The cash injection from the third round of coronavirus stimulus payments should spur digital payments growth and retail recovery

President Joe Biden signed a $1.9 trillion coronavirus relief package into law on March 11 that includes $1,400 direct payments to qualifying adults, extended unemployment benefits, and funding toward coronavirus vaccine distribution, per CNBC. This round of direct relief payments has more income limitations than the first two: To be fully eligible, individuals need to have an adjusted gross income (AGI) below $75,000, and married couples filing jointly will need to have an AGI below $150,000. However, this package also makes adult dependents eligible for direct payments. The federal boost to unemployment provides individuals with an additional $300 a week that lasts until September 6.

Digital payments will be key to getting payments to consumers quickly—aiding growth for NACHA’s automated clearing house (ACH) network as well as some peer-to-peer (P2P) payment platforms.

• Direct deposit-based stimulus distribution via NACHA’s ACH network might grow. NACHA helped with the first two rounds of stimulus payment distribution and recently said it will aid this round, which should help get payments to cash-strapped consumers quicker than mailing debit cards and paper checks. This could give the ACH network a boost in payment volume: In 2020, the ACH network processed $61.9 trillion in payments, representing an 8.2% year-over-year (YoY) increase in volume, which likely came on the back of stimulus distribution.
• The ACH network will also power distribution by P2P providers, some of which are stepping in to help customers receive their payments. Providers like Square’s Cash App and PayPal’s Venmo both allowed customers to receive stimulus payments from prior relief packages on their platforms. And because customers will likely turn to them again this time around, they may experience the increases in volume they saw before: Venmo processed $37 billion in total payment volume in Q2 2020—a 52% YoY growth surge. Venmo also launched a check-cashing feature in January that should make it even easier for consumers to cash and spend their stimulus paper checks.

Stimulus payments and extended unemployment benefits should give an added boost to consumer spending, which has already been ticking upward—and that’s good news for payment providers. The first and second rounds of stimulus fund disbursement were likely a major factor in helping increase consumer retail spending: June retail sales grew 5% YoY, and sales for January ticked up 5.1% YoY. And with the latest stimulus package’s $1,400 payments—more than double the amount consumers received in January—retail sales could see even further growth. In turn, retail spending could trickle down to card networks: Visa, for example, experienced an 11% annual increase in payment volume growth in January. The expanded unemployment benefits in this package may also result in increased consumer spending, especially for essential purchases like groceries.