Tag Archive for: Millennials

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Instalment Plan Interest High with Revolvers, Millennials, and Repeat Customers

UK Cardholders Lack Understanding of Instalment Plan APRs
June 18, 2020

Cardholders were asked to evaluate the truth of various statements about instalment plans, and their impact on one’s credit score. In fact, the highest levels of uncertainty were with instalment plan APRs—most UK credit cardholders don’t know how they function with instalment plan products.

UK Instalment Plan Users tend to be Repeat Customers
June 16, 2020

Those who have enrolled in an instalment plan tend to have enrolled in more than one, and often are managing multiple payment plans at any given time. Players wishing to expand their reach and footprint within the instalment lending space may see a high take rate among existing instalment users, compared to brand new customers.

Revolvers and Young Cardholders Drive Interest in Instalment Plans
June 12, 2020

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Prepaid Card Issuers Can Benefit from Integrating Offerings with P2P

(New York, NY):  Older millennials are increasingly eschewing cold hard currency for budget-friendly alternatives, considered to be even more secure than credit, debit, and store cards. This older millennial population, and other desirable demographic groups, are increasingly turning to P2P payments and reloadable prepaid cards when transferring funds. In fact, over one-third of cardholders have used P2P payments (42%) or a reloadable prepaid card (36%), according to a new study from Auriemma Group, which was conducted in partnership with the Network Branded Prepaid Card Association (NBPCA). The study highlighted use cases for P2P payments and prepaid among the banked population, shedding new light on who uses them and why they are an attractive payment alternative.

The results point to an opportunity for prepaid card issuers to integrate their offerings with P2P to better capture market share. The commonalities between these user groups make a compelling case. Most current P2P payment users and prepaid cardholders are male (57% and 53%, respectively), college-educated (62% and 53%), parents of minors (56% and 50%), and report a household income over $50,000 (67% vs. 55%). While these attributes register most strongly with the P2P payment users, their similarities highlight the connection between both groups.

“Our previous research tells us that those who use P2P payments are about twice as likely to currently hold a prepaid card than their non-using counterparts,” said Jaclyn Holmes, Director of ACG’s Payment Insights. “This cross-section of users could create increased engagement with prepaid cards should they be accepted by P2P payments.”

Users of both prepaid cards and P2P payments are more than just demographically similar. When looking at the perceived benefits of both methods, users of each report comparable advantages, namely security, budgeting, and convenience.

Reloadable prepaid cards are a particularly attractive payment alternative for consumers for whom security and budgeting are top of mind. Despite having a banking account, those who have used prepaid cards believe the most beneficial aspects are that they don’t link to a bank account (44%), offer a secure payment method (33%), and help with budgeting (33%). Prepaid cardholders aren’t the only ones who think the method is secure—most consumers believe prepaid cards are more secure than credit (59%), debit (60%), and store cards (58%). And unlike cash, prepaid cards bring these benefits to the digital shopping experience.

“The payment method allows cardholders to purchase online worry-free, as doing so will not compromise their checking account,” said Holmes. “And prepaid cardholders can set limits for category or everyday spend, allowing them to more easily maintain a budget.”

The perception of security is also high with P2P payments. Although users have a more positive impression of the method’s security than non-users, both believe the method is secure (88% and 65%). And this isn’t the method’s only similarity to prepaid cards.

“A small group of consumers utilizes P2P as a budgeting tool,” Holmes said. “About half of those who leave money in their P2P account do so because it helps them save money.”

Convenience and speed also earn top marks with P2P, with about nine in ten users reporting P2P payments make it easier to pay people far away (92%), that payments clear faster than checks (90%), and that splitting checks or bills is easier (87%).

“It’s safe to say we aren’t moving towards a cashless society, but we are certainly using less cash than before,” Holmes said. “By themselves, P2P payments and prepaid cards provide more flexibility, convenience, and a greater sense of security.”

The collaboration with the NBPCA marks the first time ACG has partnered with an industry association to conduct custom consumer research and signals ACG’s ongoing commitment to work with industry associations to illuminate solutions in an evolving environment.

“The findings of this study affirm what we in the industry have long known, that consumers turn to prepaid for the security and convenience the products provide,” said Brian Tate, president and CEO of the NBPCA. “From budgeting to safety to digital access to funds, it is clear that prepaid products are meeting the needs of our consumers, and prepaid providers will continue to build on the long tradition of evolving our products to continue to do so in the future.”

While this study focused on the banked population, a potential future study may focus on the unbanked population.

Survey Methodology

This study was conducted online within the US by an independent field service provider on behalf of Auriemma Consulting Group in March 2017, among 800 debit cardholders. The purpose of this research was not disclosed nor the criteria for qualifying. The average interview length was 20 minutes.

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, contact Jaclyn Holmes at (212) 323-7000.

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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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