After a very successful inaugural meeting and growing client demand, we’re excited to announce that we have finalised the date for our next Regulatory Compliance and Privacy Roundtable on the 28th of February in London.
During this session, we intend to continue to do a deep dive into how firms are implementing the New Consumer Duty into their business, and also intend to cover Operational Resiliency, PSD3, CCA Reform, Buy-Now-Pay-Later Regulation, Financial Inclusion and Access to Cash, and more.
The roundtable meeting will span over a day and a half and follow an agenda built exclusively from inputs from attendees. After the first day’s meeting, there will also be a group dinner, where attendees will have the opportunity to network amongst their peers.
If you or any of your colleagues are interested in joining this session, please reach out to Nicole Toussaint at nicole.toussaint@auriemma.group.
(New York, NY) Credit card late fees have been a hot topic since February when the Consumer Financial Protection Bureau (CFPB) proposed rules aimed at reducing them. The proposal would reduce the cap for late fees to $8 per month (from $41 today), prohibit annual inflation increases on late fee amounts, and ensure that late fees must not exceed 25% of the required payment. Auriemma Group’s latest issue of Cardbeat US uncovered how consumers feel about late fees, the proposed rule changes, and if they would be willing to accept changes to their card products that may occur as a result of the new $8 maximum.
Late fees are top-of-mind for repayment.
Auriemma’s research found that ongoing interest rates (67%) and late fee amounts (62%) are at least somewhat influential when considering how to prioritize paying off credit card balances. However, many cardholders continue to struggle. The CFPB’s biennial report to Congress on the consumer credit card market found that credit card companies charged consumers $25 billion in fees last year, and an additional $105 billion in interest.
“The big question is how to help a struggling population without hindering consumers unaffected by late fees,” says Jonathan O’Connor, Senior Manager of Research at Auriemma. “For now, late fee waivers play a key role in maintaining that balance. While 18% of credit cardholders have been charged at least 1 late fee in the past 12 months, on average, 69% of late fees charged are waived, according to Auriemma’s data.”
And while there are some cardholders that continue to be challenged by late fees, many credit cardholders express positive sentiments about them. Roughly eight-in-ten agree that they encourage timely repayment (83%) and incentivize responsible credit card usage (76%). Still, three-quarters of those who have been charged a late fee say they make it difficult to get out of debt, underscoring the importance of the CFPB’s proposal.
Most believe new late fee rules would have a positive consumer impact.
Awareness of the proposed late fee rule change is limited, but notable. 32% of credit cardholders say they have at least heard of the CFPB’s proposed amendments to Regulation Z, which “implements the Truth in Lending Act (TILA), to better ensure that the late fees charged on credit card accounts are ‘reasonable and proportional’ to the late payment as required under TILA.”
After being provided a description of the proposed rule changes, 67% of cardholders said the CFPB’s proposed late fee rule change would have a positive impact on the average credit cardholder, if enacted. Few (9%) believe the regulation would have a negative impact.
“Those who feel positive tend to believe the changes will make repayment more manageable and provide some needed financial relief,” says O’Connor. “However, detractors worry the change would force issuers to increase interest rates or devalue rewards.”
45% of credit cardholders are unwilling to change their current credit cards’ offerings for an $8 late fee.
Though many respond to the CFPB’s proposed changes positively, if negative alterations need to be enacted to introduce an $8 late fee cap, most would be unlikely to continue using the card. According to Cardbeat US, the most acceptable exchanges, cited by 20% of cardholders, would be to reduce the card’s rewards value or increase the card’s APR by 10%. The least attractive option would be to reduce statement credits or cashback redemption value.
“An $8 late fee cap can help consumers and issuers alike, if rolled out thoughtfully,” says O’Connor. “No cardholder wants to see their card’s value watered down to make room for reduced late fees they may never encounter, but the change could significantly help those in the direst financial straits better manage their repayments.”
If implemented, an industry-wide $8 late fee cap could cause market share shifts based on implementation. Auriemma’s research found that while many cardholders don’t want to relinquish rewards, benefits, or increase annual fees or APR in exchange for lower late fees, issuers able to offer the lower fee without degrading their card’s value too strongly may see a marked impact on acquisition and retention, while also aiding the cardholders in their portfolio who may be struggling.
Survey Methodology
Cardbeat US
This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in September 2023 among 802 adult credit cardholders. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying.
