Tag Archive for: UK

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Credit Cardholders Seek Smarter Budgeting Tools and Instalment Options

(London, UK): Many cardholders are looking for ways to more thoughtfully manage their purchases and repayment. Digital tools are a potential solution, but most consumers still track their budget manually. According to Auriemma Research’s latest issue of Cardbeat UK, however, 61% of cardholders believe digital tools would be helpful when tracking spend, even though only 20% say they are currently offered such a service from their card issuer.

Promoting existing digital budgeting tools (such as Monzo’s Salary Sorter, which segments income into spending, saving and bills), or creating new ones, will likely increase engagement and build loyalty with an issuer’s cardholders. However, tools offered must keep control in cardholder’s hands to remain appealing. For example, cardholders are more likely to set up spend alerts (45% likely) instead of spend limits (37%).

“Spend alerts may have slightly broader appeal because they put the real-time choice in the customer’s hands at purchase,” says Jaclyn Holmes, Director of Auriemma Research. “While both options provide cardholders the opportunity to set up thresholds in advance, limits prevent purchase at the point of sale, while alerts simply educate and allow consumers the choice.”

Digital tools can be helpful for keeping a budget organised, but instalment plans can help with budget management in the near-term. Online and in-store point-of-sale instalment plans provide a credit alternative for cardholders who have reached their spend or credit limit, those averse to credit cards or those who simply find the product appealing. Over one-third of those offered an instalment plan have taken advantage of the offer online or in-store over the past year. The take rate increases among revolvers (47%) and recent balance transfer customers (53%).

Revolvers and balance transfer customers are more attracted to point-of-sale instalment plans, they are more likely to have enrolled in them and are more likely to consider them for a variety of purchase types compared to their counterparts. And issuers have a clear advantage over third-party providers offering instalment plans. Nearly half of revolvers and balance transfer customers are interested in post-purchase instalment plans via their most frequently used card issuer, compared to nearly one-third of cardholders overall.

“Whether at the point-of-sale or post-purchase, revolvers and balance transfer customers are the richest audience for this product,” says Holmes. “Many seek ways to help manage their payments in an organised and predictable fashion, and instalment plans provide them a complement to other products that also offer them repayment flexibility.”

Whether for holiday, furniture, electronics or everyday items, instalment plans can help cardholders budget for future purchases. Although larger purchases tend to capture the most instalment plan usage, 25% of cardholders say they would consider the product for everyday items. This increases to nearly four-in-ten revolvers and recent balance transfer customers.

“Revolvers and balance transfer customers appear to be more open to utilising a variety of products available when making purchases and paying off debt,” says Holmes. “These cardholders don’t appear to be loyal to any one product and may be choosing between products based on need rather than desire.”

Cardholders have an increasing number of options to manage their finances. Whether setting up spend limits, alerts or accepting an instalment offer at the point-of-sale or post-purchase, cardholders have more flexibility than ever to decide how they will make their payments. Issuers who cater to this desire could increase engagement with their customers, particularly those who are already carrying a balance anyway.

Survey Methodology

This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma from July-August 2019, among 806 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.

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Auriemma Group Announces a New Award for UK Cards & Payments Awards

(LONDON) – Auriemma Group is pleased to announce its sponsorship of a new award at the UK Cards & Payments Awards. The award, Excellence in Operational Innovation, will recognise the card issuer, brand, banking acquirer or payment company that has best demonstrated operational innovation resulting in a best-in class customer experience.

Submitted entries could include innovation across a range of disciplines and areas, such as:

  • Transformation staff training to embrace new technology and or evolving staff environments
  • An innovative approach that had a positive impact on staff well being
  • Virtual customer service initiatives
  • Digital services to enhance people and customer interactions
  • Attracting and retaining staff initiatives

Judging criteria includes the following:

  • Innovative and forward thinking
  • Demonstrated employee or team impact and effectiveness during the qualifying period
  • Positive impact on employees and either directly or indirectly the customer
  • Metrics to validate against success criteria

Eligible entrants include brands and affinity partners, charge, credit, debit and/or prepaid card issuers, merchant acquirers and other payment companies. Entries should be submitted by 23 September 2019. Entries should feature initiatives implemented or launched between 1 September 2018 and 31 August 2019. A shortlist will be announced 13 November 2019, followed by the awards ceremony on 6 February 2020.

