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Issuers and Cardholders Shift Focus to Digital During COVID-19

(London, UK) Issuers are building out digital offerings as COVID-19 continues to curtail opportunity for in-person servicing. Auriemma Group’s latest issue of Cardbeat UK found that 42% of those who interacted with a bank branch since November 2019 haven’t used the channel again since the pandemic began. While cardholders are leaning more heavily on digital solutions, many still expect a diversity of options. Are issuers meeting their cardholders’ needs, and what would improve the customer service experience today?

Auriemma’s research found that sustained channel usage through the pandemic is most prominent for digital options. Just under nine-in-ten cardholders who used mobile apps (87%) or online portals (86%) to interact with their issuers prior to COVID-19 say they continued to use that channel since the outbreak began, while phone (74%) and bank branches (58%) saw lesser continued use.

While many issuers have numerous communication options available to their cardholders, this shift in channel usage has propelled them to reassess operational needs. Auriemma’s roundtables discussed how digital servicing has become a top priority since the pandemic began, noting that the cost of delivery, training, and staffing considerations inform which measures are taken.

“Overall, issuers are doing what they can to reorient their strategies to meet the changing needs of their cardholders, and they’ve been largely successful” says Jaclyn Holmes, Director at Auriemma Group. “Three-quarters of cardholders who interacted with an issuer both before and since COVID-19 say the customer service experience is about the same, and those who feel it has improved most often point to the strength of the human element—problems are solved more easily, solutions are flexible, and agents appear more empathetic.”

Notably, 17% of this group do say that the customer experience has gotten worse, with longer wait times (71%) most often to blame. However, these cardholders also say there are fewer options for contacting their issuer (38%) and that getting answers or solutions to their questions has become more difficult (32%).

“Ensuring customers have a variety of communication channels to choose from is clearly important, however not at the cost of speed to resolution,” says Holmes. “Issuers deciding how to allocate their resources are tasked with providing diverse options, while staffing them with an eye towards contact patterns and traffic expectations.”

One way that firms are trying to meet customer need without overburdening their resources is through self-servicing options. Auriemma’s roundtables found that many issuers have promoted the use of digitised forms for disputes, complaints and payment holidays. These options yield high customer use and provide issuers with efficiency gains.

And cardholders broadly react positively to these types of options. Auriemma’s research found that the vast majority of cardholders are comfortable completing financial actions via digital channels. This is particularly true of more common tasks like checking account balances (90%), making a payment (89%), updating contact information (88%), transferring funds (86%) and requesting new cards (85%).

“Providing self-service options has a two-fold benefit—cardholders have quick access to solutions for common questions and issuer resources become more readily available for more complex customer needs,” says Holmes. “Looking forward, providing the right allocation of resources towards self-service, chat bots, and live representatives, either in chat or on the phone, will be key to cardholders continued satisfaction with issuers channel offerings.”

Survey Methodology

Cardbeat UK

This Auriemma Group study was conducted online within the UK by an independent field service provider on behalf of Auriemma in November 2020, among 845 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. The average interview length was 21 minutes.

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 Jaclyn Holmes at +44 (0) 207 629 0075.

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How COVID-19 Is Impacting Consumer Payments and Spending

Online Shopping Promotes Increased Debit and Credit Use, but Spend Remains Down Overall
March 10, 2021

COVID-19 has continued to have an impact on consumer spend and payment methods, albeit to a lesser extent than during the first lockdown. While spending has generally decreased overall, there are a small proportion of cardholders who have increased debit and credit usage in the past 30 days as online shopping became more prevalent. Cash usage continues to show the greatest reductions, though a bit less extreme than W2-20, likely due to channel changes and hygiene concerns.

Auriemma’s data reflects reporting in UK Finance’s latest Card Spending Update, which also shows that those spending less on cards are doing so because they are spending less in general, while those spending more have increased their online shopping.

Cardholders Are Willing to Delay Rewards Redemption for Increased Value
March 3, 2021

Issuers of T&E cards may need to refresh their value proposition to keep cardholders engaged with their card as the travel industry continues to be impacted by COVID-19. According to Auriemma’s latest research, credit cardholders are willing to wait longer to redeem their rewards if doing so would increase their point’s value. This is especially true of T&E cardholders who can redeem them for high values and may not have had the opportunity to do so in recent months.

