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Young Consumers More Likely to Spend Gas Savings

(New York, NY): Most consumers have more money in their pockets thanks to lower gas prices, but younger people are more likely to spend their savings, according to research from Cardbeat®, Auriemma Group’s syndicated research publication. In a survey of 421 U.S. credit cardholders, one-third (34%) of consumers under age 45 say they’re now considering making previously postponed purchases, compared to just 20% among their older counterparts.

Many consumers’ personal finances are buoyed by lower oil prices. Close to two-thirds (62%) of drivers say they’re spending less on gas than they were a year ago, and 88% cite the lower cost of gas compared to a year ago. Yet caution permeates consumer behavior and varies considerably by age group. Consumers aged 45 and older, who remember rising gas prices during the OPEC oil embargo and Gulf War years, are more likely to see low fuel prices as a temporary phenomenon. Cardbeat data shows individuals aged 45 and older are more pessimistic in their outlook for the price of fuel going into the future, with 69% feeling the price of gas will go up in the next year, as opposed to 59% among respondents under age 45.

Major card payments networks validate that the impact of lower gas prices on card spending has been modest so far. For example, in January 2015, MasterCard CEO Ajay Banga told investors in the company’s quarterly earnings call, “We haven’t [yet] seen the extra savings from lower gas prices translate into additional discretionary consumer spending.”

The consensus among many economists is that we could start witnessing more discretionary credit card spending this summer (barring any unforeseen increases in gas prices). Marianne Berry, Managing Director of the Payment Insights practice at Auriemma, says that merchants would still be wise to presume a cautious consumer would be the rule for the foreseeable future, and target their promotions to the younger consumers who would most likely be receptive to such offers.

She adds that certain merchant categories, most notably restaurants, are likely to be the first beneficiaries of any incremental spending. “Consumers anticipate their highest increases in spending will be on food and dining over the next year” said Ms. Berry. ”After restaurants, retail in general, particularly fashion and electronics, are likely beneficiaries of discretionary spend among Millennials and Gen Xers.”

About Auriemma Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information about Auriemma’s research, please call 212-323-7000.

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Apple Pay Use in US Steadily Increasing Beyond Early Adopters

(New York, NY): The use of mobile payments is continuing to grow and broaden, as nearly half (46%) of iPhone 6 owners have successfully used Apple Pay, up from 42% just two months ago. The latest wave of Auriemma Group’s bi-monthly Apple Pay Tracker, which interviews a fresh sample of 500 iPhone 6 owners every 8 weeks, also finds high levels of repeat usage, with 63% reporting that they use Apple Pay at least weekly.

“The Apple Pay base is broadening from the tech-savvy early adopters,” says Marianne Berry, Managing Director of Auriemma’s Payment Insights practice. In Wave 1 (conducted between January 26 – February 6, 2015), 70% of Apple Pay users identified themselves as people who “like to be the first to have the newest model phone.”  In Wave 2, conducted April 10-20, that figure had dropped to 55%, indicating that less tech-oriented types are now trialing mobile payments via Apple Pay.

Consistent with the finding that the newer users might be less technologically adept, a significant number are reporting problems in set-up.  The April survey found that 45% of respondents reported having issues setting up Apple Pay. “Among those who reported issues setting up Apple Pay, 62% acquired their iPhone in 2015, compared to 38% who got their iPhone in 2014,” Berry noted.

Despite these issues, user satisfaction is very high, and their main complaint is the lack of retail venues accepting Apple Pay.  67% of those that have used Apple Pay in a brick and mortar store say they are migrating to merchants that accept Apple Pay. And 51% say that they are using other payment methods, such as cash, less often since they began using Apple Pay.

“Mobile payments still comprise only a small fraction of overall payments volume,” said Berry, “but Apple Pay is the first service to garner double-digit numbers of users. As the upgrade cycle gives more consumers access to Apple Pay, and Android Pay comes to market, the long-awaited transformation of the payments industry may finally have begun. It will be interesting to see how US adoption patterns compare to those in the UK and in Canada—markets with higher penetration of NFC and contactless cards—when Apple Pay is rolled out there.”

Auriemma’s Apple Pay Tracker conducts an online survey of 500 randomly selected iPhone 6/6+ owners every 8 weeks, accompanied by qualitative telephone interviews; the full study is available through an annual subscription. Data reported above comes from interviews conducted April 10 -20, 2015.

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.

