Holiday Post-Mortems Show Healthy Volume Gains, Sagging Average Tickets, Shift to Debit

The post mortems on the holiday shopping season are arriving from major processors, and the emerging picture appears to be one of strong consumer spending but drooping average tickets online, in physical stores, and on merchant-branded gift cards. At least one report also found a switch in consumer preferences in December toward PIN debit and away from credit cards, a trend that could cut income for large issuers affected by the Durbin Amendment’s interchange restrictions.

Confirming most retailer accounts of effervescent holiday-season sales, the December SpendTrend report from processor First Data Corp., which tracks same-store sales on credit and debit cards, shows a 6.9% year-over-year jump in dollar volume, following a 7.3% increase in November. Transactions grew 7% over December 2010, up from November’s 6.1% year-over-year increase.

But heavy retail discounting hammered average tickets, which fell 0.1% year-over-year compared to 1.1% growth in November.

Similarly, the Cyber Holiday Pulse Index from rival processor Chase Paymentech Solutions LLC reports robust increases for the November-December holiday season. Transactions ballooned 37% year-over-year, while dollar volume grew 25%, reports Chase, which tracks card-based sales for 50 major online merchants.

Still, in a sign that consumers are increasingly using the Web as routinely as they shop in stores, average tickets fell for the online merchants, with electronics retailers seeing the steepest decline at 9.1%. The processor attributes the drop to such factors as discounting, heavy purchases of digital goods, and widespread free-shipping offers. With free shipping, fewer consumers were concerned about loading up shopping carts to justify the shipping expense, Chase says.

Merchant-issued gift cards also saw a decline in average tickets in December, according to the SpendTrend report. Holiday-season promotions and discounts drove redemption average tickets down 1.1% compared to December 2010. Even so, reload activity on these closed-loop cards was strong, with dollar volume increasing 47% and transactions going up 51%.

Consumers grew concerned about controlling their spending during the period, and so shifted to debit cards, especially PIN debit, First Data’s report says. “The consumer shift to credit earlier in the year subsided in December,” it says. PIN debit transactions increased 8.3% year-over-year, while signature debit jumped 7%. Credit card transactions, by contrast, increased 6.1%. The dollar-volume increase for PIN debit also outpaced that for credit, at 7.9% compared to 6.8%.

This shift to debit, though it could prove a transitory effect of the Christmas season, is likely to exacerbate the toll new rules are taking on the net-interest income of the nation’s largest issuers. Under new Federal Reserve regulations that took effect Oct. 1, issuers with more than $10 billion in assets may earn no more than about 23 cents in interchange income per transaction on debit, approximately cutting in half what they had received. The Fed rules implement the restrictions imposed by the Durbin Amendment to the 2010 Dodd-Frank Act.