Credit Card Trends, Issues and Opportunities · Credit Card Trends, Issues and Opportunities...
Transcript of Credit Card Trends, Issues and Opportunities · Credit Card Trends, Issues and Opportunities...
Credit Card Trends, Issues
and Opportunities
Jennifer Linton
February 1, 2019
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In This Session
The credit card business has become increasingly competitive and commoditized. Protecting your valuable member relationships and delivering high-value services has never been more crucial.
Understand the changing landscape and identify areas of opportunity to grow your portfolio.
In this session, we will discuss:
• The latest industry trends
• Emerging issues and challenges
• Strategies to address new opportunities
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Industry Trends
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Competition for New Accounts Has Never Been Higher
It is becoming increasingly challenging to differentiate card products in a rewards saturated market.
1.5% and 2% cash back programs are flooding the market1
89
135
Average Rewards Cost (bps)Top Cashback Products
2010 2017
Acquisition offers are at an all time high
58%The share of card offers
with an acquisition incentive
The average acquisition incentive has been increasing
steadily
$138
$143 $140
$149
$164
Q32016
Q42016
Q12017
Q22017
Q32017
Source: Mintel Group. US Consumer Credit Card Acquisition Marketing Overview
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Net Charge-Offs and Consumer Credit Card Debt are forecasted to continue climbing
3.2%2.9% 2.8% 2.9%
3.4% 3.5%
2013 2014 2015 2016 2017 2018
1.0%
3.4%
4.7%
3.1%
5.7%
2.8%
2013 2014 2015 2016 2017 2018
Net charge-off rates as a percentage of
average outstandings – 3Qtr
Revolving consumer credit debt
YoY change (%) October
Sources: Federal Reserve G.19 Report released December 7, 2018. Revolving debt is seasonally adjusted.
5
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Where did the profits go?
Sources: Federal Reserve Bank, Mercator Advisory Group August 2018, NCUA September 2018
4.94%
4.36%4.04%
3.76%3.49%
2.72%2.40%
0.80% 0.75% 0.76% 0.78%0.96%
2014 2015 2016 2017F 2018F 2019F 2020F
Credit Card Banks All Credit Unions
Return on Assets: All Commercial Banks vs. Credit Card Banks vs. Credit Unions
2014–2020F
ROA = Net Income/ Receivables
6
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Fixed or Variable Rate pricing?
Price for Risk?
Interest Rates Continue to Rise
Do you re-score your portfolio for changes
in risk?
Now at 5.50% as of December 18, 2018
Prime Rate – Last 10 Years
9 Rate hikes in past 3
years
7
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Capital One – Re-Launched August 14, 2018
Source: www.capitalone.com 08/20/18
1 2 3
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Source: CNBC.com website August 21, 2018
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“Navy Federal Re-Launches Visa Signature®
Flagship Rewards Credit Card” – September 5, 2018
The card now offers 3X points on travel* and 2X on everything else
giving members enhanced travel rewards
*Travel is defined as: Airline and train tickets, hotel stays, car rentals, travel agencies, cruises, campgrounds and RV parks, timeshares, boat rentals, motor home rentals and travel
related arrangement services, ride-sharing services, bridges, tolls and ferries, parking garages and lots, bus lines, limos and taxis, commuter transport, passenger railways, public
golf courses, amusement parks and tourist attractions including museums, vineyards and aquariums.
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Challenges
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Some of the Challenges We Face As Issuers
Competition
• Who is it?
• Strategies for growth
• Price or rewards
• Value proposition
Profitability
• Rising cost of rewards
• Increasing fraud
• Loan losses
• Pricing
• Interchange compression
Regulations
• Dodd-Frank
• Interchange?
• CECL (Current Expected Credit Losses)
Change
• Impact to current cardholders
• Impact to your portfolio performance
• Analyze data
• Resources
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Opportunities
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Relationship Matters
Source: Aite Group survey of 1,464 U.S/ Consumers. September 2017
No62%
Yes36%
Not Sure2%
Q. Is the rewards credit card that you use most often, from the financial institution you consider to be your primary FI? (The FI you use for your primary checking account.)
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Rewards Matter
Rewards are still a critical driver of credit card acquisition and spending.
87%of cardholders own a
rewards card
76%of revolving balance dollars are carried on
rewards accounts
Sources: 2016 credit card monitor report, credit card rewards, redemption & merchant loyalty programs, April 2016JD Power 2014 U.S. Credit Card satisfaction study; US affluent community panel, June 2016.
92%of consumer credit card spend is on a
rewards card
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Premium Rewards – Affluent Card
• Are your members looking for a
premium rewards product?
• Can you offer a unique value
proposition?
• Can you link your reward to other
products/relationship criteria?
• Can you waive an annual fee
based on other Credit Union
behavior?
• Most competitive part of the
market – Super Prime
• Higher interchange rates
• Spend $24K+ annually
• Affluent households do revolve –
32% of HHs $150K+ revolvers1
1 Aite Group survey of 1,669 U.S. credit card users, September 2017
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Small Business Credit Cards
• Average small business spends
$43K a year on their cards
• Businesses are looking for:
• Spending flexibility
• Improved cash flow
• Rewards
• Convenience
• Controls
• Higher interchange rates
• Spend growing 15% YoY
• Rewards are not as rich (yet)
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Data and Analytics
• Is your card processing partner
providing you with the data you
need to analyze your portfolio?
• KPIs & Benchmarks
• Are they advising you on data?
• Are you creating goals &
strategies based on the
performance of your portfolio?
• Are you creating a holistic view
of your member relationship?
• Are you measuring profitability at
the HH or member level?
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Summary
• Credit card issuing is becoming much more complex
• As issuers, we need to actively manage our card business by
investing and partnering for success
• Come and talk to us in the Solutions Center if you have any
questions about your card business