Pandemic Payments– Paychecks, Programs, And Pivots
The COVID-19 pandemic has affected all of us in ways we hadn’t initially thought were possible; from the minor inconveniences of not being able to find toilet paper or yeast for that “pandemic sourdough” trend you caught wind of on social media, to more meaningful impacts from “Stay at Home” orders and the limits placed on our everyday lifestyles and activities. But none of that compares to the anxiety we’ve all felt trying to figure out how to navigate this experience while keeping yourself and your loved ones safe, or the grief and sadness from losing someone close to you.
In the slip-stream of the pandemic, perhaps you now have a mass amount of customer data that can help you quantify impact and maybe get a sense of where this is all heading next.
Deposits, Payroll, Stimulus, and Benefits Payments
For a fair number of American consumers, there seemed to be plenty of deposit transaction activity occurring during the pandemic. If you weren’t impacted by furloughs or considered an “essential business,” then your payroll either stayed the same or was slightly reduced. Those who were unfortunately impacted by a job loss or payroll cut may have qualified for unemployment, and for a period of time, might have been supported by emergency government programs which paid an additional $600 weekly as part of the CARES Act.
Paying close attention to the money-in moneyout relationship of the members and customers you serve will be important
Additionally, the United States Treasury Department delivered 159 million Economic Impact Payments valued at over 267 billion dollars to eligible Americans in just a few short months. While not perfect, the speed of this program was partly possible by sending 120 million payments directly into accounts via the Automated Clearing House (ACH) payment network,35 million sent out as paper checks, and 4 million payments in the last round as prepaid debit cards. 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 the 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 percent in February and peaked to 32.2 percent in April before falling to a still elevated rate of 17.8 percent 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 curbside 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 PINbase 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 into 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.