According to Seeking Alpha, in June, credit card delinquencies stayed stable at 2.79%, higher than pre-pandemic levels. Net charge-offs declined in June, but banks report that the growth in delinquencies and charge-offs is slowing.

Despite these concerns, U.S. retail sales for June remained flat, which was better than expected. Coresight Research founder and CEO Deborah Weinswig told Yahoo Finance that consumers are still spending, but there is less optimism for the future. However, there are potential interest rate cuts on the horizon, which could impact the retail sector.

As PYMNTS reported, the resilience of consumer spending is also reflected in J.P. Morgan’s latest results, which showed strong card spend in both debit and credit payments. Credit card loans were up 13% year on year, and debit and credit card sales volumes were up 7%. J.P. Morgan CFO Jeremy Barnum stated that there has been little impact from spending shifts in an inflationary environment.

However, credit card delinquency rates have reached a nearly 12-year high. The share of credit card balances that are past due is at its highest level since 2012, indicating that people are struggling to pay off their credit card debt. This is despite many consumers trimming their spending. The New York Federal Reserve also reported rising delinquency rates for credit cards and auto loans across age groups.

Mortgage delinquencies have also increased, reaching a six-month high in June. However, this surge is attributed to the calendar rather than borrower distress. The national delinquency rate rose 14.5% in June from the previous month.

Overall, while consumer spending remains resilient, there are concerns about credit card delinquencies and mortgage delinquencies. These indicators suggest that some consumers are struggling to keep up with their debt payments, despite strong retail sales and spending trends.

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But when it comes to making that purchase, many would-be customers run up against two big obstacles: a lack of transparency around financing solutions, and outdated software first launched in the previous century.

“Consumers go to dealerships and pick out a car, they go to the finance office and it’s non-transparent,” Joshua Tatum, co-founder and CPO at CarPutty, told PYMNTS. “Most consumers don’t know what their buy rate is, what the sale rate is.”

He added that the existing software in the market, largely developed in the 1990s, lacks data-driven capabilities and remains on-premises, despite the auto industry’s multitrillion-dollar scale.

But the potential for greater digital disruption in the auto finance sector is being realized by the marketplace, with solutions reshaping how consumers purchase vehicles, how lenders assess and approve financing, and how the entire customer journey is managed.

Innovating Auto Financing

Advancements within auto financing are part of a larger trend of technological disruption across various lending sectors, as the power of digital technology enables more streamlined experiences across financial services touchpoints.

“Traditionally, auto finance was transaction based. You want a car, you go look for a car, you buy a car, then you have to finance the car,” Tatum explained.

He added that CarPutty’s auto financing solutions redefine how consumers approach car financing by providing a line of credit based on the individual’s financial profile rather than the specific car they intend to purchase. The line of credit allows consumers to finance multiple vehicles, refinance existing ones, or buy out leases.

“It is a very malleable financial product for the consumer to have, that they control,” Tatum said.

And the integration of digital tools is not just a fleeting trend but a fundamental shift in how financial services are delivered and experienced. Concurrent innovations like artificial intelligence (AI) and machine learning are also enhancing underwriting and embedded lending processes. By analyzing consumer data, these technologies offer personalized loan products that better meet the needs of individual borrowers, improving customer satisfaction while reducing the likelihood of defaults.

Tatum explained that CarPutty’s own V3 tool, which stands for valuations past, present, and future, uses AI to give car owners greater insight into the value of their vehicles.

By analyzing tens of thousands of data points per vehicle identification number (VIN), V3 provides real-time and predictive valuations. Consumers can track their car’s current worth, historical value, and projected future value, transforming how they view their vehicles.

“It makes the consumer look at cars as assets versus depreciating assets,” Tatum said. “When the tires wear out, people can now make an informed decision on when to offload their car.”

Data from the February/March installment of the PYMNTS Intelligence “New Reality Check: The Paycheck-to-Paycheck Report“ revealed that for many consumers, car costs are a key concern. The study’s survey of more than 4,200 U.S. consumers found that 27% said vehicle-related expenses had a high or very high impact on their budget in the last year.

Read more: Cyberattack on Software Provider Stalls Out US Car Dealership Sector

Auto Financing in Fourth Gear

While many of today’s digital solutions focus on enhancing the consumer auto experience, they also can provide benefits to dealerships including valuable data on consumer behavior.

“We provide them actually what the consumer is doing with their car,” Tatum said, noting that CarPutty customer dealers are given access to a private portal that can help with retaining customers and identifying potential sales opportunities.

