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

(New York, NY and London, UK) COVID-19 has significantly impacted most aspects of consumer’s lives, including how they shop and make payments. People are concerned for their finances, their health, and are uncertain about the future. Auriemma Group conducted studies in the US and the UK to understand how payment activity and expectations are changing, and what issuers can do to meet this unprecedented moment in our history.

How Payment Activity Is Changing

Across both markets, about seven-in-ten consumers are anxious about the future. Many are specifically concerned about their personal finances, especially in the US (81% vs. 67% UK). This worry, paired with stay-at-home guidance and closures of non-essential businesses have altered the way many consumers make purchases, what they are purchasing, and their purchasing power.

COVID-19 has caused many to shift spend online. Nearly eight-in-ten consumers are visiting fewer businesses and, as a result, many are placing more online orders than usual (45% US vs. 38% UK). However, most have reduced their non-essential spend, particularly in the UK (72% vs. 65% US).

Spend categories and payment methods have seen immediate shifts because of COVID-19. As a category, consumers understandably noted rises in grocery spend, with many saying they stocked up on food or household items (60% US vs. 49% UK). In addition, many are making more purchases with contactless or mobile payment options (34% US vs. 45% UK). This is unsurprisingly greater in the UK, given their tenure with contactless payments.

Changes in spend are similar across geographies. Over four-in-ten say they are spending less than typical (42% US vs. 47% UK), while only slightly fewer say spend stayed the same (41% vs. 35%). The remaining one-fifth say they are spending more than typical, and the average increase in monthly spend among that group was similar across both countries ($524 vs. £463).

“While sudden shifts in behavior are to be expected, the bigger question is whether these changes will be long-lasting,” says Jaclyn Holmes, Director of Research at Auriemma Group. “Many consumers are trying new purchasing channels and methods out of necessity, and some who were previously averse to online shopping are finding the experience to be surprisingly enjoyable. Only time will tell if these options truly become ubiquitous as a result.”

How Expectations Are Changing

Financial institutions play a key role in quelling the anxiety consumers in both markets face. From a communications perspective, banks and issuers are performing strongly. About three-quarters in both geographies say they are satisfied with the COVID-related communications coming from their primary bank or credit card issuer.

In addition to strong communication, consumers expect payment leniency. Over seven-in-ten said they expect their financial institutions to be understanding of late payments at this time. With some consumers unable to meet their payment obligations, about one-in-ten say they have missed a credit card, bill, or loan payment because of COVID-19.

Most issuers are meeting consumer expectation and waiving missed payment and late fees, but a handful report that the fee was not waived. This is especially true of UK consumers—36% who were charged a fee did not have it waived (vs. 27% US).

“Waiving fees is one way to show consumers that you are in their corner,” says Holmes. “And while that may not be fiscally possible for all issuers, offering support in other ways—be it via online tools and information, offers, or exemplary customer service—could go a long way to showing cardholders that you have compassion for their situation.”

What Issuers Can Do

Since its outbreak, COVID-19 has brought about many questions that lack answers. From health to the economy, there is a lot of uncertainty in what lies ahead, and customers are looking to their card issuers for guidance and reassurance. Issuers aiming to present a customer-first approach may want to communicate the following:

  1. Actions taken to help ease payment burdens (e.g., waived fees, lower rates, extended grace periods)
  2. Recommended customer service channels or resources (e.g., new channels aimed to reduce wait times, self-servicing options, updated FAQ pages)
  3. Beneficial information to aid the shopping experience (e.g., how to reduce direct contact using contactless or mobile payment options, merchant partner deals to help them save, how to maximize rewards)
  4. Steps to take when requesting a refund or filing a dispute

“Given how quickly things are changing, finding relevant and up-to-date information can become challenging for consumers,” say Holmes. “By providing thoughtful and consistent communications, issuers can help reduce rather than contribute to the mounting concern consumers are expressing.”

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 March/April 2020 among 807 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. The average interview length was 25 minutes.

Cardbeat UK

This Auriemma Group study was conducted online within the UK by an independent field service provider on behalf of Auriemma in April 2020, among 809 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 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 Jaclyn Holmes at (+1) 646-454-4200.

(London, UK): In a short time, challenger banks have won cardholders over with their unique mobile-only banking model, differentiated from High Street offerings by touting foreign exchange features, budgeting tools, spend analytics and easy cheque splitting. But consumers aren’t breaking up with High Street just yet. According to new research published by Auriemma Group, challenger banks are being used as a complement to, not a replacement for, traditional banking products.

Currently, 13% of credit cardholders have a mobile-only current account with Monzo, Revolut and/or Starling. And 44% of credit cardholders without a mobile-only current account could be persuaded to switch to one. This small, but notable figure shows curiosity in the mobile-only banking model.

“Challenger banks market themselves as innovators in the payments space,” says Jaclyn Holmes, Director of Research at Auriemma Group. “From graphic cues like bright-coloured and vertical cards to their digitally focused approach, these banks are trying to visually and experientially differentiate themselves from their High Street counterparts.”

These benefits and differentiators alone, however, are not enough to instill full confidence in challenger banks. Nearly all (96%) of those who had a current account with a traditional bank prior to opening one with a mobile-only provider say that they have kept their traditional account open.

