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3 Ways Banks Are Implementing Hybrid Working Models

(London, UK) Widespread work-from-home started as an adaptation to COVID-19 but is here to stay. In Auriemma Group’s recent roundtable meetings financial institutions discussed long-term working models, all of which include some element of working from home. Their next challenge is developing a hybrid engagement model for their hybrid workforce.

Some have already taken then leap, and since implementing these hybrid models, Auriemma’s roundtable members received employee feedback that some feel less engaged and connected with the company. This, in conjunction with high attrition rates and challenging recruitment, means engagement strategies have become an area of focus.

Those who feel they have developed strong hybrid engagement models have focused on three areas: intentional scheduling, variety of choices and well-being considerations.

Intentional Scheduling

Firms strategically schedule location-appropriate activities when employees are onsite or working remotely. When onsite, firms try to have full teams concurrently present to build comradery and schedule more team-building activities like catered lunches and happy hours. When remote, roundtable members manage engagement via gamification and weekly competitions like step counts and quizzes.

“When managing a hybrid workforce, it is crucial that firms give equal treatment to employees regardless of on-or-offsite work,” says Louis Stevens, Director of Roundtables at Auriemma Group. “Otherwise, this can create a divide in the workforce and even lead to further attrition. Engagement models must cater to both demographics.”

Variety of Choices

Workforces are composed of a diverse mix of people with a diverse set of interests, which can make it challenging to find engagement activities that appeal to everyone. The solution? Including variety in the engagement offerings.

According to members, offerings should cater to both extroverts and introverts alike. One firm developed a successful monthly engagement programme for its employees, which allowed them to choose from a variety of activities like cocktail making classes and sporting events.

Well-Being Considerations

As part of their engagement strategies, financial institutions have incorporated well-being initiatives to protect the mental health of their employees. Initiatives vary from providing access to therapists to scheduling inspirational speakers and allotting weekly personal time in schedules.

30% of Auriemma Customer Service and Complaints Roundtable members have intentionally increased off-phone time for front-line agents since the start of the pandemic as a means of dedicating more time to employee well-being. Employees have the choice to use this time as they wish whether that be for professional development or something like meditation or yoga. Since implementing, firms have seen an improvement in productivity levels.

Auriemma’s roundtable members are still developing their engagement strategies. New developments and learnings will be discussed in depth at the upcoming Collections and Recoveries Roundtable meeting on the 9th and 10th of June in Edinburgh, as well at the Customer Service and Complaints Roundtable meeting on the 16th and 17th of June, also in Edinburgh.

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

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Declining Mental Health Takes Toll on Financial Services Operations

(London, UK) Absence and attrition rates are on the rise for front-line agents working in financial services. Mental health concerns are a primary driver, forcing financial service providers to address a once-taboo workplace subject. According to members of Auriemma Group’s Customer Service and Complaints Roundtable, mental health is frequently the cause for taking time off or leaving the company entirely. This, in conjunction with recruitment challenges facing the industry, has made mental health and well-being a top priority for firms.

According to the researchers at the University College London (UCL), only 49% of working age adults say they feel in control of their mental health, down from 54% six months ago. The study also found that the proportion of people with symptoms of anxiety and depression is at its highest level in 11 months.

There are several reasons why mental health issues are growing at higher rates amongst front-line agents. Increasingly complex calls and a rise in vulnerable customer volume has taken its toll on the mental health of many agents. Concurrently, the cost-of-living crisis is placing more pressure on all consumers, which agents are also not immune from.

“This compounds when considering many are still working from home and missing out on the social elements of the workplace,” says Louis Stevens, Director of Auriemma Roundtables. “It is easy to see why many firms are in firefighting mode in terms of capacity planning.”

The combination of these factors has led to a marked increase in both attrition and absence rates. In 2021, Auriemma Group’s Customer Service and Complaints Roundtable members reported an average attrition rate of 23%, up from 16.5% in 2020. Mental health-related absence rates showed a similar trend up to 14%, in 2021 from 11% in 2020.

“The cost-of-living crisis will only put further stress on both customers and employees, meaning without sufficient support measures in the place, this trend will likely only worsen throughout 2022,” says Stevens.

To combat this, firms are taking a varied approach by making mental health resources more accessible, building overall engagement amongst their employees to improve job satisfaction and embedding mental health awareness into their company culture and rhetoric. Roundtable members have also reported more return-to-office strategies, which will help those who have not taken well to home-based work.

This is an area of focus within Auriemma Group’s Customer Service & Complaints and Collections & Recoveries Roundtables, both of which have upcoming in-person meetings at the Sheraton Grand in Edinburgh. The Collections and Recoveries meeting is scheduled for the 9th and 10th of June, and the Customer Service and Complaints Roundtable meeting will be on the 16th and 17th of June. If you are interested in attending either session, please contact 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 call Louis Stevens at +44 (0) 207 629 0075.