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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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Card Fraud Hits 1 in 4 Consumers, but Most Are Satisfied by Bank Response

(New York, NY):  Over one-quarter (26%) of US consumers report having experienced credit and/or debit card fraud in a newly released study conducted in Cardbeat,® Auriemma Group’s syndicated research publication. Among fraud victims, one in five (20%) said that their fraud experience was directly linked to a data breach that became public knowledge.  Most consumers discover fraudulent transactions while reviewing their monthly statements, and erroneous retail charges are the most common type of fraud experienced, cited by 80% of those who report experience with card fraud.

Despite the rising incidence of fraud on payment cards, few consumers state that the experience has affected their willingness to use their debit or credit cards, a response that can be attributed their banks’ responsiveness. Three-quarters of consumers who reported having experienced payment card fraud stated that they were “very satisfied” with their bank’s response, and another 20% were “somewhat satisfied.”  Most (76%) consumers who experience card fraud were issued a brand new card with a different account number, and 65% say their account was credited for the disputed charges.

“For the most part, consumers seem to tolerate the fact that fraud is a potential risk of using payment cards, and most are appreciative of card issuers’ willingness to protect them from major security issues.  For example, 72% of all consumers who have experienced an unplanned card reissue say that their perception of their financial institution was positively influenced by the issuer response,” noted Marianne Berry, Managing Director of the Payment Insights practice. “However, the rising incidence of data breaches means that mass reissuance of cards is becoming more frequent, and some consumers have had their cards replaced multiple times in a short time frame.”  She noted that while overall satisfaction is high among those who receive new cards after a fraud incident, one-fifth (19%) of respondents report that they’ve received new credit cards due to fraud twice or more in the recent past, and their perceptions tend to decline with each subsequent reissue.

Ms. Berry says that banks still have opportunities to improve already-positive consumer perceptions.  She says “Involving marketing people in the correspondence may be an opportunity to improve the process for all parties involved.”  She noted that if the letter accompanying a new payment card is clearer about the reason a new card is being sent, consumers may be more likely to view the decision positively, regardless of how many times they’ve had cards reissued, adding that “providing consumers with a checklist of their recurring payment arrangements can also help reduce the hassles associated with switching card numbers.”

About Auriemma Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space.  We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information about Auriemma’s research, please call 212-323-7000.

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Auriemma Launches Apple Pay Consumer Adoption Study

(New York, NY):  Auriemma Group announced Thursday the launch of Apple Pay Tracker, a longitudinal study that will monitor adoption and usage of the mobile wallet throughout 2015.

The study, comprising bimonthly surveys of 3,000 iPhone 6 and 6 Plus users over the course of the year, will illuminate Apple Pay’s impact on payment providers, retailers, and other industry stakeholders.

“Apple Pay may change where people shop, how they pay, and the overall balance sheet of the payments system,” said Marianne Berry, Managing Director of Auriemma’s Payment Insights practice. “Issuers, merchants, networks, investors—all need to monitor these changes and have the flexibility to respond immediately to challenges.”

Every eight weeks throughout 2015, subscribers will receive a report tracing current levels of Apple Pay activation and usage by a randomized sample of 500 iPhone 6 owners. In addition to measuring growth in the adoption curve, subscriber reports will include information gleaned from in-depth interviews with respondents detailing their reasons for adopting—or bypassing—the service. Each iteration of the research will examine a unique subset of users, ranging from early to mainstream adopters as the market matures. Interviews with respondents will explore:

  • Motivations for usage
  • Changes to behavior and purchasing habits
  • Impacts on the customer relationship and brand attribution
  • The role of social influences in adoption and usage
  • Perceived security benefits and concerns
  • User experience and likelihood to recommend Apple Pay to other

“There is intense interest in both the industry and mainstream media about Apple Pay,” Berry said. “While transaction volumes and other aggregate data will be widely reported, these statistics won’t explain the behavior driving the numbers.“For example, how much growth in transaction volume is being driven by regular users and how much is attributable to growth in iPhone 6 sales? Are consumers changing their choice of retailers depending on the availability of Apple Pay? Do consumers make a conscious choice at point of sale among the cards provisioned in their Passbook, or does the default card become the most frequently used?”

Apple Pay Tracker joins a suite of market intelligence and syndicated research studies offered by Auriemma’s Payment Insights practice. In addition to mobile payments, Auriemma conducts consumer research focused on credit, debit, and prepaid products.

“Whether or not Apple Pay reaches broad acceptance,” Berry said, “millions of consumers will pay with their phones for the first time. This may be the long-awaited catalyst that ignites mobile payments.”

 About Auriemma Consulting Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space.  We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines.  For more information about Auriemma’s research, please call 212-323-7000.

