America is getting back to business

The economic outlook is brightening, and so is the market for payment processing services. Consumer spending surged in March and held steady in April, thanks to government stimulus payments and more Americans getting vaccinated against COVID-19. Plus, a majority of small business are open or planning to open for business, following pandemic-related shut downs.

Consumer spending up

A survey of consumer sentiment, published by McKinsey and Co. on May 13, 2021, revealed that overall consumer spending is “on a path to recovery with monthly credit card spend showing shoots of growth and smaller losses thus far in 2021.”

More than half of U.S. consumers expect to spend additionally this year by “splurging or treating themselves.” Higher income millennials are planning to spend the most, McKinsey found. Among those who plan to splurge, about half are “pandemic-fatigued” and plan to spend soon, particularly on discretionary items, such as apparel, beauty and electronics, McKinsey said. The other half is waiting for the pandemic to fully resolve, when they plan to splurge primarily on experiential categories, like restaurants and travel.

Among all consumers surveyed, about 30 percent plan to spend more at in-person restaurant dining, out-of-home entertainment and travel, McKinsey said.

Not surprisingly, McKinsey found that all retail categories are seeing increased online spend. Online credit and debit card spending rose 35 percent between January 2020 and January 2021, the consultancy reported. Consumers plan to continue spending online, especially for restaurant curbside pickup, and digital health and wellness tools.

SMBs reopening

Meanwhile, a report just published by The Strawhecker Group and the ETA revealed that 92 percent of small and mid-sized companies are now open for business or in the process of reopening. Specifically, 47 percent of SMBs are now fully open, compared to 39 percent this time last year. Thirty two percent are partially open (up from 23 percent). Another 13 percent remain temporarily closed, but are planning to reopen (down from 25 percent last year) and 8 percent are closed indefinitely (down from 13 percent).

The COVID-19 pandemic ushered in changes in the way consumers shop, and the TSG-ETA survey, like the McKinsey survey, revealed many of those changes are here to stay, particularly those that minimize physical contact.

“Our survey found that SMBs are implementing new strategies to meet customers’ desire to pay in a safe way,” said TSG President Mike Strawhecker.

And those changes seem likely to hold. For example, 41 percent have seen a shift in sales from in-person to online sales. Among those that have seen a shift to card-not-present channels, the largest group (30 percent) said the shifts were on the order of 10 percent to 24 percent. What’s more, nearly one in five SMBs have not shifted back from an online sales channel adopted during the pandemic Here’s a rundown additional SMB trends revealed by the TSG-ETA survey.

• 26 percent have added a new sales channel
• 30 percent have added in-store contactless payment acceptance
• 27 percent of have seen an increase in contactless payments
• 26 percent have added mobile apps for customers
• 20 percent are now using mobile POS devices to accept card payments (up from 14percent a year ago)
• 17 percent have added an online delivery/pickup service
• 46 percent said more customers are paying with debit cards
• 42 percent said more customers are using credit cards
• 22 percent said customers are using cash less
• Among cash-only merchants, 42 percent are considering a move to card acceptance

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