Instalment Plan Interest Drops During Pandemic (UK)
October 2, 2020

Though there continues to be notable interest in monthly instalment plans, Auriemma’s research saw a 16 percentage point drop between W1-20 and W2-20, likely due to uncertainty around cardholder’s financial future.

With COVID-19 still threatening some cardholder’s future earning potential, many may be hesitant to commit to ongoing payments.

Cardholders Cite High Take Rates for Low or No APR Offers during the Pandemic
September 14, 2020

Though only about one-quarter of credit cardholders say they were offered 0% APR on new purchases (24%) and/or reduced APR on new purchases (22%) during the last 3 months of the COVID-19 pandemic, the observed take rates were high.

About half of those offered accepted, and many used their card more as a result—77% who accepted the 0% offer, and 66% who accepted the reduced APR offer, said they used the card more than typical after receiving the offer.

Cash Usage Drops Amid Hygiene Concerns
September 9, 2020

Cardholders Still Intend to Travel in 2020
September 4, 2020

Digital Servicing Options Going Strong During Pandemic
August 25, 2020

These Businesses May Struggle Upon Reopening—Consumers Aren’t Returning Anytime Soon
August 13, 2020

High-traffic, high-density businesses will likely struggle as business start to reopen following COVID-19 closures. Nearly half of cardholder don’t see themselves going to gyms, bars, or sporting events in the near future, and many of those who frequented various businesses prior to COVID-19 say they expect to go to those businesses less once they reopen.

Consumers Expect COVID-19 to Create a New Normal
August 11, 2020

According to Auriemma’s in-depth interviews with consumers, many anticipate a long road ahead before things return to normal, if ever.

Likelihood to Enroll in Installment Plans Increases for Some Due to COVID-19
August 7, 2020

Over one-quarter say COVID-19 has made them more likely to enroll in an installment plan and more cardholders are taking advantage of these options, particularly in-store (compared to Q4-19).

Spike in Contactless Payments Attributable to Physical Cards
August 4, 2020

Cardholders Respond Positively to Payment Accommodation Offers
July 30, 2020

Issuers have done a number of things over the course of 2020 to help cardholders through these uncertain times. About two-in-five cardholders say they were offered at least 1 of 5 tested payment accommodation in the past 6 months. And the take rate among those offered is high—most accepted the payment accommodation they were offered.

Brand Selections Flex Beyond Typical in Response to COVID-19 
July 16, 2020

According to Auriemma’s in-depth interviews with consumers, many have used different merchants, brands, and purchase channels than typical because of COVID-19.

COVID-19 Shortages Present Opportunities for New Brand and Merchant Loyalty 
July 14, 2020

COVID-19 has not only changed how consumers shop, but also where they shop. Nearly two-thirds (64%) of cardholders say they have become more willing to try new ways to shop. And 40% of recent online shoppers have tried shopping with new merchants since the COVID-19 outbreak.

Many cardholders said stores they regularly shop at were out of many items, that they needed to switch from their preferred brand to purchase an item they needed, and that they have visited stores they don’t normally shop at to find what they need.

Online Shopping Increases and Channel Preferences Shift Because of COVID-19
July 9, 2020

62% of cardholders are shopping online more than usual due to COVID-19, with some buying cleaning supplies, toiletries, and groceries for the first time via the channel as a result.

And although consumers have historically preferred in-store shopping for groceries (and most still do), a notable 31% say they prefer using digital channels (i.e., websites, mobile apps) to make grocery purchases.

UK Credit Card Issuers Are Waiving Missed Payment Fees for Most
June 10, 2020

64% of those charged a missed payment fee on their credit card had the fee waived. Few (8%) report missing credit card payments because of COVID-19, but these figures increase dramatically when looking at revolvers (16%) and sub-prime/near prime cardholders (23%).

Struggling Cardholders Struggle More Because of COVID-19
June 5, 2020

Sub-prime cardholders are more likely to report high levels of concern about their personal finances, and reasonably so. These individuals are disproportionately impacted by the COVID-19 pandemic—notably higher proportions are missing credit card, bill, or loan payments as a result.

