Electronic cards spending flat in December

credit cardRetail sales in December using electronic cards were disappointing compared to the previous months, according to a Paymark study.

Paymark, which processes more than 75 per cent of card transactions in New Zealand, said retail sales using electronic cards in December were relatively flat, rising only 1.2 per cent by value compared with the 5 per cent growth from the preceding 11 months.

According to Paymark, December again proved to be a busy month with spending topping $6 billion though the Paymark network but the growth rate was low.

The study shows there were 120.7 million transactions, 2.0 per cent more than in December last year, but this amounted only to a 1.2 per cent increase in the value of goods and services traded though the network, which is below the 5.0 per cent p.a. underlying growth rate of the previous 11 months.

In Auckland/Northland, the value of transactions did not grow at all December to December. The fastest annual growth in spending occurred away from the major centres in Wanganui (6.6 per cent), Palmerston North (5.8 per cent) and Southland (5.7 per cent).

Darren Hopper, head of E-commerce, Digital Experience & Marketing at Paymark, said the figures show an interesting trend in the payments’ landscape.

“Paymark transactions reached new highs before Christmas and over the month in general but figures also point to several pressures on merchants,” Hopper said. “The annual growth rate was generally low and below the rate of the recent months that would have shaped retailer expectations.”

Hopper said they also saw widespread discounting which appears to have accelerated the trend towards lower average transaction value.

“There continues to be growing use of scheme credit and debit cards which adds to the bank fees paid by merchants. And, to further pressure the bricks and mortar merchants, e-commerce growth has accelerated of late.”

According to the company, majority of Paymark transactions are still with traditional bank-issued debit cards, totalling 70.7 million in December, but these were 2.1 per cent fewer than a year ago.

“The transaction growth experienced was dominated by the higher fee-incurring credit and debit cards issued by the credit card companies, with these transactions numbering 50.0 million, up 8.5 per cent.”

The study shows across all cards, the average transaction value was $49.77, down 0.8 per cent on 12 months earlier. The average value has been falling for several years as cards are increasingly used for lower-valued transactions but the recent decline also reflects downward price pressure within some sectors.

Fuel prices are known to have declined but this drop had a negligible effect on the change in the average transaction value across all sectors. More significant was the lower price of electronic and electrical goods, showing as a 15.2 per cent lower average transaction value among electrical and electronic goods retailers.

“Anecdotally there were also many sales, starting back on Black Friday (November 23), and this may have pushed the average transaction value lower as well, although this is difficult to see in Paymark figures as only the total transaction value is recorded,” Hopper said. “There may have been more, or fewer, items than usual within each transaction as well.”

According to Paymark, as usual, spending patterns varied among merchant groupings. Toy retailers recorded 11.3 per cent higher spending through Paymark December to December. Also relatively strong were hardware and home decorating stores (6.1 per cent) and chemists (5.5 per cent).

Spending growth on food and liquor was high relative to other merchants, including among supermarkets and liquor stores (3.9 per cent) and restaurants, bars and cafes (6.3 per cent), although both sectors experienced growth rates below those of recent months. Spending declines occurred for accommodation merchants (-2.5 per cent), as well as among the above-mentioned electrical and electronic group of merchants (-19.9 per cent) and by clothing and footwear merchants (-4.7 per cent).

Spending through Paymark e-commerce channels still makes up a relatively small portion of Paymark transactions at only 6 per cent of total transactions in December ($370 million), but the annual growth rate of 16.1 per cent is rapid. In contrast, spending across the rest of the network grew at a mere 0.4 per cent.

The busiest day of 2018 recorded by Paymark before Christmas was December 20 with $296 million worth of transactions processed, although this remains below the peak day of 2017. The busiest period was at 1216 on December 22 when a record 182 transactions per second were switched through the network.

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