And there is a new cohort of digital natives interested in purchasing a car. PYMNTS Intelligence in the April edition of the report “Why 60 Percent of Gen Z’s Live Paycheck to Paycheck“ revealed that 11% of Generation Z consumers cited buying a car as their top financial goal.

As dealers and consumers alike embrace digital innovation across the automotive finance industry, the data-driven future of automotive financing might just help them reach it.

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The country’s consumers put less money in the bank in June but didn’t spend that money, Reuters reported Friday (July 19).

“The year-on-year decrease in excess savings growth has not yet translated into increased consumption,” Tommy Xie, head of Greater China research at OCBC Bank, said in a note, per the report. “This may be related to households deleveraging by repaying loans early and shifting deposits to wealth management products.”

The Chinese government has tried to encourage consumers to spend rather than save by cutting deposit rates, according to the report.

However, risk-averse consumers have instead shifted their money from bank deposits to wealth management products, the report said.

Consumers are cautious because China has seen a downturn in property values, a fragile job market, weak social safety nets and higher household debt, per the report.

Bloomberg reported in December that it surveyed 20 middle- to upper-class Chinese consumers and found that they were focusing on saving more money for the future, cutting back on non-essential spending and delaying major purchases such as homes or cars.

The report said that even high earners in the country were concerned about their future job prospects at a time when China was suffering an economic downturn characterized by declining exports, a slowdown in manufacturing and a property slump.

During the second quarter, the country’s economic growth fell to its slowest pace in five quarters.

China’s gross domestic product (GDP) grew 4.7% during the quarter, lower than all but one of 28 estimates in a survey of economists, Bloomberg reported Monday (July 15).

In addition, retail sales climbed at their slowest monthly pace in nearly two years, signaling that the government’s efforts to bolster confidence haven’t had much impact on consumers.

Friday’s report by Reuters quoted a note from analysts at Maybank that said that getting Chinese consumers to spend more will require “structural solutions” to the problems they face.

“Instead of quick-fix stimulus, policymakers would need to address the root causes of consumers’ risk-averse behavior and encourage them to spend their incomes,” the analysts wrote.

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The data released Tuesday (July 16) may have come in better than expected — economists had been looking for a month-over-month decline of 0.3% — but digging into the numbers reveals some pullback on big-ticket items. Other categories of discretionary spending got a lift — particularly online.

The overall takeaway might be that coming fully into the summer months, the trends are mixed.

The U.S. Census Bureau reported that non-store retailers — used, generally, as a proxy for eCommerce sales — were up 1.9% month on month.

As to where the dips were, motor vehicles and related parts saw declines of around 2% month on month, and are down 2.2% from June 2023. And though spending on furnishings got a 0.6% bump in June versus May’s levels, that category was still down 4%.

We note that one key discretionary category, the sporting goods/hobby/books category, was 0.1% lower on the month, and is down 3.4% overall.

On an unadjusted basis, retail sales came in at $606 billion, down 5.9% from May and down 0.4% from June of last year; the flat reading is seasonally adjusted and is in line with typical trends.

Where the Spending Was

But the pockets of resilience show, albeit muted in some respects. Might we expect that clothing and apparel would see some spending, given the fact that we’re all getting out and about?

In that segment, sales were up 0.6%, and are 4.3% higher than a year ago. In further underscoring of the movement towards in-person gatherings, Food Service and Drinking places saw sales climb 0.3% in June versus May’s levels. Yet spending at grocery stores was flat during the month, indicating that consumers have allocated their “food dollars” to be used in social settings.

Connect the dots, and we see a consumer that has possibly tuned up the car, bought the frisbees, loaded up on the beach reads … and as we just said, got out and about.

But the pullback from the big-ticket items may be a bit more pronounced and a bit prolonged.  As PYMNTS reported, Big Lots recorded lower-than-expected first-quarter fiscal 2024 financial results, attributing its 10.2% net sales decrease to a slide in spending on big-ticket items, including furniture.

Sixty percent of respondents surveyed by PYMNTS Intelligence have scaled back on nonessential retail purchases due to price increases. And coming into the year, 62% of consumers reported being unlikely to make expensive purchases during the year (outside of gifts, clothing and accessories, vehicles, leisure travel and electronics or appliances).

The chart below, as assembled by PYMNTS, shows just how heady the pace of inflation has been through the last several months and stretching back before the pandemic. Price increases for all retail items, as we calculated, has topped 24% since then.

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The latest data from the Federal Reserve, released Monday (July 8), show that overall, consumer credit rose $11.3 billion in June, far outstripping the $6.5 billion gain on an absolute and annualized basis. That’s a 2.7% annualized surge. 

