Various private reports have been pointing to a significant drop in household consumption among Argentines, with double-digit year-on-year declines this year. However, according to a study by the leading payment service provider, which gathers information from various transaction methods offered by businesses, credit card consumption grew in the second quarter of the year, driven by installment plans and a new saving strategy among Argentines, which would be to make purchases in parts.
In other words, beyond the volume records, there has been a significant change in buying habits: the middle class has stopped stockpiling to shield themselves from inflation and instead takes advantage of financing to pay for everything from intermediate goods to consumer products. There is also greater rationalization: people buy what they need for each day or week, without the impulse to beat the rising prices by accumulating in a single transaction.
According to the Payway index, which collects information from POS terminals, QR codes, proprietary systems, e-commerce, market information, and statistics provided by Indec and the Central Bank, in the second quarter of the year, credit card purchase transactions grew by 9.83% compared to the same period last year and 6.97% compared to the first quarter of 2024.
This is related to the growth of installment plans in the second quarter due to the relaunch of the government program Cuota Simple, the reappearance of interest-free installments, and the reduction of the reference rate set by the Government. Specifically, between April and June, installment plans accounted for 29.09% of the volume of credit card consumption, while in the first quarter they represented 20.26%, and in the second quarter of 2023, 22.14 percent.
Meanwhile, looking specifically at the Cuota Simple program, in the second quarter of this year, the volume of payments in six installments grew from 40.68% to 45.28%, at the expense of the three-installment option, which fell from 51.30% to 45.56%. Midway through this period (May 17), the options for nine and 12 installments were added.
“There is a strategy of installments, as a way to lower prices, but through the payment plan and not because the price drops directly. It also has to do with the jump that occurred at the beginning of the year: many sellers adjusted prices to a much higher dollar, around $2000 in some cases,” explained Florencia Fiorentin from Epyca Consultores.
The Payway index also provides a measurement of transactions by category with all cards (credit, debit, and prepaid), which showed a varied behavior in the second quarter of the year. Everything that represents high-ticket items such as Construction, Home and Electronics, Clothing, and Restaurants fell sharply compared to the same period last year: 16.26%; 13.10%; 8.54%; and 7.32% respectively, while Pharmacies, Gas Stations, Supermarkets, and Entertainment grew by 2.87%, 16.39%; 21.88% and 30.93%.
When asked about the performance in supermarkets and gas stations, Fiorentin stated that purchases must be made in parts. In other words, divided based on what is needed for the day to control spending and because there is no fear of price increases if shopping is delayed. “These are smaller purchases, of lower amounts, aiming to rationalize consumption and control it better. Last year, purchases were likely maximized in a single transaction (filling the tank and the shopping cart), and now, since inflation is lower and real income is very down, it makes more sense to buy gradually, which is why there are more transactions. Large expenses are avoided, leading to filling the tank and the cart through several purchases,” she explained.
According to Fiorentin, the second quarter of 2023 was a quarter of acceleration in consumption in terms of money circulation due to inflation acceleration: spending was maximized in the shortest time to get ahead of future higher prices. “In comparison, expectations now are less negative regarding inflation (at that time there was expectation of acceleration, now it is expected to decrease), and other concerns like income or employment are predominant,” she pointed out and recalled that the credit card is the cheapest and most accessible financing mechanism as long as the total statement is paid and not just the minimum.
Meanwhile, Ignacio Carballo, director at the Center for Alternative Finance at the Universidad Católica Argentina (UCA) and a member of the consulting firm Payments and Commerce Market Intelligence (PCMI), said that “people, especially the middle class, are changing their consumption habits and will always take advantage of promotions with cards and will reduce the consumption of durable goods for entertainment, which is, if you will, a more luxurious expense than supermarkets but does not carry the same level of commitment amid uncertainty about durable goods.”
Finally, according to the report, usage of QR codes grew fourfold in the second quarter compared to last year due to the growth in all payment methods (credit card, debit, and transfers), while payments with contactless wallets also multiplied at the same rate during the same period.
“The new regulations from the Secretariat of Commerce, which will be fully effective from September 12, will enable users to pay without handing over their card, which will continue to boost the habit change towards contactless payments, the simplest and fastest mechanism on the market,” concluded Emiliano Porciani, Chief Business Officer of Payway.
Beyond making purchases in parts, another report recently released by the consulting firm Taquion states that 6 out of 10 Argentines claim their level of consumption has decreased. When asked how they would describe their current level of consumption compared to last year, 36% said it decreased significantly, 24% said it decreased slightly, 23% said it remained stable, 9% said it increased slightly, and 8% said it increased significantly.
“Consumption is clearly affected compared to last year in a context of strong recession. However, it is not the same for all categories. What Argentines postpone the most are long-term purchases,” stated the retail and mass consumption monitor.
In the last three months, 62% of Argentines bought at least one item of clothing and footwear, only 39% bought technology or appliances, and one in two made a purchase related to leisure. In this context, at least seven out of ten Argentines prioritized brands they were already familiar with in their latest purchases. “Price is usually the most significant factor, although for goods with a longer lifespan, quality takes on a prominent role. However, familiarity prevails over price: in food and beverages, 48% would switch brands prioritizing price, but 84% buy brands they already know,” she noted.
“When do we change a consumption habit? Sometimes, not even in the worst circumstances,” added Sergio Doval, founder of Taquion. “It is the proximity, security, and familiarity that provide us with that context so that, at the moment of that emotional and ephemeral purchasing action, we decide to take refuge in elements that give us predictability in this world of constant change and stimuli. This brand will take care of me, this one makes quality products, this is the one that invests to improve, this one thinks of me. What stories do brands tell? That is the space they will capture in the hearts and imaginations of people.”