With the number of card transactions growing more rapidly than card spending, the per-transaction component of card fee income becomes more important relative to the interchange rate. This nuance is worth bearing in mind when setting your credit union’s card strategy.
While overall growth in card use is a major success story, important implications lurk in the details. Debit card uptake has been nothing short of remarkable, with the average household using these cards 1.5 times daily.
In fact, one could attribute all consumer noncash payment growth since 2000 to debit, because gains in credit card and ACH did no more than offset declines in check use.
There has been a significant jump in credit card activity since 2012 alone, both in terms of the number issued and the number showing purchase activity. To some extent this reflects the ongoing recovery from 2008’s financial crisis.
Though on an upward trend, credit card debt remains 12% below its 2008 high water mark (as I discussed in a July blog).
In other words, more consumers are paying their bill in full each month rather than carrying balances.
What’s also interesting is that transactions per active credit card have remained stable, indicating that consumers are spreading purchases across an increasing number of cards.
This runs counter to the conventional wisdom of savvy rewards chasers consolidating their purchases on fewer cards to maximize benefits. It also implies an opportunity to grab “top of wallet” status.
A subtle point regarding the Fed’s business methodology carries another potentially valuable nugget of opportunity. The Fed estimates a net increase of eight million U.S. “businesses” since 2000. This figure flies in the face of the narrative of protracted stagnation in small business generation.
However, the Fed is quick to point out that “nonemployer firms” generate nearly all of this increase, adding that it aligns with a seven million drop in employees at “employer firms” over the same period.
This seems to be a byproduct of the emerging “gig economy,” and could indicate an opening for a new suite of products to address this growing segment’s needs.
For the first time, the Fed has released sortable data from its payments study in Excel form. If anyone wants to dig further into these numbers and share observations, I’m happy to continue the dialogue in the comments field below.
For its part, the Fed plans to release further detailed analysis, including information on payment fraud trends, in coming weeks. And in another first, the Fed will build on its triennial cycle and issue high-level annual updates on payment instrument trends, based on a more limited sample of large institutions.
The current study covers activity through 2015. Some researchers have noted a slowdown in debit growth since then. It will be interesting to see what the Fed's figures for 2016 reveal later this year.
GLEN SARVADY is managing partner at 154 Advisors and senior payments expert with Best Innovation Group, a CUNA consulting partner. Follow him on Twitter via @154Advisors. His views do not necessarily reflect those of Credit Union National Association.