Pandemic Payments - Paychecks, Programs and Pivots

Eligible small businesses were allowed economic assistance through the Paycheck Protection Program (PPP), which helped keep payroll flowing to employees and reduced unemployment.

Perhaps an unintended consequence of these programs has been a significant bump in personal savings, which to be fair was a trend also fueled by the impact of Stay at Home orders and other factors that placed some limitations on our ability to spend disposable income. According to U.S. Department of Commerce’s Bureau of Economic Analysis, the personal savings rate of the average American right before the pandemic was 12.6% in February and peaked to 32.2% in April before falling to a still elevated rate of 17.8% in July.

Debit Cards Usage Up, Credit Cards Remain Suppressed

The influx of funds through the above benefits and stimulus programs, and the relaxing of Stay At Home orders as states began to slowly reopen as early as May influenced debit card transaction volumes returning at levels greater than before the pandemic. The mix of spend differed and was heavily focused on grocery stores, other essential retail and restaurants offering curb side ordering. Food delivery apps, Amazon and other online retailers also contributed to a material shift in spend moving from in-person shopping to eCommerce. If your cards were top of wallet you likely benefited from this trend. This has also impacted how interchange income is paid and earned with many of the merchant categories with increased spend preferring PIN-base network routing.

Credit cards experienced a greater drop in transactions, and the volume of credit card spend just hasn’t yet returned to pre-pandemic levels. With less opportunities for travel and larger ticket discretionary spending, it may take some time for credit cards to become a consumer favorite again.

Cash & ATMs Are Like “Clean Coal”

Use of ATMs for cash-based transactions remains suppressed as many of us seek out more seemingly hygienic payment experiences, with contactless credit and debit cards and digital wallets taking the lead. Stay at Home orders also made visiting an ATM less convenient for check deposits with much of this volume migrating to mobile deposit channels.

So What’s Next?

It will be hard to accurately predict what happens next and the 4th quarter of 2020 comes with much uncertainty. Hundreds of thousands of jobs protected by the CARES Act won’t be guaranteed as of September 30, and economic stimulus programs haven’t been extended, at least at the time of writing this article. With less money being earned, savings rates will continue to decline and may dip below pre-pandemic rates. This all impacts how and where we spend our money, and what obligations we pay first. Temporary stays across various cities and states on evictions may expire, and landlords may look to their mortgage provider for additional loan payment deferral relief.

Paying close attention to the money-in money-out relationship of the members and customers you serve will be important, as it will help you develop a better understanding of what is happening next, and will also provide you an opportunity to define how to best help them through the next phase of this pandemic.