Within the context of a modest decline in the total retail spending spike has been a much greater decline in the month-on-month lift in credit card spend and to a lesser extent, the lift in debit card spend.
In 1996 when the spike in retail spend was 26.1 per cent, credit card spend jumped by 29.9 per cent - but only once in the ensuing 20 years did the increase in credit card spend in December exceed retail spend.
Fast forward to December 2016 and retail spend rose by 23.6 per cent from November to December whilst credit card spend was up by just 2.4 per cent.
At first glance, this appears to be a negative implication for payment card use in the biggest spending month of the year. But we’re not Christmas Grinches for the payments industry.
The first aspect we considered was a transfer or extension of spending spike to other months. This does not appear to be the case; for example, there is scant evidence card spend is being delayed until the January sales.
We think the answer lies in our earlier reference to the increasing use of cards as a payment alternative to cash and other options.
Twenty plus years ago, credit cards were primarily used for relatively high-value discretionary spend such as travel and entertainment with debit cards used for lower value everyday commodity items.
Today both credit and debit cards are much more frequently used for ordinary purchases.
The jump in card sales in December once reflected the use of cards for the purchase of gifts and preparatory holiday spend. This constituted a significant proportion of card use which at the time was largely devoid of what are today considered mainstream card applications.
It’s easy to forget the acceptance of payment cards was unusual twenty plus years ago at the likes of medical practices, schools, utilities, insurance, bill payment and even supermarkets.
The broadening use of cards has reduced the impact of seasonal influences so the monthly distribution of use is much more balanced.
This increase in use can be gauged by considering in December 1996 there were 28.8 million purchases made with a credit card but by December 2016 that had grown to 239.1 million.
Yet this number was eclipsed by 468.7 million purchases made with a debit card so in December 2016, there were 707.8 million purchases using credit and debit cards.
The spike has diminished, not as a result of alternative payment options but due to the wider use of cards across the economy.
No longer do they just come out pre Christmas for discretionary spending but now, via plastic or the mobile, they constitute a major and more balanced payment option.
Mike Ebstein is Founder & Principal at MWE Consulting