By: PSCU 

Despite a slight dip in consumer sentiment, overall spending remained steady through February. In the March 2024 edition of the PSCU Payments Index, we revisit a Deep Dive on Gambling following record-breaking betting around Super Bowl LVIII in early February. More states have legalized online gambling over the past few years, and sports betting activity has become more mainstream through merchants such as FanDuel, DraftKings and BetMGM. Goldman Sachs estimates that the growing U.S. sports betting market, which currently drives $10 billion in spend annually, could reach $45 billion at maturity.

The Consumer Confidence Index dropped in February to 106.7 following three months of gains. This is down from a revised January result of 110.9 as economic uncertainty persists. Despite another month of strong job growth, with 275,000 new jobs reported by the U.S. Bureau of Labor Statistics, the overall unemployment rate for February increased to 3.9%, or 6.5 million people. 

Key Takeaways

In the March 2024 edition of the PSCU Payments Index, the Deep Dive revisits the accelerating popularity of gambling, especially after the significant amount of betting that occurred around Super Bowl LVIII. Key takeaways include:

• Including Feb. 29 (“leap day”), debit purchase growth was 7.1% for February, continuing to outpace the growth in credit purchases, which were up 3.6%. For transactions, debit grew 6.8% and credit grew 5.5% year over year.
   
• On a normalized basis (omitting leap day) debit purchases were up 2.7% and credit purchases were down 0.4%. Debit transactions were up 2.8% and credit transactions were up 1.6%. This normalized view provides cleaner insight into consumer behavior, which is generally steady from the previous month. All comparisons in this edition are based on normalized February 2024 results, unless specifically noted. For the sixth month in a row, the main driver of purchase growth was the Services sector, contributing 0.8% growth for credit and 1.1% growth for debit. Food & Grocery and Restaurants were the leading contributors for credit transaction growth, collectively contributing 1%, while the Goods and the Food & Grocery sectors led debit transaction growth, together accounting for 1.2% of growth. 
   
• The Consumer Price Index (CPI-U) increased 0.4% in February, while the 12-month rate of inflation was 3.2%. Shelter and Gasoline contributed 60% of the increase. Excluding the volatile Energy and Food sectors, the core CPI index increased 0.4% from January, putting the 12-month Core CPI index at 3.8%.
   
• Gambling posted strong results in February, fueled by further expansion of Government Licensed Internet Gambling to a total of 38 states. Florida, Kansas, Kentucky, Maine, Massachusetts, Nebraska, Ohio and Vermont joined the group permitting online gambling, with six additional states considering adoption. However, the burden still lies on the merchant to determine if the cardholder is in a state where the transaction is permitted, based on geolocation.
  
  Overall Gambling debit purchases were up 39%, while credit purchases were up 11%. The top three merchants (FanDuel, DraftKings and BetMGM) represented over 70% share of purchases in this single category that peaked in February, with Super Bowl LVIII occurring in Las Vegas on Feb. 11. 

So what should credit unions do now about gambling? Internet gambling was not facilitated via debit or credit cards until 2018, but changes in regulations and state-by-state adoption now place debit cards as a key payment preference. While online gambling was once viewed negatively, it now represents a growth segment opportunity, particularly among younger demographics. This growth presents an opportunity to keep internal staff informed about this evolving transaction trend, as well as provide members with financial wellness education. Additionally, credit unions are encouraged to investigate fraud cases in these categories, as a substantial portion of these cases have turned out to be first-party fraud.

As we continue to move through 2024, we hope the Payments Index keeps providing valuable insights. We strive to help our credit unions best serve their members by making informed and strategic decisions about the latest trends in consumer sentiment and payment preferences.