About the Card & Payments Awards

The Card & Payments Awards recognise customer service, excellence and innovation in the UK and Irish card and payments industry. Very well established and now in its 15th year, each year many eligible organisations compete for one of these prestigious Awards which are judged by an independent panel of industry experts.

About Auriemma Group

Auriemma Group’s mission is to give clients access to data and intelligence that drive decision-making. We provide information and advisory services in four areas: operational intelligence, co-brand partnerships, consumer research, and corporate finance. Founded in 1984, Auriemma serves the consumer finance industry from our offices in London and New York City. For more information, visit us at www.auriemma.group or call David Edwards at +44 (0) 207 629 0075.

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Card Controls Could Prevent Budget Shortfall and Curb Bad Habits

(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.

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Rethinking Debt Collections: Give Up Outbound Dialling & Pick Up Digital Channels

(LONDON) – The debt collections space in the U.K. is ripe for disruption: As outbound dialling performance yields decreasing returns, lenders have an opportunity to explore other contact strategies.

Over the last 18 months, core dialler performance metrics have deteriorated, according to Auriemma Roundtables data. A key indicator, right-party contact (RPC) rate, fell from 2.5% to 2%, a decrease of 20% since November 2017. Despite this slipping performance, firms have been apprehensive to retire their diallers, which have been the cornerstone of collections outbound strategies since the 1980s. Outbound calling is still relied upon to drive output, keep agents at the heart of the collections process, and demonstrate to internal stakeholders that firms are performing their part in mitigating risk by contacting customers to resolve their arrears.

Auriemma’s Roundtable members have often viewed the inertia associated with outbound dialling as a major hurdle in the adoption of alternate communication channels. To mitigate the decline in dialler performance, U.K. firms are looking at a variety of experimental solutions to improve overall contact rates.

Omnichannel Approach

Challenger banks by design have minimal telephony operations and demonstrate strong customer engagement via digital channels. Without the handicap of legacy systems, these firms utilise more efficient ways to support delinquent customers, primarily relying on live chat and two-way SMS staff using omnichannel systems. These systems provide agents with a holistic view of customer interactions across all channels and products throughout the account lifecycle. Consequently, agents are equipped with deeper knowledge of customers’ past interactions and can better anticipate contact preferences.

“Dialler-less” Approach

Recently, a few firms have tested completely switching off outbound dialling for the lifecycle of ring-fenced accounts and continued to track the progress of the test group. Inbound contact rate remained flat – disproving the prevailing wisdom that most inbound calls are responses to a voicemail or a missed call from a number. Moreover, turning off the dialler saves considerable costs and resources which can be reallocated across alternate and more efficient contact channels.

One such firm found performance improvement when testing tactical and precise usage of SMS, email, and live chat for customer outreach as a substitute for the dialler. This makes intuitive sense, due to the predominance of non-voice communication for the bulk of servicing requests and customer avoidance of answering calls from unidentifiable numbers. Moreover, missed calls or cryptic voicemails can further degrade repayment rates, as many customers perform Internet searches for these phone numbers, which may lead to incorrect information listing the number as part of a scam.

As the customer preferences continue to evolve, the way firms communicate will have to change to ensure future success. Auriemma’s Collections and Recoveries Roundtable provides members with access to industry expertise and best practises to support actionable improvements within the debt collections space.

About Auriemma Group

Auriemma Group’s mission is to give clients access to data and intelligence that drive decision-making. We provide information and advisory services in four areas: operational intelligence, co-brand partnerships, consumer research, and corporate finance. Founded in 1984, Auriemma serves the consumer finance industry from our offices in London and New York City. For more information, visit us at www.auriemma.group or Louis Stevens at +44 (0) 207 629 0075.

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How Balance Transfers Help Consumers Manage Debt

(London, UK): As consumers continue to face increasing debt levels and expenses, new data from Auriemma Consulting Group suggests that balance transfer offers continue to be an effective tool for consumers who are struggling to pay down their debt.

Balance transfers can help consumers better organise and pay down their debts by consolidating payments to one institution, often at a competitive interest rate, sometimes as low as 0% APR. The result: 49% of balance transfer customers report that they have seen a decrease in their total debt level since taking the balance transfer, versus only 25% that report increasing their total outstanding balances.

“Balance transfers can be a win-win for issuers and consumers alike,” says Jaclyn Holmes, Director of Auriemma’s Payment Insights practice. “Issuers get the chance to acquire a new customer while struggling consumers can apply APR-savings directly to their debt.”