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Auriemma Research Suggests U.S. Holiday Spending Will Be Up Slightly in 2014

(New York, NY):  As we approach the 2014 holiday season, there are signs for cautious optimism on consumer spending.  For example, the U.S. has experienced slow but steady economic growth for the past several years, and the national unemployment rate stood at 5.8% in October according to the U.S. Bureau of Labor Statistics, which the agency notes has not been that low since July 2008.

Auriemma Group, a leading consulting firm in the payments field for the past 30 years, believes 2014 holiday spending is likely to show slight increases over 2013 holiday spending levels.  According to recent research conducted in Cardbeat,® Auriemma’s syndicated research report derived from a web-based survey of credit card users in the U.S., more than half (52%) of respondents say they will be increasing the amount they spend this season.  However, the biggest increases will come from the youngest consumers, who begin at a lower dollar amount of spending.

“Barring any unforeseen factors such as weather, 2014 holiday spending should show a moderate overall increase,” says Marianne Berry, Managing Director of Auriemma’s Payment Insights practice.

She adds that Auriemma’s ongoing research shows that many U.S. consumers have working been to deleverage their personal balance sheets, so many are in better fiscal condition than they have been in years.  However, in the absence of rapid income growth, it’s hard to envision just what might drive a big jump in overall sales.  ACG’s annual forecasts of holiday spending have proven directionally correct over the past decade.

One bright spot for the banking and payments industries, she says, is that more consumers (81% in 2014 vs. 72% in 2010) this year say they’ll plan on using credit cards to pay for their holiday purchases, although it’s worth noting that only a portion of this group will carry balances on any of their credit cards.  Cardbeat data suggests that about 60% identify as revolvers, with 38% who occasionally revolve, and 22% who revolve frequently.

By many accounts, forecasts for 2013 holiday spending growth failed to materialize, with industrywide holiday sales growth for 2013 being the slowest since 2009.  Severe weather conditions in much of the U.S. last December, along with fewer holiday shopping days between Thanksgiving and Christmas 2013 adversely impacted consumer spending.

For 2014, the National Retail Federation forecasting November-December 2014 sales (excluding autos, gas and restaurant sales) to increase by 4.1%.  By comparison, Gallup’s spending estimate suggests an increase between 2.2% and 3.5% in 2014 U.S. holiday retail sales, and the organization says that the most likely outcome will probably be around 3%.

About Auriemma  Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space.  We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines.  For more information about Auriemma’s research, please contact 212-323-7000.

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U.K. Credit Cardholders Want to Choose Their Payment Due Date

[LONDON] According to consumer research recently conducted in the U.K. and published in Cardbeat®, a syndicated research report published by Auriemma Group, the ability to choose a payment due date for their credit card has broad appeal to cardholders.  However, only a quarter recall being offered this option by any credit card issuer.

Account management tools with the next highest appeal are alerts for payment related events (e.g., approaching credit limit, payment due, payment received, etc.) and end-of-offer reminders.  More than one-third of cardholders find these features beneficial; yet more than half report never being offered this timely information.

Marianne Berry, Managing Director of the Payments Insights practice at Auriemma, points out,  ‟Cardholders under 45 years old and revolvers are significantly more likely to find control and security benefits appealing than older cardholders or cardholders who pay their balance in full each month.”  And the youngest surveyed cardholders, those under age 25, state a significant preference for receiving alerts and reminders via mobile app.  Ms. Berry observes, ‟Channel predilection is likely to shift to newer, more convenient technologies, especially as young consumers mature using their mobiles for all sorts of information and daily transactions.”

The survey’s Industry Satisfaction Index is trending upward — reaching its highest point in the past two years, with the biggest gain in ‘trusting the credit card company with personal information.’  Banks can build on growing customer satisfaction by offering tools with high perceived value that cardholders want to use to manage their credit card accounts.  Auriemma’s research highlights opportunities for banks and other financial institutions to capitalise on their knowledge of consumers’ perceived value of specific account management tools.

Forgetting a credit card PIN is the single most frequent problem that cardholders experience, with more than two-thirds of these cardholders receiving their replacement PIN via post.  Half of these cardholders report using their credit card less often, stopping using the card, or cancelling their card.

Given that roughly one in seven cardholders report having forgotten their PIN within the past year, waiting for a replacement PIN to arrive via post interrupts usage and leads to potential significant attrition.  Card issuers should note — some issuers have procedures in place to replace a PIN via email, phone, or via their website, thus precluding their cardholders substituting another card.

About Auriemma Consulting Group

Auiriemma 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 +44 (0) 207 629 0075.

