By Kristen St. Jean
Every year, PSCU uses its Member Insight suite of analytic tools to analyze credit and debit card transactions conducted during the holiday period by members of its owner credit unions. This year’s analysis looked closely at the transaction mix conducted during this two-month period to gather insights on how cardholder purchasing trends are changing.
The research showed the industry as a whole — supported by data from Mastercard and Visa — experienced 5% growth in overall spend from the 2016 holiday shopping season. PSCU-owner credit unions saw an increase in more than 10% over this same time frame, more than double the industry growth rate. Credit and debit card purchase growth was driven by two factors: growth in the number of cards purchasing and average purchase spend per card.
Spending Growth Drivers
Both credit and debit had healthy growth in cards actively purchasing during the 2017 holiday period (versus the same time the previous year) — almost 6% for credit and 5% for debit. Average debit spend (per card purchase spend) drove overall debit growth higher than credit spend for this holiday period.
PSCU’s average ticket size remained flat for credit ($65.89) and grew by just over 1% for debit ($37.71). The low growth in ticket size was due to the consistency of cardholders using their cards for staple items instead of luxury items and could also be due to lower credit limits than the industry. Spend at grocery stores and fast food restaurants remained steady during this period, increasing 1.6% and 3.7%, respectively.
While average ticket spend remained flat, solid transaction growth pushed debit per account spend up over 6% (equating to a $100 increase in spend per account). It is tempting to discount this trend due to lower overall revenue yield from debit. However, while credit interchange is higher than debit, credit continues to experience interchange rate compression. For debit, there was actually a small uptick in interchange yield due to a change in the transaction mix — from in-store to e-commerce and card-not-present transactions.
eCommerce and Card-Not-Present Growth
The holiday period, like other high-spend periods, often amplifies spending behavior changes that indicate a new or persistent trend. In 2017, the same top 15 merchant categories for holiday spend were essentially the same as during the non-peak spend period. There were only slight changes in rank due to more non-discretionary spending during the holiday period. The bigger news is the persistent and emerging preference toward eCommerce instead of traditional merchants. eCommerce and card-not-present holiday spend was up 16% over last year for PSCU Owners, which corresponds to Mastercard’s 18% reported growth rate. Debit eCommerce and card-not-present spend alone increased by over 22%, exhibiting a growing trust for using debit cards online. The data also started to show a downward movement in brick-and-mortar and card-present spend, with only 2.5% growth in 2017, versus 8% the previous year.
With the eCommerce/card-not-present share of total spend now over 30% — and up from 2016 — the growth differential in this space, versus traditional merchants, has increased significance.
All About Interchange
PSCU saw continued interchange compression in credit, but not as drastic of a change as seen in previous years. The rate only decreased one basis point from 2016 to 2017, but it has decreased five basis points since 2014. It is important to continue monitoring this trend closely.
While card-present and card-not-present transactions are showing compression, the interchange rate for eCommerce/card-not-present transactions is 12 bps higher than card present.
The increase in e-commerce/card-not-present transactions has offset credit interchange compression a bit this year, but compression is expected to continue as larger merchants negotiate better terms with networks. Debit interchange rates are relatively stable right now, and the average rate is actually up one basis point from 2014. These rates have stayed relatively flat due to the mix of transactions, but more complexities in debit interchange analysis are expected in the coming years.
Holiday Insights
Applying a strong analytic approach helps set strategy to adapt to changes in the business environment. More than 450 PSCU owners regularly use the CUSO’s powerful suite of Member Insight analytics tools to extract actionable insights from their card and transactional histories to make informed adjustments around optimization strategies for growth and profitability.
PSCU found those owners with actively managed programs saw higher than average spend growth during the 2017 holiday shopping season. In fact, when performing a full year-over-year comparison, actively managed programs averaged over $1,000 more in per-account spend. Founded in 2004, PSCU’s Advisors Plus focuses on providing consulting on portfolio performance, as well as marketing services and business-to-consumer marketing campaign execution. PSCU owners that utilize Advisors Plus outperform credit unions in multiple areas when compared with those that do not.
Kristen St. Jean isManager of Business Intelligence & Analytic Solutions for PSCU. St. Jean joined PSCU in 2015 with 15 years of business intelligence and analytics consulting experience. Throughout her career, she has excelled in building enduring partnerships with leading technology providers and organizations. Kristen’s team at PSCU is responsible for the data that is accessed through Member Insight, a best-in-class analytics platform for the credit union industry.