index increased 0.3%, while the energy index declined 1.0% in May as a result of lower gasoline prices. Core CPI, which excludes the Food and Energy sectors, increased by 0.1% in May following a 0.2% decrease in April, bringing the 12-month Core CPI to 2.8%
Jobs grew by 139,000 in May, with increases in healthcare, leisure and hospitality, and social assistance, offset by a decline in jobs with the Federal Government. Reuters reports that economists believe that uncertainty on the actual level and lasting impacts of the President’s import tariffs are contributing to slower job growth and complicating business planning. Also in the current jobs report, both March and April new jobs figures were downwardly revised, lowering the three-month average of new jobs from 155,000 to 135,000. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate was unchanged for May at 4.2%, or 7.2 million people. Contributing to the steady unemployment rate was the reduction of 625,000 people who dropped out of the workforce in May.
Much of the economic uncertainty stems from the expected impacts of the Trump import tariffs and the reciprocal impact of tariffs on U.S. exports. The World Bank recently cut the global growth forecast by four-tenths of a percent, due to these “significant headwinds” emanating from the United States. While the 90-day pause on reciprocal U.S.-China tariffs would end on Aug. 12, 2025, there is news from the White House that a “deal is done,” locking in Chinese imports at a 55% tariff without additional increases. At the same time, President Trump continues to pressure Fed Chair Jerome Powell to reduce interest rates by up to a full percentage point – although there is little expectation in the market that a reduction will occur. Two scheduled Federal Open Market Committee (FOMC) meetings remain this summer, concluding on June 18 and July 30, where subsequent rate adjustments could be communicated.
“Rewards and loyalty programs are most effective when they reflect the real behaviors and preferences of members. Our analysis shows that while Boomers and Gen X generate the majority of rewards earnings, they tend to redeem less frequently – often saving for larger redemptions or letting points expire. In contrast, Millennials and Gen Z are more active redeemers, using rewards as part of their everyday financial strategy. Income also plays a key role, with lower-income members redeeming at higher rates, suggesting a greater reliance on the tangible value rewards provide,” said Annie Cox, vice president, Product Management, Velera. “These patterns highlight the importance of segmentation – not just by age or income, but by lifecycle and behavior. Credit unions that design flexible, personalized rewards experiences based on these preferences and relationships will be better positioned to build loyalty, increase engagement and become the trusted, go-to financial partner for every member segment.”
Key takeaways for May include:
- Growth for both credit and debit for May was steady and positive, influenced by the uncertainty around import tariffs. Debit purchases were up 5.2%, with the Goods sector contributing just over one-third of the growth. Credit purchases were up 1.3%, with the Goods sector contributing just over half of the increase. For May, debit transactions were up 3.2% and credit transactions were up 1.8%.
- In this month’s analysis of loyalty and rewards programs, we see the following trends:
- The two oldest generational segments (Boomers+/Gen X) historically represented 67.3% and 88.5% of rewards accounts and earnings, respectively, while the remaining generations collectively accounted for only 11.5% of rewards earnings, despite accounting for 32.7% of account mix.
- Boomers+ and Gen X demonstrated lower rewards redemption/earned ratio at 14.6% and 15.9%, respectively, compared to younger cohorts ranging from 26.5% to 34.9%.
- Cash consistently represents the majority of Rewards redemptions, with the exception of the holiday season, when a downturn in cashback was mirrored by an uptick in gift card redemptions.
- The 12-month CPI through May increased by 2.4%, up 0.1% from April. The shelter index continues to contribute significantly to the monthly increase. Energy decreased by 1.0% due to drops in gasoline. Core inflation, which excludes food and energy, is up 0.1% at 2.8% for May.
The full report is available for download here or can be shared as a PDF upon request.