But revolving credit — which includes credit cards — notched a 6.3% annualized gain in the month, and now stands at $1.3 trillion. Non-revolving credit, tied to auto loans and student debt, gained 1.4% annualized. 

The Fed’s data noted that interest charged on credit card debt in May stood at a 21.5%, where that rate had been 15% before the pandemic. The revolving debt’s held mostly by depositary institutions, at $1.1 trillion of the $1.3 trillion reported.

PYMNTS Intelligence data showed credit cards remain a key and preferred payment method, especially when it comes to everyday spending. Our research indicates that within the various categories of credit profiles, of the 43% of consumers who revolve their credit, 51% live paycheck to paycheck without issues paying their bills, while 65% of those with issues making ends meet do so.

Within the category of “necessary financers,” those consumers spend $92.64 on groceries with credit cards. The use of credit as a lifeline is underscored by the fact that, as we found, more than six in 10 U.S. consumers who earn below $50,000 annually have less than $500 on hand for medical emergencies.

Some Warning Signs?

There may be some warning signs in the mix. As noted here, amid continued pressure on the paycheck-to-paycheck economy, more consumers are making only the minimum payments on their credit cards.

Accounts that are 30-plus days and 60-plus days past due have hit a high not seen in 11 years, according to fourth-quarter 2023 data from the Federal Reserve Bank of Philadelphia.

PYMNTS’ Intelligence data from December indicated that 57% of credit cards are owned by paycheck-to-paycheck consumers. The same study found that 43% of consumers at least occasionally revolve their credit card balances, while 65% of struggling consumers do so, representing a rise from 59% seen at the end of 2022. 

Forty-five percent of bridge millennials and nearly 41% of millennials revolve their balances. Nearly one in three Generation X borrowers reached their credit limits in the past year. 

Part of the May surge might be explained by travel-related spending, which may be corroborated by bank earnings later this week.  

Headed into the summer months, PYMNTS found that more than a third of consumers turned to credit products to manage their finances, while 21% of them used credit products as their top strategy.

PYMNTS Intelligence also found that 27% of consumers turn to credit cards when they are faced with unexpected expenses totaling $5,000 or more.

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By the Numbers

The PYMNTS Intelligence report “The Online Features Driving Consumers to Shop With Brands, Retailers or Marketplaces,” created in collaboration with Adobe, drew from an October survey of more than 3,500 U.S. consumers to better understand their actions, choices and behaviors when they shop online.

The study found that, among consumers who had purchased groceries in the previous month, 23% said that facing higher prices than other merchants was the top issue or challenge faced in the process. This share is greater than those who said the same in any other industry and greater than those who said the same of any other difficulty purchasing groceries.

Meanwhile, another 18% cited the crowds or lines as the top challenge they faced, 10% cited difficulties finding the products they wanted, and an additional 10% cited the limited selection of products.

The Data in Context

Noting the tendency of high prices to alienate consumers and conversely the power of bargains in attracting them, retail giants Walmart and Amazon are competing to offer the lowest grocery prices.

“We have almost 7,000 (price) rollbacks. That’s really helping. In our food categories, we see an even larger spread between eating at home, preparing meals at home, and eating out, which we think can help Walmart over the remainder of the year,” Walmart CEO Doug McMillon told analysts on the company’s most recent earnings call in May.

Meanwhile, also in the spring, Amazon Fresh, the eCommerce behemoth’s mass-market grocery division, began rolling out discounts of up to 30% on 4,000 items. The PYMNTS Intelligence report “Whole Paycheck Report: New Consumer Spend Data Finds Amazon Way Ahead of Walmart” found that by the end of last year, Walmart captured 18.9% of food and beverage consumer spending, while Amazon increased its share to 2.9% from 2.6% in the previous quarter.

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Max Rieck, CFO at Versatile Credit; Chris Guido, head of TD Owned Brands, Sponsorships and Emerging Opportunities for TD Retail Card Services; and Chad Evans, VP of merchandising at AVB Marketing, told PYMNTSTV that embedded financing — and using partners to offer that financing — can help enterprises navigate, and even thrive, amid those choppy macro waters.

Many independent retailers, Evans said, are “stretched pretty thin.”  These firms don’t have the tech know-how, or budget, to shift fully toward new back-end and consumer-facing initiatives that can help boost top and bottom lines, including offering financing options at the point of sale.

Evans noted that his company operates as a proverbial “one stop shop” for enterprises technology and marketing needs.