Younger Cardholders Embrace Innovative Payments Due to COVID-19
June 1, 2020
May 29, 2020
Compared to their older counterparts, Gen Z and Millennials made more behavioral changes as a result of COVID-19. These younger credit cardholders are more likely to have:
  • Used less cash over the last 3 months
  • Used online options, contactless, and P2P instead of cash
  • Stocked up on food
  • Ordered more delivery than usual
  • Placed more online orders than usual
  • Ordered items online they would normally buy in-store
SOURCE: Auriemma Group / Cardbeat US / Q1-2020

 

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Cardholders Are Missing Payments—Here’s How Payment Holidays and Accommodations Can Help

(New York, NY and London, UK) COVID-19 has put additional financial strain on cardholders globally, but some issuers are trying to lessen the immediate burden. Auriemma Group’s latest issues of Cardbeat US and UK uncover how the pandemic could be affecting on-time payments, which accommodations issuers are offering consumers to help ease the strain, and how card rotation is being impacted as a result.

While missing payments is not exclusive to COVID-19, wage cuts, job loss, and other unexpected financial stressors could make missed or late payments more common. According to Auriemma’s research, about one-sixth of cardholders in both markets say they have missed a payment over the last 6 months. During this time, unemployment figures in both regions increased, with many cardholders needing government aid. However, credit card issuers in both geographies are finding creative ways to assist cardholders through this unprecedented time.

Payment Holidays Provide Short-Term Relief

One of the many ways UK card issuers are helping relieve payment pressure for their cardholders is by offering payment holidays, which allows cardholders to miss monthly payments without penalty. Auriemma’s research found that 20% of UK credit cardholders were aware of the option to take a payment holiday from their issuer, and 33% of them accepted the offer.

The high take-rate is unsurprising given the circumstance. Pandemic-adjacent reasons are most often cited for their acceptance, including wanting to keep money in their bank account and that it would help with cash flow.

“Payment holidays offer a temporary solution for an immediate problem,” says Jaclyn Holmes, Director at Auriemma Group. “And while the accommodation has become a necessary offering for high street banks in this moment, issuers will need to determine and communicate its intended tenure before it becomes table stakes for their cardholders.”

Long-Term Accommodations Chart a Corrective Course

While payment holidays offer a short-term fix, impacted cardholders can be transitioned to other accommodations meant to improve their financial standing in the long-term. In the US, 40% of cardholders have been offered at least one of the accommodations tested in Auriemma’s study (e.g., a reduction in their monthly minimum payments or interest rate, waived interest charges, forbearance options, hardship programs)within the past 6 months.

According to Auriemma’s study, the top offers include increasing credit card limits (20%), offering hardship programs (17%), and providing forbearance options (16%). These accommodations are popular among those offered them, with over half accepting.

“Offering payment accommodations provides a halo effect for your brand,” says Holmes. “Those offered a payment accommodation say they felt more positively about their card issuer as a result, which, along with attractive rewards and benefits, could influence card selection when making a purchase.”

Accommodations and Attractive Rewards Could Impact Card Selection

Over six-in-ten cardholders in both regions report using multiple payment cards in the past 30 days. These individuals are also more likely than their counterparts who used a single payment card to have taken either a payment accommodation or a payment holiday. And while goodwill derived from payment accommodations has an ancillary influence on which card is chosen in the near-term, attractive rewards and benefits remain the main drivers of card choice, regardless of locale.

“When the dust settles, consumers struggling financially will look back on this time and remember which issuers had their back” says Holmes. “Rewards and benefits continue to be critical factors in card selection, but they’re not the only consideration at the moment. Issuers who give their cardholders both payment flexibility and relevant benefits during these uncertain times will be best suited to secure or maintain their top-of-wallet position.”

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 June 2020 among 811 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 22 minutes.

Cardbeat UK

This Auriemma Group study was conducted online within the UK by an independent field service provider on behalf of Auriemma in July 2020, 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. The average interview length was 20 minutes.

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.

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Merchants Contacted First, But Issuers More Likely to Solve Disputes

Who do you contact when you have an issue with a purchase? Although the vast majority would contact the merchant first if they made a credit card purchase and didn’t receive the correct goods or services, credit card issuers tend to resolve most of these disputes.

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Payment Holidays Unfamiliar to Cardholders

Auriemma’s most recent issue of Cardbeat UK revealed that 59% of cardholders are familiar with the term ‘payment holiday’ though almost half are unsure as to its potential impact on credit scores, highlighting the potential need for education to ensure cardholders understand the possible effects on their personal circumstances.

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Instalment Plan Interest High with Revolvers, Millennials, and Repeat Customers

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

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Payment Behaviors Shift as US and UK Consumers Adjust to COVID-19 Fallout

(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.

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Why Challenger Bank Customers Haven’t Left High Street

(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.

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