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How High Street Banks May Benefit from Incoming Buy Now, Pay Later Regulation

(London, UK): Incoming FCA regulation could add restrictions on how consumers can use Buy Now, Pay Later (BNPL) services, but these changes may be welcome. According to Auriemma Group’s latest issue of Cardbeat UK, there was an 80% increase in negative experiences with BNPL plans between September 2020 and July 2021.

The increase is uniform across customer segments, including different age groups, household income, and levels of familiarity with BNPL, signalling concerns around the product itself, rather than new or unfamiliar user experiences.

“Our research shows that the few who have negative BNPL experiences most commonly attribute it to unexpected fees or issues it’s created for their other finances,” says Will Moody, Manager at Auriemma. “With a growing segment of consumers turning to BNPL options for borrowing, regulation may play a role in maintaining positive customer sentiments for the product.”

Auriemma’s latest findings show an increase in negative experiences using BNPL or instalment plans–from 5% in September 2020 to 9% in July 2021. While 9% remains the minority, it represents a large community when considering that 17 million UK consumers have used BNPL services as of November 2021.

“This sentiment is being reflected within other markets too,” says Moody. “In the US, a market where over half of adults have used a Buy Now, Pay Later service, about one-third had a negative experience. This rapid growth has caught the attention of the CFPB, and surprisingly enough, half of BNPL users in the US agree these plans should be more regulated.”

Klarna is the leading BNPL and instalments provider in the UK with 16 million customers using its products and services, but the Swedish FinTech reported a round of substantial losses in H2 2021 to add to the strain of incoming regulation.

Many of the UK’s High Street Banks and lenders already have products in market, such as NewDay with its NewPay product. Moreover, regulated FinTechs such as Monzo and Curve also joined the BNPL space in 2021, with Revolut soon to follow.

“Auriemma expects that BNPL regulation will put significant strain on compliance resources for unregulated players such as Klarna,” says Louis Stevens, Director of Roundtables. “This, in turn, could impact innovation, development and growth, opening the door for regulated lenders such as High Street Banks and credit card issuers to step in.”

Could the future of BNPL in the UK rest with traditional players integrating instalments into their existing product sets? And will this be the solution to reversing the rise in poor customer experience? Auriemma Group will continue to monitor and discuss BNPL in upcoming Cardbeat studies, and within its Customer Service Roundtable groups when they next meet June 16-17 at the Sheraton Grand in Edinburgh, Scotland. Email research@auriemma.group to learn more about our consumer studies and roundtables@auriemma.group to inquire about our forums.

Survey Methodology

These Auriemma Research studies were conducted online within the UK by an independent field service provider on behalf of Auriemma from in September 2020 and July 2021, 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 Will Moody at +44 (0) 207 629 0075.

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Buy Now, Pay Later Preferred Over Credit Cards by Gen Z and Millennials

(London, UK) More credit cardholders ages 18-34 would prefer to use a Buy Now, Pay Later (BNPL) service than their existing credit card if faced with a need to borrow, according to Auriemma Group’s latest issue of Cardbeat UK.

BNPL popularity and usage has grown exponentially in the UK since Klarna launched in September 2016, accelerated by the pandemic and the resulting shift to online shopping. In these 5 years, firms such as Laybuy, Clear Pay and PayPal have entered the BNPL space, capitalising on the rising demand from consumers.

Auriemma Group’s latest research revealed a significant shift in borrowing preferences. Among credit cardholders, 20% would prefer to use a BNPL provider (e.g., Klarna) if they did not have enough funds available on hand, representing a 43% increase since November 2020. Meanwhile, the proportion of cardholders electing to borrow on their current credit card fell to 38%, representing a 17% decrease. The growing preference in using a BNPL product to borrow is largely attributable to older Gen Z and Millennial cardholders. Nearly three in ten (29%) say they would prefer to use BNPL when they do not have the funds to hand, compared to 25% who prefer using their credit card.

UK Neobanks are picking up on this trend, with Monzo and Curve announcing the launch of BNPL products last week, and Revolut expecting to follow suit. High Street banks such as Barclays have also expressed an interest to pursue a BNPL venture. But for the larger players bringing a product to market quickly is not easy, and with regulation coming from FCA by the end of 2022, time is of the essence.

“This shift in preference is leading some cardholders away from traditional credit solutions,” says Jaclyn Holmes, Director of Research at Auriemma Group. “Credit providers should evaluate their product sets to understand how they may need to adapt and differentiate in order to meet their customers’ evolving needs.”

Auriemma has seen credit card cancellations increase as consumers look to other payment and borrowing methods. 14% of credit cardholders have cancelled a card in the past 18 months, up from 8% in November 2020. And this proportion increases to 24% among those who have used a BNPL plan.

While BNPL has experienced significant growth, credit and debit are still the preferred payment choices. BNPL only captures 7% of total transactions while credit and debit capture far more (44% and 41%).  Issuers looking to meet growing consumer demand could integrate BNPL into new or existing credit card products, where there is interest from 43% of cardholders.

“As BNPL continues to grow in popularity we expect interest in credit card instalments to rise further,” says Holmes. “As we’ve seen in the US, this type of offering gives issuers a way to compete directly with BNPL providers without cannibalising their credit card portfolio.”