“They can come to our organization,” Evans said, “and we can help them with their marketing, from video content to online catalogs … and layer in the technology that gives them solutions such as consumer financing, which makes the transactions easier [for consumers] and what keeps businesses profitable.” 

Benefits of White-Labeling

On that last point, to integrate that financing, AVB has partnered with TD and Versatile Credit to offer AVB Complete, its consumer financing program. That program leverages TD’s omnichannel waterfall application processing platform — providing access to financing options from multiple lenders via TD Complete — which is in turn powered by Versatile Credit’s financing solutions, connecting enterprise level merchants and financial institutions including TD. 

“At the end of the day,” Guido said, “the financing program needs to be an extension of the business, and we need to be aligned to help grow the retailers’ businesses.”

As Rieck said, “With embedded lending, we’re meeting the merchant where they are,” as those financing options can be integrated across customer relationship management (CRM) and point-of-sale systems and inventory management. Rieck said the expertise comes in an “off the shelf” manner that “allows merchants to be onboarded quickly into a lender stack that allows them to service consumers’ needs” across the prime, near prime and subprime credit spectrum.

Observed Evans of the partnership effort: “It cuts down on the friction between the retailers, the consumers, and in our case, the financing. … The retailers are definitely all in on” embracing a platform that gives them options to cut down on those frictions.

Beyond improving consumer engagement, Rieck said, the platforms and partnerships give merchants visibility into who’s buying what inside a store and online, and how they’re using credit to do so.  Companies with multiple locations can use granular, data-driven insights to determine how to fine-tune the performance of those locations.

In addition, Evans said, the average ticket goes up, the customer keeps coming back, and they have a credit line with which they can walk back into a merchant, and AVB can set up lifecycle marketing.  The smaller merchants have same “ability” with embedded lending that the larger companies have.

As Evans remarked to the panel, “You’re reaching additional customers that you could not reach before, and customers are able to transact more efficiently because they’re given more options.”

Added Rieck, “Embedded lending allows a relatively frictionless process … drive more sales and further drive the business.”

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.

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The pause comes as the White House defends its new repayment plan against a spate of GOP-backed lawsuits, CNBC reported Sunday (June 30). Enrollees in the Saving on a Valuable Education, or SAVE plan, and have a monthly payment above $0 will not owe anything for now, the Education Department told the network.

The SAVE plan lets borrowers pay just 5% of their discretionary income to repay their student loans each month. People who make $32,800 or less have a $0 monthly payment. The program also expedites the timeline after which many borrowers’ debts are fully canceled.

However, last week saw federal judges in Kansas and Missouri temporarily halt major parts of SAVE, after a group of Republican-led states filed suit arguing the White House was overstepping its authority and trying to find a way to forgive student debt after the Supreme Court blocked the Biden administration’s efforts last year.

Despite the court ruling, the Department of Education has continued to cancel debt for borrowers, including another 160,000 last month: members of the SAVE plan, public service workers like teachers and nurses, or borrowers who were approved for relief because of fixes the department made to its Income-Driven Repayment program.

Also in May, the government forgave $6.1 billion in loans for graduates of the Art Institutes, saying those people were misled by the now defunct chain of for-profit arts schools.

In April, the administration announced a plan that would cancel the debt for 30 million borrowers, a group that includes people who owe more now than when they started repayments due to interest, borrowers who entered repayment 20 or more years ago, students who attended schools that “failed accountability measures or failed to provide enrollees with sufficient financial value,” and borrowers dealing with financial hardships.

These debt cancellation efforts come as consumers are facing increased pressures. As PYMNTS’ Karen Webster wrote in a recent column — with a nod to PYMNTS Intelligence research, corroborated by government stats on retail sales and sentiment — “the other consumer spending shoe is starting to drop.” 

Two-thirds of consumers say they are trading down, while a little more than half of consumers are switching to cheaper merchants. PYMNTS has consistently chronicled that about 60% of American households live paycheck to paycheck.

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By the Numbers

“The Credit Card Use Deep Dive Edition” of the PYMNTS Intelligence series “New Reality Check: The Paycheck-to-Paycheck Report” draws from a survey of more than 3,200 United States consumers, aiming to better understand their financial lifestyles and to gain insight into how they use credit cards to manage their cash flows to get by. 

The results reveal that the majority consumers who do not have financial safety nets to fall back on are left to revolve their credit card balances. As of November, 43% of the population said that they at least occasionally do so. That share rises to 65% for those who live paycheck to paycheck with issues paying off their bills and to 51% for those who live paycheck to paycheck but without issues paying their bills.

Meanwhile, for those with more financial reserves to draw on, only 23% said they at least occasionally revolve their credit card payments.