Despite the product’s benefits, only 14% of credit cardholders have taken a balance transfer offer in the past year, pointing to a potential gap in the marketplace. While the product isn’t for everyone, there are opportunities for issuers to better communicate the benefits of balance transfers to those who may need it.

Over one-in-ten consumers who were offered but declined a balance transfer did so because they thought applying would be more hassle than it’s worth, and 16% of customers reported not wanting to open a new account. Additionally, 5% of consumers indicated that they simply didn’t know enough about balance transfers. Pricing continues to play a role as well. Almost one-in-five customers say they didn’t take a balance transfer because they didn’t want to pay a fee and 10% of customers said that the rates offered were not attractive.

“Balance transfers offer consumers a way to better manage and ultimately pay down their debt,” says Holmes. “With some guidance, issuers have the opportunity to develop loyal, long-term customer relationships, as our research indicates that many consumers continue to spend with their balance transfer card after their debt is paid off.”

 

Survey Methodology

 The study (UK Cardbeat) was conducted online within the UK by an independent field service provider on behalf of Auriemma in October 2018, 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

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 Dave Edwards at +44 (0) 207 629 0075.

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Financial Institutions Take a More Proactive, Holistic Approach to Vulnerable Customers

(London):  Fair treatment of vulnerable customers has been high on banks’ agendas since the Financial Conduct Authority (FCA) issued guidance in 2015. In the three years since, financial institutions have invested time, money, and effort to identify and improve outcomes for customers in vulnerable situations.

Vulnerable consumers, or those whose personal circumstances make them especially susceptible to detriment, make up 2.4% of credit card accounts and 3% of balances, on average, according to Auriemma’s UK Card Collections and Recoveries Benchmark. However, the size of vulnerable populations varies widely based on portfolio composition and other factors, with some issuers reporting larger populations.

Until recently, vulnerability was tied to debt collection, as there is a natural correlation between vulnerable customers and those in arrears. Now, attention has shifted to proactively identify vulnerable consumers across the product lifecycle, with more precise treatment applied based on customers’ personal circumstances.

“Vulnerability is an increasingly complex concept and cannot be treated as a binary phenomenon,” said Louis Stevens, Director of Auriemma’s UK Roundtables practice. “While card issuers recognize the benefit of having a standardised definition for vulnerability across the industry, it’s virtually impossible to capture all the grey areas with a single, uniform classification system.”

Here are three ways financial institutions are taking a more targeted and holistic approach to address customer vulnerability:

Proactively identifying vulnerable customers. While customers in arrears tend to be more vulnerable, issuers are embedding their approach across more functions of the organisation. Over the past year, the focus has shifted toward identifying potential vulnerability, regardless of where the customer is located within the lifecycle. For example, Customer Service teams are now tasked with identifying triggers or clues to vulnerability, such as a mention of illness, and proactively monitoring potentially vulnerable customers even if they make payments on time.

“By definition, vulnerable customers are anyone who can suffer difficulty, and it’s the job of financial institutions to identify and rehabilitate that,” Stevens said.

Tailoring treatment to individuals. While the FCA defines vulnerability broadly, financial institutions have developed more precise definitions to meet non-standard needs across a diverse customer base. Most card issuers use two broad categories to determine severity – for example, “soft” vs. “hard,” “temporary” vs. “permanent,” – with further sub-categories to capture the nuances of a customer’s situation. In fact, issuers may have 20 or more classes of vulnerability to ensure a flexible, tailored response. For example, a customer with hearing or visual impairment may need special assistance to complete routine payments. These cases may not typically be indicative of financial difficulty but can be a sign of vulnerability.

Maintaining a flexible exit strategy. Effectively dealing with short-term vulnerability, such as temporary unemployment, is another key consideration for financial institutions. In particular, it’s important to have a defined exit process for customers who move out of a vulnerable situation, to ensure vulnerability treatment is accurately applied and customer care efforts are appropriately prioritised. Card issuers are taking steps to establish regular contact to monitor the customer’s situation and ensure timely removal of vulnerability flags for rehabilitated customers.

“Anyone can find themselves in vulnerable circumstances,” Stevens said. “Financial institutions will continue to reevaluate their vulnerability strategies to ensure a culture of empathy, support, and inclusion.”

