Monthly economic data from Paymark: Tapping out

Tapping out

Wednesday 6 June, 2018

Paymark processed nearly 109 million transactions in May. These transactions reveal information about the economy, and about our behaviour. Two patterns stand out at present: we are embracing the seamless “tap and go“ payments that contactless cards offer but we are also taking a more cautious approach to spending in general.

Contactless payments are growing in popularity and their impact on the card use patterns are starting to be seen in the data.

Spending did pick up in May from the holiday-induced slowdown of April but the annual growth rate remains modest, especially in the major urban regions, confirming that spending has decelerated this year. The month-to-month pick up shows as a seasonally adjusted 1.0% jump in spending through Paymark between April and May, following the 1.4% decline in April. The more telling indicator statistic is the 4.0% growth rate between May 2017 and May 2018, both below the 4.8% average of the first four months of the year and below the 5.4% of 2017.

As has been the case for several months now, the lowest growth rates are occuring in Auckland/Northland (2.0% annual growth in May), Wellington (4.1%) and Canterbury (4.1%). Conversely spending growth is strong amongst the smaller regions such as Gisborne (12.6%), Marlborough (11.1%), Palmerston North (10.7%), Wairarapa (10.3%), Wanganui (10.2%). The smallest of the Paymark regions, West Coast (5.7%), experienced growth between the two extremes.

The Auckland/Northland trend is well-established (see Figure 2) and is likely linked to housing markets. Wellington, Canterbury and Nelson show a similar pattern. Elsewhere the trends are mixed. West Coast is coming off relatively strong growth last year, as are Bay of Plenty, Hawke‘s Bay, Otago, South Canterbury, Southland, Taranaki and Waikato. Conversely growth has generally been stronger of late in Gisborne, as well as in Marlborough, Palmerston North, Wairarapa and Wanganui.

Figure 2: Paymark All Cards data underlying growth on month year earlier for selected regions

Within each region, the sector spending patterns are mixed (see Figure 3). For example, Gisborne spending growth in May was evident across all major sector groupings (although not all merchants and sub-sectors experienced growth e.g. Gisborne Footwear spending down 27%). West Coast spending growth was also general but at a lower average rate. But patterns were more patchy in Auckland/Northland, with retails sub-sectors such as clothing, electrical and recreational goods all recording lower spending in May, as was also the case for Accommdation (within the Hospitality sector) and amongst non-retail merchants groupings such as banks, insurance, rental cars, gyms and providers of travel-related activities. Some of these patterns appear to reflect strong tourism activity in Auckland twelve months earlier.

Figure 3: Paymark All Cards data underlying growth for sectors within selected regions (May 2018 versus May 2017)

Irrespective of cyclical patterns across regions and sectors, a growing preference for contactless payments is showing through strongly.

The number of transactions through Paymark dropped in the first five months of this year for the traditional methods of swiping (using the magnetic stripe), dipping (putting the card chip into the terminal) and simply exchanging card details, in total by 0.2%. But total transactions were up 4.7% to almost 600 million. The contactless card increase of 42% has contributed to all the growth in card usage so far this year.

Contactless cards have been slow to catch on in the early stage of their deployment but as more terminals are deployed that can read these cards, and as retailers become more comfortable with the use of contactless cards, the increase in usage is starting to ramp up.

Figure 4: Paymark All Cards data number of transactions by payment mechanism (Jan-May 2018 versus Jan-May 2017)

ENDS

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