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Auriemma Research Suggests U.S. Holiday Spending Will Be Up Slightly in 2014

(New York, NY):  As we approach the 2014 holiday season, there are signs for cautious optimism on consumer spending.  For example, the U.S. has experienced slow but steady economic growth for the past several years, and the national unemployment rate stood at 5.8% in October according to the U.S. Bureau of Labor Statistics, which the agency notes has not been that low since July 2008.

Auriemma Group, a leading consulting firm in the payments field for the past 30 years, believes 2014 holiday spending is likely to show slight increases over 2013 holiday spending levels.  According to recent research conducted in Cardbeat,® Auriemma’s syndicated research report derived from a web-based survey of credit card users in the U.S., more than half (52%) of respondents say they will be increasing the amount they spend this season.  However, the biggest increases will come from the youngest consumers, who begin at a lower dollar amount of spending.

“Barring any unforeseen factors such as weather, 2014 holiday spending should show a moderate overall increase,” says Marianne Berry, Managing Director of Auriemma’s Payment Insights practice.

She adds that Auriemma’s ongoing research shows that many U.S. consumers have working been to deleverage their personal balance sheets, so many are in better fiscal condition than they have been in years.  However, in the absence of rapid income growth, it’s hard to envision just what might drive a big jump in overall sales.  ACG’s annual forecasts of holiday spending have proven directionally correct over the past decade.

One bright spot for the banking and payments industries, she says, is that more consumers (81% in 2014 vs. 72% in 2010) this year say they’ll plan on using credit cards to pay for their holiday purchases, although it’s worth noting that only a portion of this group will carry balances on any of their credit cards.  Cardbeat data suggests that about 60% identify as revolvers, with 38% who occasionally revolve, and 22% who revolve frequently.

By many accounts, forecasts for 2013 holiday spending growth failed to materialize, with industrywide holiday sales growth for 2013 being the slowest since 2009.  Severe weather conditions in much of the U.S. last December, along with fewer holiday shopping days between Thanksgiving and Christmas 2013 adversely impacted consumer spending.

For 2014, the National Retail Federation forecasting November-December 2014 sales (excluding autos, gas and restaurant sales) to increase by 4.1%.  By comparison, Gallup’s spending estimate suggests an increase between 2.2% and 3.5% in 2014 U.S. holiday retail sales, and the organization says that the most likely outcome will probably be around 3%.

About Auriemma  Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space.  We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines.  For more information about Auriemma’s research, please contact 212-323-7000.

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U.K. Credit Cardholders Want to Choose Their Payment Due Date

[LONDON] According to consumer research recently conducted in the U.K. and published in Cardbeat®, a syndicated research report published by Auriemma Group, the ability to choose a payment due date for their credit card has broad appeal to cardholders.  However, only a quarter recall being offered this option by any credit card issuer.

Account management tools with the next highest appeal are alerts for payment related events (e.g., approaching credit limit, payment due, payment received, etc.) and end-of-offer reminders.  More than one-third of cardholders find these features beneficial; yet more than half report never being offered this timely information.

Marianne Berry, Managing Director of the Payments Insights practice at Auriemma, points out,  ‟Cardholders under 45 years old and revolvers are significantly more likely to find control and security benefits appealing than older cardholders or cardholders who pay their balance in full each month.”  And the youngest surveyed cardholders, those under age 25, state a significant preference for receiving alerts and reminders via mobile app.  Ms. Berry observes, ‟Channel predilection is likely to shift to newer, more convenient technologies, especially as young consumers mature using their mobiles for all sorts of information and daily transactions.”

The survey’s Industry Satisfaction Index is trending upward — reaching its highest point in the past two years, with the biggest gain in ‘trusting the credit card company with personal information.’  Banks can build on growing customer satisfaction by offering tools with high perceived value that cardholders want to use to manage their credit card accounts.  Auriemma’s research highlights opportunities for banks and other financial institutions to capitalise on their knowledge of consumers’ perceived value of specific account management tools.

Forgetting a credit card PIN is the single most frequent problem that cardholders experience, with more than two-thirds of these cardholders receiving their replacement PIN via post.  Half of these cardholders report using their credit card less often, stopping using the card, or cancelling their card.

Given that roughly one in seven cardholders report having forgotten their PIN within the past year, waiting for a replacement PIN to arrive via post interrupts usage and leads to potential significant attrition.  Card issuers should note — some issuers have procedures in place to replace a PIN via email, phone, or via their website, thus precluding their cardholders substituting another card.

About Auriemma Consulting Group

Auiriemma is a boutique management consulting firm with specialised focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines.  For more information, please contact +44 (0) 207 629 0075.