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Banks That Issue the First Credit Card in Wallets Have Opportunity to Grow with Consumers’ Incomes

(New York, NY):  Becoming the first credit card in a person’s wallet has long-term financial benefits for banks; the average account tenure is 17.4 years. Further, more than two in five (41%) consumers report that they also have some other type(s) of account(s) with the same bank in addition to their credit card, most commonly checking and savings accounts. The results were published in Cardbeat,® a syndicated research report published by the Auriemma Group, and is based on a web-based survey of credit card users in the U.S.

Logically, most (64%) consumers indicate that they applied for their first card in order to establish their credit history. Additionally, the largest percentage (71%) of these consumers cite a specific life-event being associated with their first credit card acquisition, with many being related to educational milestones such as college or high school graduations. In theory bank transactional data, as well as lower-tech solutions such as having retail bank salespeople help to manage consumer relationships can enable banks to market to consumers during these life events.

Although direct mail remains an important acquisition channel for credit cards, in recent years, branches have been a rapidly-growing acquisition channel for new cards for a number of large banks. In fact, branches or other facilities that offer face-to-face consumer interactions are now responsible for nearly half (45%) of all new credit cards sold.

However, retail banks face challenges, notably, most new credit cards are issued to the Millennial population (born between the years of 1981-1991, now between the ages of 23-34), and this demographic segment is much more likely than other age groups to avoid visiting bank branches completely, preferring to conduct most of their routine bank business at ATMs or online instead. This makes reaching them more difficult than it was for prior generations. Some financial institutions have started to experiment with concepts like video chats with bank call center reps right from the ATM. While these are still in trial phases, its definitely a step in the right direction.

Marianne Berry, Managing Director of the Payment Insights practice at Auriemma, says that the overall message to banks is clear:  the benefits of being the first credit card in someone’s wallet are genuine, and these tend to be long-lasting, attractive consumer relationships. She says, “While most of the Millennial population cannot yet be defined as affluent based on income or assets, there is little doubt that in time, some will become affluent.”  Ms. Berry adds the banks that establish relationships with Millennials now, during their formative years, will have a unique opportunity to grow and expand existing relationships with these consumers as their personal wealth grows.

About Auriemma Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information about Auriemma’s research, please call (212) 323-7000.

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Consumer Understanding of Credit Bureau Data May Be Flawed

NEW YORK, NY:  Over the years, American consumers have gained greater transparency on credit reporting. For example, in 2003, The Fair Credit Reporting Act (FCRA) was amended to require that each of the nationwide credit reporting companies provide consumers with one free copy of their credit report, upon request, once every 12 months. Previously, access was available for a fee unless the consumer had already been denied credit based upon credit bureau information.

According to recent consumer research published in Cardbeat®, a syndicated research report published by Auriemma Group, most U.S. consumers have a general awareness of credit bureau information (including their credit reports). Many consumers also understand the impact information has on their ability to obtain credit at a reasonable price. Cardbeat research shows that half (50%) of consumers are generally familiar with credit bureaus, with a higher percentage familiar when consumers have children in the household (66%), or are affluent, defined as consumers with $100,000 or more in assets (61%). Since the FCRA was amended to provide free consumer access to their credit information, the incidence of consumers who have reviewed their credit reports has grown from slightly less than half (49%) to more than three in five (62%).

Consumers consider their credit bureau information and credit score to be of nearly equal importance in terms of their ability to get the credit they need at a reasonable price (79% and 82%, respectively). However, more than one-third (34%) of consumers feel the cost associated with accessing their credit bureau information is not reasonable, when, in fact, it should be accessible for free.

Marianne Berry, Managing Director of the Payment Insights practice at Auriemma says, “The discrepancy between actual cost and perceived cost may be explained by possible consumer confusion.” For example, services that provide credit monitoring often charge fees. The Federal Trade Commission acknowledges that imposter websites claiming to offer “free credit reports,” “free credit scores,” or “free credit monitoring” have created consumer confusion. (Although the CARD Act did mandate new disclosures in the advertising of such services.)

Another area of confusion is the fact that credit reporting is not the same as credit scores. Credit scores are not routinely provided for free. Further, there are different credit scores available (widely-used credit scores are those developed by FICO, and another called VantageScore created in collaboration with the three major credit bureaus).

Financial institutions may have a role in helping to educate consumers. For example, banks’ own websites can potentially direct consumers to the official ‘annualcreditreport.com’ website for a free copy of their credit reports. Also, some credit cards are now offering consumers with complimentary access to their FICO credit scores. Ms. Berry adds, “While the short-term financial benefit of providing such consumer education may be difficult to quantify, gaining consumer trust may pay longer-term dividends by establishing them as a provider of choice.”

About Auriemma Consulting Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information, call 212-323-7000.

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