In last week’s blog post I highlighted core findings from the recent Fed Payments Study and compared those findings with ones from our SpendTrend offering. Today, I’ll continue that discussion, finishing it with a look at recent trends in credit.

Since December 2010, we have noted that credit usage has posted strong growth over the past three months, while debit usage concurrently slowed during the same period. This trend correlated well with recent increases in consumer economic sentiment, as well as a tangible increase in perceptions of the durability of the economic recovery. Even more interesting, this return to credit does not appear to have been accompanied with a return to higher levels of revolving debt. As a result, it appears that this return to credit has largely been among transactors—consumers who pay off their credit card bills in full every month. The majority of consumers are still not ready to bite off more revolving debt.

While higher gas and food prices have not shifted this trend into reverse, we believe that they have begun to have an impact, both on consumer sentiment and behavior. Several measures of consumer economic sentiment have recently declined This is clear in the most recent consumer sentiment numbers, which according to several recent measurements have chalked up notable declines. In addition,  March 2011 SpendTrend data—out today—indicates that growth has been steady despite tough comps and a late-falling Easter holiday, but that the fundamentals appeared to weaken. Signature debit volume jumped as credit growth slowed, while declines in Travel and Holiday spending put negative pressure on Mid-Atlantic dollar volume growth. The full report is out today. (See below for more information.)

We will continue to watch to see how these and other unsettling trends impact consumer behaviors.

Electronic Is Displacing Paper. In my last post, I referenced results from the Fed study. I want to close with a look at the corollary to the increasing use of electronic cards, which is—of course—a concurrent reduction in demand for paper checks. Between 2006 and 2009, the number of checks written declined by 5.7% per year, the Fed reported, while the value of checks written declined even further, by an outsized 8.6% per year. A similar trend was notable in terms of value and volume of checks paid.

CONTEXT: What’s clear is that paper checks remain in a secular decline, as the benefits of “swiping” a payment rather than “writing” it have become increasingly evident in recent years. The expansion of electronic payments infrastructure at the POS has made it increasingly convenient to do so. As a result, regardless of whatever shift in medium occurs within the electronic payments category moving forward, the long-term structural shift away from paper is destined to continue.

With the exception of the recent rebound of credit, the Fed’s numbers serve as a solid validation of ongoing trends impacting the look and feel of the payments industry. And given the pace of change, be sure to hold on to your hat—that validation suggests that the pace of change isn’t set to slow anytime soon. Indeed, while the Fed study didn’t concentrate on the alternative payments space, two recent announcements reflect the continuing rate of change.

First, Discover Financial Services announced it was entering the person-to-person (P2P) payments market in partnership with PayPal . Called Money Messenger, the Discover service is powered by PayPal technology, and lets cardholders send funds to other cardholders, or those without a Discover card.

In addition, jockeying for position in the US mobile payments world continues. In a recent interview with Bloomberg , Sprint Nextel Corp. announced the firm’s intention to launch an open mobile payments platform for physical location purchases, designed to compete with (and, according to Sprint, be released before) Isis, the competing m-payments platform from AT&T, T-Mobile USA, and Verizon Wireless, with Discover Financial Services providing the payments rails.

For more info on the Fed study, see www.frbservices.org . The March 2011 edition of SpendTrend was released today. The press release can be found at   http://www.firstdata.com/en_us/about-first-data/media/press-releases/04_11_11 .