Christmas in July- The Fed Delivers New (2024) Payments Data

The Federal Reserve has a quirky pattern of sharing results of its flagship payments research over major holidays. Usually that holiday is the Christmas/New Years window, with initial findings from the Fed’s triennial Payments Study shooting down the chimney. For whatever reason this cycle’s initial results were delayed until the eve of America’s 250th birthday.

Sure, the data’s already 18 months old but it’s nonetheless the most authoritative snapshot of payments activity we’ve got. Here are my main takeaways, which don’t map entirely to the Fed’s self-selected highlights:

• Credit cards can’t stop, won’t stop- Use of general purpose credit cards grew by more than 10% annually from 2021-24, both in terms of number of transactions and the dollars conveyed. It’s remarkable for a product as presumably mature as credit cards to continue to expand at a double digit clip. It’s also double the growth rate of the prior three-year period (2018-21), and more than double the 2021-24 rates (in number of transactions) of every other payment instrument tracked. A separate New York Fed report shows consumer credit card debt rising at a more moderate pace; hopefully this means much of the increase is fueled by “transactors” paying off their bills each month rather than “revolvers” ballooning their balances.
  
  
• Was 2021 a bigger outlier year than we realized? In hindsight, the Fed’s 2021 data appears to reflect an unusual point in time. Bear in mind the Fed collects much of this data every three years, then assumes a constant rate of change over the period. Recall what was happening in 2021: so-called “revenge spending,” and higher-than-normal checking/savings balances juiced by stimulus checks without the chance to splurge on travel and entertainment. Under such circumstances it’s not surprising to see debit growth outpace credit. Now the pendulum has swung back, with 2021-24 growth rates more resembling the 2015-18 period than 2018-21.
  
  
• Is payments growth actually slowing and if so, why? Curiously, the Fed chose to tout the notion that the number of non-cash payments posted “the largest three-year increase since the FRPS began estimating U.S. noncash payment volumes in 2000.” However this is by the slimmest of margins- if true at all- and that absolute growth is from a larger base. In percentage terms, noncash payments growth of 4.9% was the slowest since 2015-18. I don’t see this as a major issue, other than to wonder whether some payments to middlemen are being cut out of the system, or if there’s “leakage” to payment types not captured by the Fed. More concerning is the reported value of payments growing at a CAGR of only 2.9%- well below inflation (CPI) of 3.7% over the same period. This implies the value of noncash payments declined in real terms over the past 3 years? Hard to believe, but worthy of further exploration if those figures are even in the ballpark.  
  
  
• Checks refuse to die- Check volumes continue their longstanding decline, and remain the only instrument on a downward trend. However, nearly 10 billion of them (9.7B to be precise) were still written in 2024. Moreover, the $24.7 trillion of value checks carry annually remains more than double the total of credit and debit cards combined.  

Hopefully more insight can be gleaned on some of these open questions when the Fed follows up with its “detailed findings”- which hopefully will appear sooner than this year’s mistletoe.