 

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, call Louis Stevens at +44 (0) 207 629 0075.

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FCA to Focus on Repayment Behaviour, Persistent Debt in Follow Up to Credit Card Market Study

(London): The FCA is conducting research on consumer repayment behaviour to alleviate persistent debt in anticipation of a new package of remedies. The additional research follows the Credit Card Market Study Final Findings released in July.

Everything from behavioural cues to statement presentation could potentially influence payment behaviour, an FCA representative said during a Q&A session at Auriemma’s Card Finance Roundtable in October. While at the meeting of card issuers, the regulator detailed some of the hypotheses it is testing, including how different consumer segments react to behavioural nudges around suggested repayment amounts, the impact of minimum payment “anchoring,” and how the presentation of amortisation can stimulate repayment habits.

Six months of data will be used in the analysis to assess the study’s impact on consumer behaviour and monitor for unintended consequences.

The FCA also detailed an additional study in collaboration with The UK Cards Association, focussed on further conceptualising early intervention and establishing a set of escalation tools firms will follow to encourage consumers out of persistent debt.

“The FCA has acknowledged that behavioural nudges may not work for all customers, as some may be in financial difficulty,” said Matt Bethell, Senior Associate of Auriemma’s UK Industry Roundtables. “The output of these additional studies will be remedies that incentivise firms to escalate intervention around persistent debt, without damaging customer service.”

The follow-up studies directly respond to some of the FCA’s more significant conclusions from the July study, including the identification of two consumer groups requiring attention:  those carrying debt for longer than three years (most likely due to habitual minimum payments) and those moving rapidly from acquisition to problem debt within one year. To identify these groups, the FCA requested significant data sets from issuers and ran analysis across the product lifecycle. The FCA compared the returns of credit card products for both low- and high-risk consumer segments and found that, between 2010 and 2014, returns were typically six percentage points greater on high-risk segment products. One quarter of accounts taken out in 2013 by consumers within the high-risk segment were in severe or serious arrears by 2014.

“While the FCA concluded that the market is working well for the majority of consumers, and that product cross-subsidisation was not materially impacting competition, it also believes firms have fewer incentives to address consumers with persistent levels of debt and should be intervening earlier,” Bethell said.

While the full implications of the results of these studies are not yet known, issuers are anticipating changes to their portfolio economics and, potentially, value propositions. These developments will be key agenda items at the Card Finance Roundtable in the year ahead.

About Auriemma Group

Auriemma 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 Matt Bethell at +44 (0) 207 629 0075.

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US and UK Payment Behaviors More Similar Than Different

(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

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Auriemma’s UK Roundtables Discuss the Implications of PSD2 as Adoption Date Approaches

(London):  Supranational regulations such as the European Payment Services Directive 2 (PSD2) will burden credit card portfolio profitability and create new risks and opportunities, Auriemma Group said today.

The impact of PSD2 on credit cards and issuers more broadly was at the forefront of the agenda at Auriemma’s first UK Card Finance Roundtable meeting of 2016. The executive group, which convenes Finance Directors, CFOs, & SVPs of Finance and Accounting for leading issuers, meets regularly to discuss key financial management and compliance-related topics. The wide reaching implications of the directive ensures it features across all of Auriemma’s UK roundtables, from our UK Collections and Recoveries Roundtable to UK Customer Service, and is also a focus of discussion at our Fraud Operations Roundtable next month.

PSD2 is set to be one of the most disruptive payment directives ever implemented in the UK, when it is adopted by member states in 2018. While the first iteration of PSD in 2007 aimed to make payments simpler and more efficient across Europe through the creation of the Single Euro Payments Area (SEPA), the implications of PSD2 are far more potent for issuers and payment providers more broadly.

PSD2 will open the payments infrastructure and allow access to consumer account information to market players through the use of Application Programming Interface (API). By facilitating this direct access, API will establish two new roles in the EU payment landscape: Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs).

“Opening the payment landscape presents a unique set of challenges for issuers and card schemes, while presenting retailers and information aggregators such as comparison websites with previously inaccessible data,” said Carina Da Cruz, Director of UK Industry Roundtables at Auriemma.

Practically speaking, a PISP will have the right to initiate payments on behalf of the consumer by establishing a direct connection with the consumer’s bank upon authentication. Consumers will grant a PISP, such as an online retailer, permission to perform a payment transaction directly, thus bypassing multiple traditional payment participants including, most obviously, the merchant acquirer and card scheme. Significantly, this relationship will stay active to facilitate future payments until the consumer removes permission.