About Auriemma Group
For nearly 40 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized 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 maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call Jonathan O’Connor at (+1) 1-646-437-6116.
(London, UK): Buy Now, Pay Later (BNPL) services continue to see significant growth across the UK and European markets. Over 19 million UK consumers have used Buy Now, Pay Later (BNPL) services, including 40% of credit cardholders, according to Auriemma Group’s latest issue of Cardbeat UK.
Much of this growth can be attributed to Klarna and Clearpay, which are the top two providers used and preferred by BNPL users. As of mid-2023, half (51%) of Buy Now, Pay Later users have used Klarna before, while 47% say it is their preferred provider. Use of Clearpay remains notably lower, with one-quarter (24%) of Buy Now, Pay Later users trying the service, and 10% preferring it over other providers. Regardless of the provider, the BNPL experience is overwhelmingly positive for those who have used the service. Over nine-in-ten (91%) BNPL users say they had a positive experience using it (up from 74% in Q4-22).
While expectations of regulation coming to the sector have placed a spotlight on Buy Now, Pay Later practices, discussions have not dampened customer appetite for BNPL. New providers continue to enter the marketplace whilst established players continue to increase their investment and focus on service enhancements. Earlier this month, Klarna confirmed an intention to continue investing in the UK market despite calls for tightened regulation.
Whilst growth continues with the younger generations (54% of credit cardholders under 35 have used at least one BNPL plan), there is increasing evidence that the relevance and appeal of BNPL has broadened. The UK Finance Payment Market Report found that the percentage of pensioners now using BNPL services doubled in 2022 compared to the previous year.
“UK banks and traditional lenders are beginning to recognise that BNPL is here to stay as a way for consumers to pay,” says Simon Cottenham, Head of International Partnerships at Auriemma Group. “The key for these players is to create a product, value proposition and customer journey which can appeal in this competitive marketplace.”
Similar trends are being seen in other European markets with Germany reporting 30% growth in BNPL use in the last year. Around one-quarter of consumers in Europe are believed to have made a purchase using BNPL with annual growth rates forecast in the 20%-40% range by most industry observers.
Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Customer Service Roundtable groups.
Survey Methodology
This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma in July 2023, among 80o+ 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 nearly 40 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.
Consumer Duty is finally here, but how is the financial services industry approaching it?
Join us for our inaugural Regulatory Compliance Roundtable meeting on the 18th of October at the St. Pancras Renaissance Hotel London from 9:30 – 17:00 GMT.
The discussion will be primarily focused on the FCA’s New Consumer Duty Act; however, the group will be open to discussions on other regulatory areas (e.g., BiFD findings, ISO 20022 and early discussions on what the industry would want to see from PSD3).
Our meeting agendas are attendee sourced; however, we expect to cover:
- Changes already made to processes and procedures
- Early learnings post 31st July go-live date
- Focus areas for future changes
- Internal governance structures
- Third-party oversight models
- MI and reporting usage
- Other regulatory areas of focus
If you or your colleagues are interested in attending, please contact nicole.toussaint@auriemma.group.
(London, UK) The Financial Conduct Authority’s (FCA’s) New Consumer Duty went into full effect on the 31st of July 2023. Auriemma Industry Roundtable members have been eager to collaborate with one another on how the regulation could affect each operational area and on what changes they are prioritising. At each meeting this year, roundtable members shared department-specific plans for tackling Consumer Duty as well as greater, overall objectives.
Collections and Recoveries Roundtable members are aligned in their focus on ensuring their forbearance toolkits are fit for purpose – with 23% of members introducing new forbearance options for struggling customers. Additionally, 54% of members indicated an intent to make changes to their supplier-oversight strategies—another focus area of the regulation.
“Our Customer Service members are hyper focused on communication structure and readability,” says Louis Stevens, Auriemma Industry Roundtables Director, “They are reviewing their entire communications catalogue and leveraging external partners to ensure verbiage meets the average UK reading and numerology levels.” To further ensure comprehension, many are also utilising customer research groups.
Complaints and Disputes departments alike are improving the customer experience around submitting a complaint/claim. They have increased the number of touchpoints to keep customers updated on the progress of their claim, with 15% of roundtable members intending to introduce text message updates as part of their journeys. As with Customer Service teams, 46% also intends to change their communication content, especially with complaints.
