Special Analysis: Changes in credit card purchases as a result of the corona crisis
Change in credit card
The dynamic picture is presented on an on-going basis as part of the situation room established by the Bank of Israel Governor at the start of the crisis. It includes indicators from the labor market, the credit market, the capital market, and the foreign exchange market, among others. In addition, in view of the nature of the crisis, the Bank of Israel has formulated designated rapid indicators that should show any changes in the economic trends, which are constantly updated. The payment systems and means of payment are particularly relevant, as they essentially constitute the infrastructure through which economic transactions are made by the public—both individuals and businesses. Indicators from this area include, for instance, cash withdrawals by the public from ATMs, checking activity, and payment card activity.
An indicator of particular interest is credit card activity by industry. This indicator enables the Bank to obtain a very clear picture of the intensity of the crisis’s impact on various industries, and assists in the formulation of the Bank’s policy measures.
The attached graph shows the change in payment card activity in selected industries, relative to the beginning of the year. These are data obtained on a daily basis from Shva (Automatic Bank Services), which is the payment system for payment card transactions in Israel. The data are processed and analyzed by the Bank of Israel.
The graphs shows that the significant decline in the volume of transactions began on the date when the restrictions on economic activity were announced, and worsened with each additional wave of restrictions. In April, payment card purchases on a daily level in the electrical appliances, and clothing and footwear industries declined by about 50 percent relative to the start of the year. In the fuel and transport industry, the decline is about 60 percent, and in the leisure, education, restaurants, and tourism industries, the decline is more than 70 percent relative to the start of the year.
In contrast, beginning with the first announcement of restrictions (March 16), there has been an increase of about 25 percent in payment card purchases at grocery store chains.
When comparing the two periods—from January 1 until the announcement of restrictions (March 16), and from the announcement of restrictions onward—we can distinguish an average decline of about 30 percent in total payment card activity during the closure—from about NIS 1.1 billion per day before the crisis to an average of NIS 786 million during the closure (see the attached table and figure).
The Bank of Israel uses these data to identify risks in the financial system, including credit risks, but also to validate economic growth forecasts and formulate policy measures that will encourage the industries that have been impacted. Moreover, a trend of returning to economic activity should also be reflected in these data. The Bank of Israel intends to publish updates to these data for the public in the future.