By Roy Urrico
Consumer spending remained strong throughout the three-month 2024 holiday shopping period, despite increased budget consciousness, lower consumer confidence and uncertainty about the future. These are some of the findings in January 2025 edition of the Velera Payments Index, which also featured the last of a three-part “Deep Dive” on holiday spending.
St. Petersburg, Fla.-based Velera – formerly PSCU/Co-op Solutions – which describes itself as the nation’s premier payments CUSO and an integrated financial technology solutions provider, designed the Velera Payments Index to help credit unions and other financial institutions make strategic, data-informed decisions on behalf of their members and customers.
“Consumer spending was remarkably sustained throughout the holiday season in the face of increased budget consciousness, lower overall consumer confidence and real uncertainty about the future. The continued growth of online shopping and mobile purchases, as reflected in card-not-present (CNP) transactions, was also notable. Looking ahead to 2025, we see both optimistic trend lines and some worrying indicators,” said Taylor Nelms, senior director, market insights and advisory services for Filene Research Institute, in the report.
Nelms added, “For many credit union leaders, there are concerns about asset quality deterioration on their balance sheets – which may impact consumer spending, especially considering record levels of consumer credit card debt. Additionally, the unsettled regulatory and policy environment is generating additional uncertainty. It will be critical for credit unions, in the face of this uncertainty, to avoid decision paralysis and remain proactive in their strategic decision-making.”
Key Index Takeaways
The Consumer Confidence Index declined in December 2024 by 8.1 points to 104.7, especially in the areas of future business conditions and incomes. Jobs grew by 256,000 in the last month of last year, with increases in healthcare, government and social assistance. The increase was much larger than expected. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate slightly decreased for December to 4.1% or 691 million people.
For the month of December, year-over-year growth rates strengthened, impacted by the 2024 Thanksgiving holiday timing and subsequent peak shopping days occurring five days later than in 2023. Debit purchases were up 4.3% and credit purchases were up 4.0% in December. Debit transactions were up 2.5% and credit transactions were up 3.0%.
For both credit and debit, the goods sector had the biggest impact on the year-over-year increase, accounting for roughly half of the growth in purchases. Money services had been the top contributor to debit purchases growth since March 2024. In December, money services accounted for 1.4% of the debit purchases growth while goods accounted for 1.9% of the overall 4.3% increase.
The 12-month consumer price index (CPI) through December 2024 increased by 2.9%, up 0.2% from November 2024.The energy index increased 2.6% and accounted for 40% of the overall increase.
Deep Dive: Holiday Spend Part III
The third and final installment of Velera’s annual Deep Dive on holiday spending, which aggregated the results of the overall shopping season from October to December 2024, revealed that year-over-year consumer spending growth in the goods sector peaked in December. Credit and debit transactions were each up 5.3% for the goods sector when compared to December 2023.
For the cumulative holiday season, year-over-year credit purchases in the goods sector were up 0.6%, compared to being down 1.2% a year ago, while debit purchases were up 5.4%, compared to being up 2.7% for the same period in 2023. Growth in card not present (CNP) for the three-month holiday period in the goods sector grew faster than card present (CP). For transaction growth for the cumulative holiday period, credit CNP was up 3.9% and credit CP was down 0.9%, while debit CNP was up 8.2% and debit CP was up 1.1%.
Digital merchants within the goods sector, which Velera said mainly consisted of Amazon, had the largest year-over-year positive growth and the largest percentage of purchases. For the three-month period, credit purchases were up 3.5% and debit purchases were up 8.9%. Discount stores (Target, Walmart, Ross, HomeGoods, Dollar General), wholesale clubs (Costco, Sam’s Club, BJ’s Wholesale Club) and digital goods (Google, Apple, Microsoft) all experienced positive year-over-year growth. While each of these categories were positive, growth in debit purchases outpaced growth in credit purchases for the cumulative holiday season.
The three “bellwether large retailers” (Amazon, Target and Walmart), like the overall goods sector, peaked in December for growth in both credit and debit purchases. These results, noted the Deep Dive, are exclusively based on the Velera Payments Index card populations with these select merchants.
Amazon maintained the strongest growth of the three, with credit purchases up 4.5% and debit purchases up 8.0% for the cumulative holiday period. For the same period, transaction growth was up 5.1% for credit and up 8.7% for debit.
For the three-month holiday season, both Target and Walmart saw their peak for growth in credit purchases in December and the peak for growth in debit purchases in November. Also, both Target and Walmart saw much higher growth during the last week of the year compared to 2023. For Walmart, credit purchases were up 1.4% and debit purchases up 3.0% year over year for the October to December period. Walmart transaction growth was up 2.0% for credit and up 2.5% for debit. For Target, credit purchase growth was up 0.2% for the 13-week period and up 3.7% for debit. For transaction growth, Target was up 1.6% for credit and up 4.3% for debit year over year.
“Growth in Card Not Present was the clear winner in the 2024 three-month holiday spending season. For each of the segments (overall goods sector, Amazon, Target and Walmart), each saw growth in CNP outpace growth in card present activity (transactions and purchases) for both credit and debit,” Velera Payments Index’s Deep Dive noted. Additionally, growth in debit (both transactions and purchases) grew stronger than its credit card counterpart for the holiday season.
For the overall goods sector, debit CNP transactions were up 8.8%, debit CP transactions were up 2.2% while credit CNP transactions were up 2.1% and credit CP transactions were down 1.1%. Both credit and debit CNP growth skyrocketed in December, with double-digit growth for each segment, transactions and purchases, with one exception – growth in credit CNP transactions for the overall Goods sector grew by 9.2%. For December transactions, debit CNP Goods grew by 11.1%, Walmart CNP debit grew by 31.6% and CNP credit grew by 21.5%, Target CNP debit grew by 20.5% and CNP credit grew by 21.3%, and Amazon (which includes Whole Foods) CNP debit grew by 12.1% and CNP credit grew by 10.4%. Comparatively, CP activity for debit and credit, transactions and purchases all grew within the range of plus 3.2% to minus 2.0%
What Should Credit Unions Do Now?
“Many credit unions are concerned about asset quality deterioration on their balance sheets,” the Index reported. “This could impact consumer spending levels, especially considering the record levels of credit card debit. The unsettled regulatory and policy environment is leading to uncertainty about the future as well. Credit unions should remain proactive in their decision-making.”
Velera recommended that credit unions should:
Begin planning for the second quarter of 2025. “Execute card awareness communications, which center on consumer convenience as well as card product benefits. Highlight features such as alerts and digital wallets and include ‘set and forget’ messaging for recurring bill payments, memberships and subscriptions.”
Consider implementing a home improvement campaign. This, the Index stated, could drive transactions during peak spring and summer spending in this merchant category.
Capture balances from competitive credit cards by offering balance transfers at special rates. In addition, offer big-ticket promotions or extra reward points for members using their credit union’s credit card. “The new year is also a good time to evaluate members’ credit limits to ensure they are within reason and can support these additional balances and transactions.”