Fraud Control Roundtable members are pivoting to track more outcomes-based metrics and building new reporting structures around them. Many members have also recognised the need for Fraud Departments to become more involved in the vulnerable customer journey given that vulnerable customers are often targeted victims of fraud.
When looking at Operations as a whole, roundtable members have common themes within their plans. At the recent Auriemma Consumer Duty Workshop, 92% of members indicated they intend to run new training plans under Consumer Duty with the goal of building awareness amongst the department and delivering pinpointed training on how the regulation will affect individual roles. Outcome testing is a primary focus for many with 70% of firms already having had outcome testing frameworks in place, and the remaining 30% having planned to implement it in the months leading up to the deadline.
“Although it is crucial that the industry makes specific changes to comply with the New Consumer Duty, we must not forget that the intention of this regulation is to trigger a cultural change not just act as a tick-box exercise,” says Stevens. “This is not just a cultural change at the company level either, but rather across the industry as a whole. Collaboration amongst firms is crucial not only to comply with the regulation but to ensure the best possible outcomes for customers.”
To assist in this change, Auriemma is excited to announce its newly launched Regulatory Compliance Roundtable, with the pilot meeting specifically covering Consumer Duty. The agenda will be participant-led but will likely cover early learnings post the go-live date, planned future changes, internal governance structures, third-party oversight models, MI & reporting usage and more.
“We’re really excited for this new group and the enthusiasm we’re already seeing behind it,” says Stevens. “We hope that the group can become an extension of firms’ Consumer Duty teams and help shape the future of how this regulation is successfully implemented within the industry.”
The meeting is scheduled for the 18th of October at the St. Pancras Renaissance Hotel in London. If you or any of your colleagues are interested in attending as our guests, please contact us via roundtables@auriemma.group.
About Auriemma Group
For more than 35 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 contact Louis Stevens at louis.stevens@auriemma.group.
(London, UK): Klarna is the leading Buy Now, Pay Later (BNPL) provider in the UK with 13 million customers using its products and services, but the Swedish FinTech reported $1bn of losses in 2022, its largest ever, adding to the strain of incoming regulation following the UK Government’s draft legislation in February.
Despite losses, the UK giant continues to have a strong foothold in the marketplace. According to Auriemma Group’s latest issue of Cardbeat UK, 50% of BNPL users say they prefer Klarna to other BNPL brands. Clearpay comes in a distant second at 16%, with the remaining providers such as Laybuy in single digits.
Klarna and its competitors offer similar services, including 0% interest on instalment purchases, and weekly or monthly repayment plans. One of the key differentiators, however, is each provider’s portfolio of merchant partners where customers can utilise the competing services.
For example, ASOS, one of the UK’s largest online retailers with 8.9 million customers, lists Klarna and Clearpay as BNPL options at checkout, while major sports retailer JD Sports has deals with Klarna and Laybuy. So, is it really just availability at checkout that drives usage?
Auriemma Group’s research found that 31% of BNPL users have previously tried Clearpay and 12% tried Laybuy, compared to 50% who have tried Klarna. Furthermore, while 45% of BNPL users have only used one BNPL provider, a notable 36% have tried two or more, highlighting a willingness to use alternative providers even if they are not preferred. This open tendency could play to the advantage of regulated entities following February’s draft legislation.
“Though Klarna remains the top BNPL provider for the majority of cardholders, a considerable portion have tried other options,” says Jaclyn Holmes, Director of Research at Auriemma Group. “This shows that accessibility can take priority over brand loyalty, highlighting an opportunity for the competition.”
While availability at checkout plays a large role in BNPL selections, familiarity with a provider is also important. 42% credit cardholders say they would use Klarna if presented the option at checkout because of familiarity with the brand. This supersedes user experience (23%), attractive rates (15%) and customer service (10%). More generally, 34% of credit cardholders say that familiarity with the provider has the greatest influence on BNPL usage though the strength of the terms and conditions (33%) are also a notable factor.
As regulated entities like NewDay with NewPay and Zopa make headway in the space, the focus on consumer awareness will be as critical, if not more, as product strength and customer experience.
“Regulation may require changes from Klarna and others that disrupt their current customer journey, opening the door for competitors already accustomed to regulation,” says Holmes. “If new players can quickly build brand awareness and availability at the point-of-sale, we could see Klarna more readily challenged as consumers’ top choice.”
Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Customer Service Roundtable groups.
Survey Methodology
This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma in October 2022, among 80o+ 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 35 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.