By Beth Phillips, CO-OP Director of Strategic Portfolio Growth and John Patton, CO-OP Senior Payments Advisor
As the summer winds down and cooler temperatures prevail, get ready for a busy fall payments season. Personal consumption expenditures rose by 1% in June, as businesses reopened, and consumers activated their long-delayed travel, dining and entertainment plans. As the economic recovery continues, we are anticipating an active autumn highlighted by a supercharged back-to-school shopping season and the return of business travel. The return to the office and classroom will cause spending patterns to increase across many merchant categories and payment channels that may have been more dormant during the pandemic.
Following are our payment trends predictions for the fall season, along with some recommendations for how credit unions can meet their members’ payment needs and enhance the member experience:
3 Spending Predictions for this Fall
- Back-to-School Gets Back to Normal: According to a recent survey by the National Retail Federation, back-to-school spending is expected to reach an all-time high this year. Meanwhile, Deloitte predicts a 16% increase in spending, well above the typical 1-3% growth seen in most years.
Several factors are driving this surge, including the widespread return of students to the classroom after a year of remote and hybrid learning. This trend will be even more acute among college students, whether returning to campus or leaving home for the first time, necessitating a wide range of purchases from technology like laptops, tablets and educational software, to school supplies, clothing and furnishings for the dorm room.
- Last-minute Leisure Travel: This summer saw a massive jump in leisure travel, with roughly 2 million travelers passing through U.S. airports each day. Visa announced a 20% improvement in domestic travel spend from the fiscal second quarter to the third quarter of this year, and cross-border travel spending also improved.
We predict consumers will continue to book leisure travel right into the fall, squeezing in trips before returning to school or full-time work schedules, and driving continued increases in the dining, camping and entertainment categories as cardholders make up for time lost during 2020’s pandemic lockdowns.
- Boom in Business Spending: As consumers scramble to schedule last minute vacation time with family, the changing foliage will also herald a shift to business travel, as companies begin to relax employee travel restrictions and industries dust off the traditional fall in-person conference season.
For example, Capital One announced in its recent second quarter earnings call that corporate travel and entertainment (T&E) purchase volume was up 3% in June 2021 as compared with June 2019, a positive sign that such activity is returning to pre-pandemic levels.
The reopening of offices also means that workers will be shopping for new work clothes and dining out more, helping to spur growth in those merchant categories.
It’s important to keep in mind a few factors that may throw the above predictions in doubt. One is the increasing threat of the Delta variant as it spreads around the world and across the country. Any widespread return of lockdowns and social distancing mandates would dampen the economic recovery and hence consumer spending trends. Likewise, we are keeping a close watch on recent inflationary trends. Although most economists believe the recent rise in the Consumer Price Index (CPI) is primarily caused by short-term supply and demand factors, a longer-term trend could also have a dampening effect on the economic recovery.
What Credit Unions Should Do Now
Here are a few areas to focus on as your members prep for a busy fall shopping season.
First, although in-store shopping is making a comeback, don’t forget about your contactless and digital wallet strategy. According to an August study from PYMTS.com, 47% of consumers are very interested in using digital cards in-store over the next year. Make sure you are offering a compelling contactless card product and using every opportunity to provision your members’ cards into their wallet of choice.
Second, to boost interchange income, be sure to promote growing merchant categories like travel and tourism, department stores, sporting goods and camping. Use engagement campaigns and rewards programs like CO-OP Lifestyle Loyalty to incent your members and strengthen your Primary Financial Relationship.
Lastly, don’t forget about the increasingly popular subscriptions category, which continues to show phenomenal growth. Everything from monthly lifestyle memberships, like Stitch Fix, Dollar Shave Club and Hello Fresh, to streaming services and even automobile brands are moving to a subscription model. In its most recent earnings call, Apple announced its paid subscriptions hit 700 million, up 150 million from last year. With television’s Emmy Awards coming up on September 19, expect popular streaming channels that create original content, like Netflix, Hulu and Amazon Prime to get a boost in subscribership. Now is the time to ensure your cards are set up as the preferred payment method in all these popular services.
Optimize Your Payments Program with CO-OP
Is your payments strategy meeting members where they are? Look beyond basic transaction data and create an action plan to achieve all your payment program goals. Begin by accessing CO-OP Insights Center to activate your data in meaningful ways. Then, reach out to CO-OP SmartGrowth Consultant Services to take your program to the next level.