Digital Payments Continue to Surge as COVID-19 Keeps Buyers at Home

The use of digital payments continues to surge due to COVID-19 as large portions of the population remain under stay-at-home orders, a scenario that has created opportunities for credit unions to promote specific products catering to current buying habits.

Card-not-present transactions were up 35% in the first half of May compared to the same period a year ago, while in-person transactions using cards were down 33%, according to a financial analysis from CO-OP Financial Services. A similar trend was seen in year-over-year data from April, when card-not-present transactions increased 30% while card-present spending decreased by 41%.

Online bookstores such as Amazon are especially popular now, with debit and credit spending up 52% and 74% respectively during the first half of May.

“This indicates a strong opportunity for credit unions to begin promoting their card to the top of the Amazon wallet in order to not only capitalize on this spending trend, but also hold on to transactions at this popular merchant for the future,” according to CO-OP Financial Services.

Hardware stores are also seeing a boost, with credit card spending up 35% and debit card spending up 46%. The report tied that increase to early benefits of slowly reopening the economy.

Grocery stores and department stores, though, have continued to see a decrease in year-over-year data.

Debit spending was down 8% and credit spending was down 11% at grocery stores. That was a slight improvement from April, when spending through both categories was down 15%. The rebound in debit transactions could be due to the arrival of stimulus relief checks, but the overall downward trend highlights a shift to online grocery shopping, according to the report.

Debit and credit spending was down 38% and 23% respectively for department stores, relatively on pace with the decrease seen in April. The report noted that several prominent department stores, including J.C. Penney and Pier 1 Imports, have declared bankruptcy.

The financial outlook is not expected to get any better in the near future. “Even as parts of the economy begin to open over the coming weeks, department stores anticipate declining traffic numbers and sales to continue,” according to the report.

Discount stores, though, saw their sixth consecutive week of growth. Debit spending was up 16% for the first half of May, and 24% for credit spending. A key item to watch will be how the opening of other retail stores affects this trend going forward.