Studies find growth in fast, digital payments

Consumers are stepping up credit and debit card usage and exploring faster payment methods, according to reports issued by the U.S. Labor Department, PSCU and the U.S. Faster Payments Council. Researchers attribute these spending behaviors to current economic headwinds, citing data from the Consumer Price Index (CPI) and Bureau of Labor Statistics.

Jeremiah Lotz, managing vice president, digital and data at PSCU, stated that March 2023 showed softening, single-digit growth in consumer spend with credit and debit transaction growth surpassing purchases.

"In this month's Deep Dive, we provide a new perspective on the primary ways credit and debit cards are used by defining Digital Payments compared to Physical Card payments or true 'card in hand' uses," he said in a statement. "As we reach the two-year anniversary of the PSCU Payments Index, we continue to evolve the report's data view and analysis to provide relevant insights in the changing financial landscape."

CPI, BLS by the numbers

PSCU researchers noted the CPI increased by 0.1 percent in March 2023 as the inflation rate dropped for the ninth consecutive month from its peak of 9.1 percent in June 2022 to its current level of 5 percent ,and grocery prices also fell throughout the month.

In addition, the Bureau of Labor Statistics reported 236,000 jobs were added and jobless claims reached 246,000 in March, reflecting reduced demand for workers as job growth slows, suggesting the Federal Reserve's interest rate hikes may be having an impact on the job market. The Fed's next meeting is scheduled for May 2 and 3.

Following are additional highlights from PSCU's April study:

• Discretionary spending growth: Credit card transactions were up 4 percent, and purchases were up 6 percent. Debit card usage improved for discretionary and non-discretionary transactions, up 8 percent and 4 percent, respectively.

• Digital payments: Card not present, mobile wallet and tokenized transactions represented 44 percent of all credit transactions, 58 percent of all credit purchases and 37 percent of all debit transactions in March 2023.

• Credit card balance transfers: Total balance transferred dollars were up 13 percent compared to March 2022, and the average balance transfer was $4,414, up 14 percent year over year.

• Credit card delinquency rates: Total credit card balances were up 13.2 percent for March compared to a year ago, while average credit card balance for active accounts was $2,917, up 8.3 percent (or $223) year over year.

  The full report is available at www.pscu.com/insights/topics/payments-index .

Faster payments

The 2023 Faster Payments Barometer, published in April 2023 by the FPC and Glenbrook Partners and sponsored by Volante Technologies, explored progress and perceptions around faster payments, trends, use cases and challenges in the United States. Researchers polled a range of payments stakeholder segments, including financial institutions, core processors, payment network operators, business end users, acquirers, fintechs and more between Feb. 14 and March 22, 2023.

FPC Executive Director Reed Luhtanen stated the barometer provides insights into current adoption trends and challenges in faster payments. "Finding potential solutions for the most pressing faster payments issues will support increased adoption and help advance the industry forward," he said. "The FPC and its Members will continue to tackle these issues through collaboration and dialogue that will provide a roadmap for the future."

Luhtanen further noted the fourth annual edition of the report shows growing momentum and increasing demand for faster payments. Forty-four percent of survey respondents are already implementing FedNow, 62 percent are in the process of implementing real-time payments, and 77 percent have implemented Zelle, while 85 percent have deployed same-day ACH services, he stated.

Faster network connections

Elizabeth McQuerry, partner at Glenbrook Partners, has also seen growing interest in faster payments and believes the planned launch of FedNow this summer will propel the overall industry forward. "Even so, the persistent challenges that we see, including the lack of ubiquity and interoperability, suggest that there are real limits that need to be addressed for the momentum to continue," she stated.

McQuerry also noted that interoperability remains top of mind for organizations, with 92 percent of survey respondents hoping to achieve interoperability across all compatible systems. For organizations planning to implement RTP and FedNow, 47 percent plan to connect to faster payments networks via third-party service providers, and 32 percent plan to connect directly to each network.

Deepak Gupta, senior vice president, global head of Payments-as-a- Service at Volante, feels that it is not surprising that most survey respondents want to connect through service providers that can quickly connect to multiple networks. "The right universal connectivity approach, coupled with the ability to bring faster-payment customers experiences to market at pace, will help early adopters differentiate from their competition," he said.

A copy of the report is available at fasterpaymentscouncil.org/userfiles/2080/files/Barometer_Infographic_04-17-2023%20Final(1).pdf .

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