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Velera issues December 2024 payments index

Thursday, December 19, 2024 — 12:21:17 (EST)

St. Petersburg, Fla., Dec., 19, 2024—Today, Velera – formerly PSCU/Co-op Solutions, the nation’s premier payments CUSO and an integrated financial technology solutions provider – published the December edition of the Velera Payments Index, the goal of which is to provide information and insights to help financial institutions navigate the evolving financial landscape to make informed, strategic decisions for their organizations and members.

The 2024 holiday shopping season is in full swing and heading toward the rush of the final spending days. As multiple sentiment studies show continued consumer optimism and favorable expectations of inflation on the horizon, consumers spent record amounts online this year during the peak five-day shopping period from Thanksgiving through Cyber Monday. In our December 2024 edition of the Velera Payments Index, we present the second of our three-part installment on holiday spending, which details both results from the peak five-day period (Nov. 28 through Dec. 2) and the month of November.

The Consumer Confidence Index increased in November to 111.7 from 109.6 in October, with a large jump in confidence for consumers under 35. The increases come from positive consumer assessments and greater optimism on future job availability. The November results are at the top end of the range of scores from the past two years. The University of Michigan Index of Consumer Sentiment increased for the fifth consecutive month in early December, rising 2.2 index points (month over month) to 74.0 and marking a 4.3-point increase compared to December 2023. A surge in buying conditions for durable goods, up over 20%, is fueled by concerns of future price increases.

The Federal Reserve Bank of New York released its Survey of Consumer Expectations, showing that household financial situations improved considerably in November 2024, inflation expectations increased for the short and longer terms and the unemployment rate is expected to be higher a year from now.

In the Labor Department’s Dec. 11 update, the Consumer Price Index (CPI) increased 0.3% in November, bringing the cumulative 12-month rate of inflation up to 2.7%. The largest contributor to inflation continues to be shelter, accounting for 40% of the monthly increase. Food increased by 0.4% and energy, which was unchanged in October, increased by 0.2%. The index for communication was one of the few that dropped in November. Core CPI, which excludes the Food and Energy sectors, again remained the same at 3.3% for the 12-month Core CPI rate through November.

In November, jobs grew by 227,000 with increases in healthcare, leisure and hospitality, government and social assistance. Employment declined in retail trade. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate increased slightly for November to 4.2%, or 7.1 million people. Despite the growth in jobs, the labor force participation rate has remained somewhat consistent (62.5% for November) and may support an interest rate cut later this month.

The final 2024 Federal Open Market Committee (FOMC) meeting concludes on Dec. 18 and it is widely expected that there will be a quarter-point rate reduction. Looking ahead to 2025, Fed Chair Jerome Powell is expected to be a bit more cautious given the strength of the U.S. economy. The slight uptick in inflation may be a thorny issue for President-elect Trump with across-the-board tariffs on the horizon.

“The U.S. economy has been surprisingly strong the last few years despite high inflation and corresponding rate increases. It’s no surprise that 2024 holiday spending is on pace to break records as inflation has cooled and consumer sentiment improves. However, community financial institutions need to proactively respond to the shift in consumer payment behavior. It’s crucial to gain market share in digital wallets while the channel is rapidly growing,” said Ryan Myers, senior vice president, Advisors Plus. “Additionally, the continued adoption of buy now, pay later (BNPL) services at the expense of traditional credit cards is a significant threat. We must combat consumer temptation at checkout by ensuring they understand the opportunity cost of not using valuable reward cards and leveraging easy-to-use BNPL services offered by their primary financial institution to better manage spending.”

Key takeaways for November include:

As consumers spent record amounts online from Thanksgiving Day through Cyber Monday (Nov. 28 through Dec. 2), overall debit purchases were up 22.3% and Goods sector debit purchases were up 11.1% within the Payments Index data for this intensive five-day spending period. Overall credit purchases were up 9.0% and Goods sector credit purchases were up 2.6%.

For the month of November, year-over-year growth rates were mixed, impacted by the 2024 Thanksgiving holiday and subsequent peak shopping days occurring five days later than in 2023. However, any appearance of softening in growth will likely be picked up in December, which includes a record Cyber Monday. Debit purchases were up 6.2%, while credit purchases were down 2.1% in November. Debit transactions were up 4.5% and credit transactions were up 0.4%.

For credit, the Goods sector had the biggest impact to the year-over-year decline. For debit, Money Services continued to be the largest contributor to the growth in debit purchases, accounting for 2.0% of the 6.2% year-over-year increase.

The 12-month CPI through November increased by 2.7%, up 0.1% from October. Consumer sentiment indicators remain favorable with a 25-basis point interest rate cut widely anticipated in December.

With two-thirds of the 2024 holiday shopping season reported, growth in Goods sector debit purchases remained comfortably positive, up 4.8%, while growth in Goods sector credit purchases was down 2.2% for the cumulative shopping season through November. Of our tracked major retailers, all were positive for growth in debit purchases and negative for growth in credit card purchases. Amazon had the strongest growth for debit purchases, up 4.2%, and Walmart had the strongest growth in credit purchases, down 0.7% for November.

The full report is available for download here or can be shared as a PDF upon request.

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Source: Company press release.