There are several factors likely at play in this decision. Many who are uninterested in challenger banks express satisfaction in their current offerings (58%), prefer banks with physical locations (42%) or don’t know enough about them (28%).

In effect, challenger banks are charged with informing the consumer about who they are and what makes them better. While some focus on the strength of their digital offerings to make this point, others have taken innovative steps to address the perceived need for in-person service.

Starling Bank, for example, partnered with the postal service to offer cash deposits in a physical location for its account holders. This partnership offers a consistent physical footprint (i.e., the post office) for the bank as traditional bank branches continue to close across the UK.

While offering a physical location for some banking activities is one solution, other mobile-only providers focus squarely on self-service options. These are especially important for younger cardholders, who, according to Auriemma’s research, are less likely to see branches as a critical component of the banking relationship.

“Although the absence of a branch footprint is currently an obstacle for challenger banks, its importance may wane as the industry becomes more digital,” says Holmes. “As the industry shifts, we can expect consumers to become more comfortable with mobile-centric banking solutions.”

Challenger banks cultivated enthusiasm around innovative tools and features, many of which currently exist in the High Street digital experience. It appears even basic tools could be enough to keep these cardholders from looking elsewhere. Many of those who find tools important most often cite bread-and-butter functionalities that are already a part of online banking—spend alerts, reports, and automatic transfers.

“Challenger banks are bringing digital tools to the forefront of the customer experience, but consumers will continue looking to legacy providers for everyday banking needs,” says Holmes. “High Street Banks have given little reason to look elsewhere, and although challengers have their merits, it’s unlikely that cardholders will transition their entire banking relationship to them in the near term.”

Survey Methodology

This Auriemma Group study was conducted online within the UK by an independent field service provider on behalf of Auriemma in November 2019, among 855 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.

(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.

(New York, NY): Apple’s new credit card will be released later this summer and is well-positioned to capture the attention of Apple’s existing shoppers and Pay users, according to a study by Auriemma Research. The card appears designed with Apple enthusiasts in mind and may encourage the use of Apple Pay.

Although the Apple card has not yet been released, it is already well-liked by Apple Pay users. Three-quarters of them are attracted to the card’s offer, which includes a strong incentive for using Apple Pay at the point-of-sale. Cardholders earn 3% cash back on all Apple purchases, 2% for using Apple Pay, and 1% for using the physical card. Unlike most rewards cards, Apple’s rewards will be available automatically, deposited on an Apple Cash card daily or applied as a statement credit with no activation or redemption necessary.

“In the past, any uncertainty or issues using mobile payments often led consumers to fall back to the plastic card to avoid friction at the point-of-sale,” says Jaclyn Holmes, Director of Auriemma Research. “Shoppers now have reason to ask the cashier if Apple Pay is accepted in order to maximize the rewards they’ll earn on the purchase.”

Cash back won’t be the only thing encouraging Apple cardholders into Apple Pay. The digital card will be stored in the Wallet app, along with accompanying tools and features (e.g., sophisticated spend analyzers, transparent payment calculators). Because of this integration, Apple cardholders’ familiarity with the Wallet app (and Apple Pay) should increase.

Apple’s titanium card is different from others on the market, featuring a sleek and numberless display and a redesigned EMV chip. But even Apple’s physical card softly promotes Apple Pay usage. Those who want to make contactless payments will need to use their phone, since the physical card is not expected to support contactless technology.

“The Apple card appears to be another way to get brand loyalists interested in Apple Pay,” says Holmes. “While we shouldn’t expect swaths of non-Apple users to buy an iPhone so they can use an Apple card, we can expect increased engagement among those who already own one.”

Apple Pay users are already abuzz about the offer, according to Auriemma’s study. About half of Apple Pay users have heard about the card, an extremely high proportion considering the card has not yet launched. Awareness for the card is also notable (27%) when looking broadly at all consumers eligible for mobile payments.

Apple’s announcements often garner significant media attention, but these high levels of awareness are impressive for payments. An introductory video for the Apple card uploaded in tandem with the late-March announcement has racked up 17.5 million views as of August 2019, over ten times the number of views for similar videos for other cards.

Interest in Apple’s new credit card also spans beyond brand loyalists. Three-quarters of Apple Pay users are attracted to the Apple card, but so are 60% of eligible non-users. Those who are not attracted to the card most often say it is because they don’t make frequent Apple purchases or they don’t use Apple Pay much/at all. A notable proportion also mention that the rewards were unappealing, citing better rewards with existing cards or cash back percentages being too low.

The interest among non-users represents an opportunity for Apple to increase its Pay user base after over four years of stagnant growth. And between the cash back offer, the integration with Apple Pay, and the contactless technology only being available with the phone, it appears the Apple card is well-positioned to do just that.

“While the Apple card may have an impact on Apple Pay usage, its reception will likely impact other card products and comfort with mobile payments generally,” says Holmes. “Many payment professionals are already thinking about how cardholder expectations for the digital experience may shift in response.”

Survey Methodology

This Auriemma Research study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) between April-May 2019, among 2,029 mobile pay eligible consumers. Respondents were screened to own an eligible smartphone or wearable device. All respondents also have a general purpose credit card in their own name.

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 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 Jaclyn Holmes at (212) 323-7000.

(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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