Second, AISPs will for the first time provide consumers with an aggregate view of their financial situation by combining multi-institution account information into a single portal. AISPs will have a direct connection with each financial institution and aggregate this information through a single authentication portal. More significantly, with this information AISPs will have the ability to cross-sell consumers more relevant, tailored propositions based on usage data.

The introduction of new players with direct access to consumer data will undoubtedly present significant challenges to issuers by way of lost revenue and increased competition. However, there are significant opportunities for issuers; members of Auriemma’s UK Card Collections and Recoveries Roundtable meeting in February discussed the challenges of obtaining reliable consumer financial information to complete accurate affordability assessments. API could allow issuers to assess debt affordability to a previously unattainable level of accuracy.

“API opens up a host of new opportunities to produce better customer outcomes, and issuers should rightfully be asking the European Commission for greater clarity regarding their ability to access cross institution account information to facilitate this,” said Da Cruz.

At the Auriemma UK Card Fraud Operations Roundtable in April, members will discuss the technical details of implementing new authentication processes mandated by PSD2. Opening the payment landscape to new players will require next generation multi-factor authentication technology to ensure consumers are protected and liability is shared fairly.

“PSD2 will remain front of mind for members across all of our UK roundtables as adoption looms,” said Da Cruz.  “Our model provides the ideal opportunity for market players to discuss the technical detail of the directive and assess the impact on individual portfolios.”

About Auriemma Group

Auriemma 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 Tom LaMagna at +44 (0) 207 629 0075.

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Clearer Issuer Communications Help Consumer Satisfaction With Credit Cards Reach 4-Year High

(London): Consumer satisfaction with credit cards has seen a steady increase since 2012, suggesting that the investments issuers have made in communicating the value and benefits of credit cards are paying off, according to Auriemma Group’s UK Cardbeat.® This syndicated online research publication was conducted in February 2015 among 442 UK cardholders. While the industry scored better for each of the factors measured, the improved satisfaction is mostly attributed to higher levels of trust in protecting information, and clarity surrounding credit card terms, signifying that recent efforts by banks have not gone unnoticed.

The Auriemma Industry Satisfaction Index (ISI) is a trended measurement of consumer satisfaction with credit cards, and has seen a stable rise over the past 4 years (69.6 in 2015 vs. 61.6 in 2012). While the industry posted an increase in each of the factors measured, the largest gains were among “I trust credit card companies to protect my personal information” (averaging 6.8 vs. 5.9 in 2012) and “Rules, terms and conditions are easy to understand” (5.6 vs. 4.4 in 2012). While this higher rating demonstrates progress, there is still substantial room for further improvement in transparency by banks, which the Financial Conduct Authority (FCA) has prioritised since early 2014.[1] The organisation identified areas they believe are not working in the best interest of some consumers, and hope to build a detailed picture of the credit card market to identify which actions should be taken.

“Improving consumer education through easily-understood marketing has been a priority in the industry for quite some time, and it’s encouraging to see consumers are recognising the efforts that have been made,” say Marianne Berry, Managing Director of the Payment Insights practice at Auriemma. “Even before the FCA’s most recent push, banks were already headed in the right direction.”

The research shows additional signs of improved consumer knowledge, specifically regarding APRs. In 2012, less than one-quarter (22%) were able to indicate the interest rate on the outstanding balances on their most frequently used credit card. Over the past four years awareness has steadily risen, and the proportion has doubled to nearly half (45%). Among revolvers, the group most impacted by APRs, awareness is even higher, with 6 in 10 able to specify their interest rate.

Following a similar line of inquiry to the work the FCA is doing, Auriemma’s upcoming issue of UK Cardbeat® will focus on opportunities for consumer education and improvement. “Providing notification is no longer enough; we need to ask cardholders what aspects of financial education they want more of. Efforts tend to be unsuccessful without a thorough understanding of what the consumer hopes to learn, and by what means we can successfully deliver this information. Our forthcoming research aims to unveil just that” says Berry.

Survey Methodology

The study was conducted online within the United Kingdom by an independent field service provider on behalf of Auriemma Consulting Group in February 2015 among 442 credit card users (“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.

 About Auriemma Group

Auriemma 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.

[1] http://www.fca.org.uk/news/credit-card-market-study

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