spending habits – Auriemma Group

(London, UK): Consumers are well-intentioned when building their budget, but even a nominal unplanned expense could leave UK cardholders financially constrained. Many can’t afford the miscalculation—on average they have £20 for daily discretionary purchases and 23% need to put their total income towards outgoings.

Consumers often navigate these financial hurdles on their own. While automation is transforming the banking industry, budgeting remains a very manual process for many cardholders. Auriemma Research’s latest issue of Cardbeat UK confirms that new technology may make budgeting easier for savvy consumers, with challenger banks Monzo and Starling leading the way.

In mid-2018, Monzo and Starling launched tools aimed at giving customers increased control over their spending behaviour. Several months later, Barclays followed, becoming the first high street bank to allow debit cardholders to block payments within specific retailer categories (others may adopt the technology in the future).

The move was aimed at protecting vulnerable consumers by providing them controls to disallow transmission of funds in select areas like gambling services, premium phone lines, pubs and more. The technology even offers a self-activated barrier to purchases in spend categories the consumer deems problematic, stopping them from overindulging at the casino, bar or local eatery. But this technology could evolve to assist in budgeting, helping consumers set spend limits or alerts by merchant category.

Cardholders desire these types of card controls, according to Auriemma’s Cardbeat UK report. Over one-quarter of credit cardholders want the ability to freeze/unfreeze a lost credit card, 22% want to choose which transaction types (e.g., in-store, online) are permitted and 10% want to set spend limits. Currently, 38% say that their issuer offers the freeze feature, 23% say they can choose which merchant categories are permitted and 32% can set spend limits.

“These features are still new, but tools that promote more thoughtful decision-making could help build loyalty with the institution that offers them,” says Jaclyn Holmes, Director of Auriemma Research. “Although card freeze traditionally isn’t used as a budgeting tool, it functions in a similar way to the other card controls and could raise awareness and comfort with this type of technology moving forward.”

Card controls are currently being used to protect against fraud and spend derived from addiction, but future developments could place an emphasis on budgeting. The study also found that 60% of cardholders are open to credit card alerts, which could be utilised to inform cardholders when they are approaching their spend limit in a category, or send a warning alert once they’ve reached a pre-defined proportion of their allocated spend.

“Challenger banks tend to set the bar in terms of innovation,” says Holmes. “Over the last couple years, we saw high street banks introduce the ability to freeze their cards following Metro Bank’s example in 2014. Barclays is already putting more control in their cardholder’s hands, and we expect others will also build upon the technology and features that deliver more control to cardholders.”

Survey Methodology

The Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma from March-April 2019, among 800 adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at +44 (0) 207 629 0075.

(New York, NY) As the UK prepares to vote on whether to remain in the European Union, Britons debate the strength of their ties to Europe. When it comes to their financial behavior, however, they are clearly more similar to their American, rather than their Continental, cousins. While usage of credit cards in European markets such as France and Germany remain stubbornly low, both the US and the UK are reporting rapidly mounting levels of credit card debt, approaching levels not seen since the heady days preceding the financial crisis.[1] And while the US is usually seen as the poster child for “buy now, pay later,” UK cardholders aren’t so different, nearly equally likely to revolve balances on at least one card, according to newly released research from Auriemma Group, which conducted parallel studies in both markets.

Although on opposite sides of the northern Atlantic, payment behavior in the US and the UK is eerily similar, save a few key differences. It’s true, on average, US consumers hold more credit cards than their UK counterparts (2.3 vs. 1.9), but an equal proportion (26%) of each market frequently carries a balance on them. American and British consumers are also nearly identical when looking at balance transfers (10% vs. 13%), missed payments (11% vs. 13%), and credit card inactivity (24% vs. 27%) within the past year. “We generally find the same things important, but perhaps to varying degrees,” says Jaclyn Holmes, the Auriemma senior manager who directed the study. “This also translates when examining payment behavior. US cardholders, for example, are more likely to be incentivized by rewards or cashback offers, but both populations select this as the top offer that would make them use less frequently used cards more.”

A majority of consumers in both markets (65% in the US, 59% in the UK) cite the most obvious reason, “high spending,” for revolving balances. These revolvers try to pay off the credit card with the highest APR first, but UK cardholders more frequently cite allocating extra funds to paying off the card they use most frequently (22% vs. 16%). “Britons don’t want to lose access to that credit line,” says Holmes. “Twice as many UK cardholders say they rely on borrowing to afford day-to-day purchases so paying down that card first makes sense.”

Borrowing, of course, isn’t just limited to credit cards. Consumers in the US and the UK both cite taking out a mortgage (69% vs. 62%), emergencies (59% vs. 56%), and making large purchases (33% vs. 32%) as justifiable reasons to borrow. Auto loans, however, are much more widely held in the US (61% vs. 40%), while UK cardholders more often cite funding a creative project (23% vs. 15%) or managing cash flow (17% vs. 13%). “About one-third of each market has taken out a personal loan, but UK cardholders are nearly twice as likely to borrow for debt consolidation,” says Holmes. “Britons believe the repayment schedule would be easier with a personal loan, while those in the US more often cite wanting to build their credit history.”

For financial institutions wishing to better understand consumers across the pond, the good news is that payment behavior is generally similar regardless of locale. “Sure, US and UK consumers are not carbon copies of one another,” says Holmes, “but, based on our research, it looks like we are more alike than some may initially think.”

Survey Methodology

Cardbeat US was conducted online within the United States by an independent field service provider on behalf of Auriemma Consulting Group in April 2016, among 800 U.S. credit card users. Cardbeat UK was conducted online among 500 credit cardholders in the U.K. during March 2016. The number of interviews completed is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualifying.

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. Founded in 1984, ACG has grown from a one-man shop to a nearly 50-person firm with offices in New York and London. For more information, contact Jaclyn Holmes at (212) 323-7000.

[1] http://www.wsj.com/articles/balance-due-credit-card-debt-nears-1-trillion-as-banks-push-plastic-1463736600
http://www.reuters.com/article/britain-banks-lending-idUSL3N18D3SX

Tag Archive for: spending habits

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