Dive Brief:

• Major payments industry analytics and consulting firm The Strawhecker Group released data last week showing 21% growth in consumer spending on credit and debit cards nationwide in July compared to the same month last year. When compared to July 2019, to adjust for the impact of COVID-19, spending still up nearly 20% on a two-year compound annual growth rate basis.
• Credit and debit card spending by consumers in July was higher in most of the 250 industries covered by TSG’s year-over-year analysis released Aug. 25.
• Nevada, South Carolina, Delaware, and Arkansas showed the biggest jumps in spending with increases exceeding 25% between July 2019 and July 2021. “The high growth states [reflect] a mix of industries and economic trends more than the shift to card [use] from cash,” TSG President Mike Strawhecker said by email.

Dive Insight:

The growth rates in card spending in most sectors from entertainment to orthodontia dovetails with the rising dollar amounts Americans are adding to their cards annually. 

“The card and payments industry have major tailwinds driving growth that were sped up due to COVID,” said Strawhecker, which dampened spending last year as businesses shut down and people stayed home, and then accelerated it this year when those trends reversed.

“The reasons for the shift are multi-pronged," TSG said. "Many high-growth industries may be benefiting from consumer preferences shifting to digital goods like buying apps on a phone, new volume shifting from check to card, as well as the proliferation of e-commerce spending on services like online grocery shopping.” 

Total U.S. card processing volume last year was valued at $7.6 trillion, up 4% from $7.3 trillion in 2019, according to a separate TSG report reflecting figures from the card companies Visa, Mastercard, American Express, and Discover Financial as well as digital payments company PayPal. Before the start of the pandemic, that spending was growing about 11% annually.

The growth in card spending rates aligns generally with the overall increases in spending in many categories, regardless of payment method. Strawhecker pointed to 2020 U.S. Census data showing retail food and retail spending was up 15.8% in July over the year before.

In a separate survey TSG conducted with Visa Consulting & Analytics in July 2020, 26% of consumers said they expected to use cash less after the pandemic than before. The study concluded that the pandemic accelerated the use of contactless e-commerce payments as 60% of respondents felt contactless payments were safer in thwarting the spread of the COVID-19 virus.

Among the high-performing industries cited in the TSG report, with significant card growth between 2019 and 2021, were a mix of sales in disparate areas that may reflect the pastimes Americans turned to as the pandemic took hold, including spending for aquariums, car rental, video streaming and sporting goods.

Consumer spending accounts for 70% of the U.S. gross domestic product and 70% of that spending is now electronic, reflecting increased merchant acceptance and growing consumer use of card and mobile payments, TSG said. That underscores payments as “the backbone of the U.S. and global economies,”  TSG said in an Aug. 25 news release accompanying the latest data.  

The few areas that saw a decline in credit card spending during the two year-period also likely reflected the impact of the pandemic. They included payments for public fines, travel agencies, bus lines, and child care services.

Data from Omaha, Nebraska-based TSG represents nearly 50% of all card-accepting merchants in the U.S. and captures a statistically representative sample of the U.S. payments market by merchant size, according to the firm.