5 Things Earnings Season Shows About the US Consumer

Earnings season, like clockwork, offers up a dizzying mosaic of data and qualitative analysis of revenues, profits (or lack thereof) and high-level views of the economy.

The state of the consumer also comes into focus. In taking stock of what banks, payment networks and digital-only platforms have shown in their earnings reports, supplementals and on the conference calls, a few key trends stand out — from the technology consumers use to make payments in an omnichannel world, to the pressures they face as they grapple with debt.

Contactless Gains Favor in-Store

PYMNTS has long tracked the rise of the click-and-mortar shopper in the post-pandemic age. The lines of commerce are blurring as consumers go back to physical stores but want at least some digital imprint throughout the journey.

Once consumers are in a store, contactless payment methods are the preferred option. Visa detailed in its earnings report that 74% of all face-to-face transactions it logs are contactless. The United States has lagged but is catching up, as tap to pay was up 13 percentage points in the first quarter to 57%.

Mastercard said in its earnings report that contactless payments now represent 72% of all in-person, switched transactions.

Tokenization remains another growth area for payment networks, as Visa had, by the end of the year, issued 12.6 billion tokens, representing a 44% surge from the previous year.

As Visa CEO Ryan McInerney said on the company’s earnings call, “If you just look at eCommerce on tokenized transactions, we have six percentage point higher approval rates. That [translates into] significantly higher sales for our merchant partners and 30% reduction in fraud rates, which is good for everybody in the ecosystem … Tokens have become one of our most important platforms for enabling innovation.”

Mastercard CEO Michael Miebach said that during 2024, the company tokenized 4 billion transactions per month, a rate that is 40 times higher than it was six years ago.

“There are many use cases for tokens,” he said during the company’s earnings call. “Take, for example, the next click of our multi-option payment solutions. We’re rolling out the Mastercard One credential, which allows consumers the flexibility and control to set their payment preferences in the banking app for each transaction if they so choose to beat credit, debit, prepaid, or buy now, pay later — it’s all behind one credential, one token.”

Debit Is Growing More Quickly Than Credit

As for the types of payments themselves, consumers are opting to use the cash that is in their bank accounts.

Although credit cards are still being used at the (online and in-store) registers, Visa’s debit volumes in the U.S. accelerated to 8% growth year over year, while credit volumes grew by 7%.

Mastercard saw a similar trend, as U.S. consumers’ debit gross dollar volumes were up 10.7% year on year, and credit gross payment volume gathered 7.8% over the same timeframe.

Banks, such as J.P. Morgan and Bank of America, reported combined debit and credit spending, and volumes were in the mid-single digits year over year.

The PYMNTS Intelligence report “Debit Dominates in-Store Shopping While Credit Owns Online” found that there’s a bit of bifurcation in payments choice, depending on the setting. Debit is used more often in-store, and credit is used more often for online purchases (perhaps due in part to the enhanced liability and fraud protections that come with those cards as hackers and criminals relish the anonymity of eCommerce).

BNPL’s Momentum Seems Unstoppable

Several firms took stock of the momentum of buy now, pay later (BNPL), as paying over time helps consumers manage their spending while getting what they want immediately, particularly during the robust holiday shopping season.

Affirm’s earnings report revealed 23% growth in its active user base, and gross merchandise volume surged 35% to $10.1 billion, an accelerating pace. Transactions per active consumer were 22% higher year on year.

Meanwhile, although PayPal’s overall earnings results showed some slowdown, BNPL remained a bright spot. PayPal users spend about 30% more on average when using BNPL, and through 2024, the firm drove approximately $33 billion in total payment volume tied to paying over time, up 21% versus 2023.

Loans and Consolidating Card Debt

Taking on personal loans means that consumers are tapping alternatives to credit cards to keep up with their financial obligations in a high interest rate environment, and in many cases are paying down their card debt with those loans.

SoFi saw personal loan originations of $5.3 billion, while LendingClub’s personal loan growth was 13% year over year to $1.8 billion. Upstart’s personal loan segment was up 89% year over year.

Discretionary Spending: Thinking Twice Before Buying?

The start of earnings season revealed that — through commentary on earnings calls from the likes of Citi — high-end consumers were continuing to spend. J.P. Morgan pointed to “healthy” consumers. Capital One’s outlook, in the words of CEO Richard Fairbank, depicted consumers as a “source of strength.”

However, January’s retail data showed a slump that was greater than consensus had expected, particularly in discretionary categories like hobbies and electronics. Walmart, as of Thursday morning (Jan. 20), is guiding to sales growth that has been lower than previous years.