Despite an increase in spending on Visa Inc. cards in both July and September (August saw a decline), card-spending growth dropped during the third quarter as consumers remained cautious about their finances, according to Visa Europe’s UK Expenditure Index released on Oct. 7.
Visa Europe bases its index on spending on all Visa debit, credit and prepaid cards. The company worked with London-based financial information services company Markit Group Ltd. to produce the report.
During the quarter, card-spending growth decreased to 7.9% from 11.3% a year earlier. And though card-spending growth declined, spending is back to pre-recession levels, according to Visa Europe.
Despite the “total amount spent on cards, especially debit, reaching its highest levels since the start of the recession, it seems unlikely these strong growth rates will continue as consumers remain cautious about the future,” Steve Perry, executive vice president of relationship management, sales and commercial development for Visa Europe, said in a recent news release. “The data does suggest, however, that there will be a muted recovery rather than another recession.”
In total, consumers spent £87.6 billion (US$139.4 billion or 99.7 billion euros) using 91 million Visa debit and prepaid cards in the United Kingdom, up 6.8% from £82 billion spent during the same time last year. Visa Europe did not include last year’s card total in the index.
The average value for all card transactions during the quarter was £48.4, down 2.4% from £49.6 during the same period from last year, reflecting the post-recession levels of the fourth quarter when consumers also were very cautious about spending, Visa Europe said.
“In both Europe and North America, consumers have remained very conservative with their spending, even though we are no longer in a recession,” Gwenn Bézard, research director at Boston-based Aite Group LLC, tells PaymentsSource. Many consumers also still are concerned with the high unemployment rate and are not spending as much, he adds.
Additionally, “some European countries such as Ireland, Greece and Spain are not doing well financially because of the impact of the recession as well as high unemployment rates,” Bézard says. Moreover, some countries’ governments are not delivering on [financial] reform, which leads to lower consumer sentiment.”
As such, merchants most likely will have to work hard, especially during the upcoming holiday season, to entice consumers to spend money, Visa Europe’s Perry contends.
What do you think about this? Send us your feedback.