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Banks That Issue the First Credit Card in Wallets Have Opportunity to Grow with Consumers’ Incomes

(New York, NY):  Becoming the first credit card in a person’s wallet has long-term financial benefits for banks; the average account tenure is 17.4 years. Further, more than two in five (41%) consumers report that they also have some other type(s) of account(s) with the same bank in addition to their credit card, most commonly checking and savings accounts. The results were published in Cardbeat,® a syndicated research report published by the Auriemma Group, and is based on a web-based survey of credit card users in the U.S.

Logically, most (64%) consumers indicate that they applied for their first card in order to establish their credit history. Additionally, the largest percentage (71%) of these consumers cite a specific life-event being associated with their first credit card acquisition, with many being related to educational milestones such as college or high school graduations. In theory bank transactional data, as well as lower-tech solutions such as having retail bank salespeople help to manage consumer relationships can enable banks to market to consumers during these life events.

Although direct mail remains an important acquisition channel for credit cards, in recent years, branches have been a rapidly-growing acquisition channel for new cards for a number of large banks. In fact, branches or other facilities that offer face-to-face consumer interactions are now responsible for nearly half (45%) of all new credit cards sold.

However, retail banks face challenges, notably, most new credit cards are issued to the Millennial population (born between the years of 1981-1991, now between the ages of 23-34), and this demographic segment is much more likely than other age groups to avoid visiting bank branches completely, preferring to conduct most of their routine bank business at ATMs or online instead. This makes reaching them more difficult than it was for prior generations. Some financial institutions have started to experiment with concepts like video chats with bank call center reps right from the ATM. While these are still in trial phases, its definitely a step in the right direction.

Marianne Berry, Managing Director of the Payment Insights practice at Auriemma, says that the overall message to banks is clear:  the benefits of being the first credit card in someone’s wallet are genuine, and these tend to be long-lasting, attractive consumer relationships. She says, “While most of the Millennial population cannot yet be defined as affluent based on income or assets, there is little doubt that in time, some will become affluent.”  Ms. Berry adds the banks that establish relationships with Millennials now, during their formative years, will have a unique opportunity to grow and expand existing relationships with these consumers as their personal wealth grows.

About Auriemma Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information about Auriemma’s research, please call (212) 323-7000.

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Consumer Understanding of Credit Bureau Data May Be Flawed

NEW YORK, NY:  Over the years, American consumers have gained greater transparency on credit reporting. For example, in 2003, The Fair Credit Reporting Act (FCRA) was amended to require that each of the nationwide credit reporting companies provide consumers with one free copy of their credit report, upon request, once every 12 months. Previously, access was available for a fee unless the consumer had already been denied credit based upon credit bureau information.

According to recent consumer research published in Cardbeat®, a syndicated research report published by Auriemma Group, most U.S. consumers have a general awareness of credit bureau information (including their credit reports). Many consumers also understand the impact information has on their ability to obtain credit at a reasonable price. Cardbeat research shows that half (50%) of consumers are generally familiar with credit bureaus, with a higher percentage familiar when consumers have children in the household (66%), or are affluent, defined as consumers with $100,000 or more in assets (61%). Since the FCRA was amended to provide free consumer access to their credit information, the incidence of consumers who have reviewed their credit reports has grown from slightly less than half (49%) to more than three in five (62%).

Consumers consider their credit bureau information and credit score to be of nearly equal importance in terms of their ability to get the credit they need at a reasonable price (79% and 82%, respectively). However, more than one-third (34%) of consumers feel the cost associated with accessing their credit bureau information is not reasonable, when, in fact, it should be accessible for free.

Marianne Berry, Managing Director of the Payment Insights practice at Auriemma says, “The discrepancy between actual cost and perceived cost may be explained by possible consumer confusion.” For example, services that provide credit monitoring often charge fees. The Federal Trade Commission acknowledges that imposter websites claiming to offer “free credit reports,” “free credit scores,” or “free credit monitoring” have created consumer confusion. (Although the CARD Act did mandate new disclosures in the advertising of such services.)

Another area of confusion is the fact that credit reporting is not the same as credit scores. Credit scores are not routinely provided for free. Further, there are different credit scores available (widely-used credit scores are those developed by FICO, and another called VantageScore created in collaboration with the three major credit bureaus).

Financial institutions may have a role in helping to educate consumers. For example, banks’ own websites can potentially direct consumers to the official ‘annualcreditreport.com’ website for a free copy of their credit reports. Also, some credit cards are now offering consumers with complimentary access to their FICO credit scores. Ms. Berry adds, “While the short-term financial benefit of providing such consumer education may be difficult to quantify, gaining consumer trust may pay longer-term dividends by establishing them as a provider of choice.”

About Auriemma Consulting Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information, call 212-323-7000.

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