The Data in Context

Of course, consumers want to pay off their debt. The Federal Reserve’s latest report on consumer credit, released earlier this month, indicated signs that consumers might be pulling back on spending and prioritizing paying down card debt.

The outstanding revolving debt, which includes credit card balances, declined at an annualized rate of 0.4% in April. Earlier in the year, the rate had been markedly positive, exceeding 10%, but it slowed to around 1.5% annualized in March.

PYMNTS Intelligence’s “The Paycheck-to-Paycheck Report: Why 60 Percent of Gen Z’s Live Paycheck to Paycheck” found that 15% of Generation Z consumers said repaying debt is a priority, as did 22% of baby boomers, 23% of Generation X consumers, 20% of bridge millennials and millennials, and nearly 19% of zillennials.

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Atlanticus — parent company of the Fortiva brand — becomes the preferred provider of second-look financing for Synchrony’s private label credit cards and installment loan products.

Florin Arghirescu, senior vice president and chief product officer at Synchrony, told PYMNTS that the “enhanced” partnership is strategically important to his company, emphasizing the necessity of considering all three key parts of Synchrony’s ecosystem when developing solutions: partner banks, consumers and merchants.

“Given Synchrony’s position in the market, with over 71 million active customers and 460,000 merchant locations, we have to look at solutions from both a consumer perspective and a merchant side,” Arghirescu said. “We were doing this well, but there was room for improvement to do this great.”

The decision to deepen the partnership with Atlanticus was driven by extensive market research and merchant feedback. Arghirescu said Synchrony recently surveyed its merchant base and found a need for what he called multisource financing.

“What we learned is that our merchants really wanted Synchrony to provide an integrated program because it helps from both a merchant onboarding and underwriting perspective, as well as for a seamless consumer application or overall experience,” he said.

A key aspect of the expanded partnership is the streamlined enrollment process for both merchants and consumers. For merchants, Arghirescu described the integration as “turnkey,” eliminating the need for separate underwriting and integration processes when working with a secondary lender. For example, if Synchrony signed up with a specific merchant, Atlanticus and its brands will be integrated into the overall ecosystem.

On the consumer side, Arghirescu emphasized a “fully integrated experience that starts with one app,” including features like mobile wallet provisioning and QR code presentation. This seamless integration aims to enhance the customer experience and simplify the application process.

Strategic Partnerships

The partnership aligns closely with Synchrony’s broader strategy of offering diverse payment solutions and expanding its product suite. Arghirescu highlighted the company’s focus on “unique experiences and relentless innovation” in how it displays its products, emphasizing omnichannel and digital capabilities.

A important component of this strategy is Synchrony’s commitment to installment loans and pay later options. “We continue to scale our pay later product, which is the Synchrony installment product. This really broadens the utility of our products,” Arghirescu said. He stressed Synchrony’s belief in the “power of choice,” offering installment products alongside traditional credit options to cater to diverse consumer needs.

Arghirescu also discussed recent innovations in product presentation, including a multiproduct prequalification process that presents consumers with options based on the products they qualify for. “We do see the buy now, pay later or installment product adjacent to our core products to be very powerful,” he added.

While the expanded partnership aims to serve consumers with thin credit files or those new to credit, Arghirescu was quick to clarify that it’s not necessarily indicative of broader economic conditions.

“The consumer is still very, very strong,” he stated, emphasizing that the partnership is more about providing credit utility to specific segments of the population, particularly those looking to build credit.

The collaboration is expected to benefit a wide range of Synchrony merchants, including small businesses, healthcare providers and retail partners. By offering a preferred second-look financing solution under the Fortiva brand, which includes general purpose and private label credit cards as well as installment loans, the partnership aims to help merchants grow by providing responsible financing solutions to a broader customer base.

For consumers who may not qualify for initial credit offers from Synchrony, the partnership provides an opportunity to receive instant second-look offers through Atlanticus’ program. Arghirescu said this approach aligns with Synchrony’s commitment to financial inclusion and responsible lending practices.

David Caruso, chief commercial officer at Atlanticus, expressed satisfaction with the deepened partnership, saying, “This collaboration enhances our ability to provide inclusive financial solutions, helping our merchant partners serve more customers effectively.”

The partnership also includes a provision for customers who demonstrate responsible usage and repayment behavior to potentially graduate to Synchrony credit products over time, further emphasizing the companies’ commitment to helping consumers build and improve their credit profiles. The collaboration is expected to not only increase Synchrony’s customer base but also provide Atlanticus with access to Synchrony’s extensive merchant network.

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