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 June 2021, among 800 adult credit cardholders. The number of interviews completed is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for 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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4 Payment Trends that Emerged in the Shadow of COVID-19

(London, UK) COVID-19 has brought about many changes in consumer behaviour and issuer offerings. Auriemma Group’s 2020 Cardbeat UK Trend Report identified four areas where shifts were most prominent, highlighting the impact that the pandemic has had on the payment’s ecosystem for both financial institutions and cardholders alike.

1. New card acquisition, spend amounts and card usage have declined.

Cardholders were less engaged with their existing products and fewer sought new products compared to prior years. According to Auriemma’s research, new card acquisition dropped nearly 50%, with only 10% of UK credit cardholders in Q4-20 saying they acquired a new credit card in the past 18 months, down from 18% the same time the year prior.

“Consumers and issuers kept focus on current offerings,” says Jaclyn Holmes, Director at Auriemma Group. “During this period, issuers recognized their efforts were best spent building meaningful and productive engagement with their existing customers. For cardholders, it was critical that they got the most out of their existing products and kept on top of the various solutions that were being presented to them.”

Cardholder spend across payment methods declined from Q4-19 to Q4-20, coinciding with a drop in usage among heavy top of wallet card users. By the end of 2020, UK cardholders reported £854 in average monthly spend, down from £988 the year prior. Meanwhile, the proportion of cardholders who use their most frequently used card 20+ times in a typical month decreased over the same period (30% vs. 22%).

2. Types of rewards cards held shifted away from T&E and towards day-to-day rewards.

The impact of travel restrictions and stay-at-home guidance was felt most prominently in the T&E space. Over 2020, the types of rewards cards held shifted to align with new consumer spend patterns due to COVID-19. Ownership of supermarket co-brand (from 21% in July 2020 to 28% by November) and cash back cards (23% to 27%) rose, as co-branded airline (19% to 9%) and hotel card (5% to 2%) ownership trended down.

“While rewards card ownership shifted towards the end of 2020, and travel naturally became a lesser focus given the obvious limitations, our research found that most T&E cardholders still enjoy earning travel rewards” says Holmes. “These cardholders currently prefer redeeming their rewards for non-travel benefits, but we anticipate travel-centric redemption will bounce back as travel becomes more routine.”

Auriemma recently covered COVID-19’s impact on travel and consumer loyalty in-depth here.

3. Payment holidays became a commonplace issuer-provided relief option.

COVID-19 impacted some cardholders earning potential, leading issuers to develop payment accommodations, including payment holidays, for those unable to make their payments. Despite being a new concept to many, credit card payment holidays had strong consumer awareness by Q4-20 (94% aware), and nearly one-quarter of those offered the option took it.

Future interest was rather low (17%), signalling that the accommodation–which was intended to be a temporary, short-term solution–likely will not be missed post-pandemic. In fact, 58% of cardholders were ambivalent or would not be disappointed if payment holidays were no longer an option in the future.

“We’ve passed the March 31st deadline for cardholders to enrol in payment holidays, so issuers are now preparing for a possible increase in delinquency volume. Most cardholders aren’t expecting to rely on a future payment holiday, but there will be a group who aren’t able to jump back into their payments and will seek alternative accommodations to help make ends meet,” says Holmes.

The government has already shared guidance for such a program. Breathing Space, enacted May 4th of this year, provides a 60-day freezes on interest, fees and enforcement for people in problem debt. The program is expected to bring in £400 million in extra repayments in the first year, ultimately extending upon the improvements made with persistent debt figures throughout 2020.

Auriemma covered payment holidays and Breathing Space in greater detail here.

4. Reduced spend and focus on paying down balances led to fewer in persistent debt.

While shifting finances were a hallmark of COVID-19, reductions in spend and access to payment accommodations led some to improve their financial positions. Auriemma found that the number of cardholders in persistent debt decreased from 7% in Q4-19 to 3% by Q4-20, likely because cardholders were able to focus on paying down their balances without compounding interest slowing them down.

“COVID-19 had the potential to worsen persistent debt, but a combination of cardholder thriftiness and payment accommodations created an environment where consumers could improve their financial standing instead,” says Holmes. “However, as payment holidays come to an end and spend levels return to pre-pandemic levels, we’ll see if this change, along with the others that emerged in the shadow of COVID-19, is long-lasting or temporary.”

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 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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Challenging Transition Ahead for Lenders as HMT Breathing Space and Payment-Holiday Conclusions Near

(London, UK) Collections Departments faced unprecedented challenges throughout the COVID-19 pandemic, from embracing remote working to managing significant payment holiday volumes. And now, they must take action on HMT Breathing Space while transitioning from payment holidays. Auriemma Group’s Collections and Recoveries Roundtable has been discussing these events and their corresponding strategies amongst the UK’s top financial institutions. These two deadlines are quickly approaching, and along with the unpredictable macroeconomic environment, lenders must leverage learnings from the last year to prepare for the likely spike in volume ahead.

“Payment holidays have been the primary focus since the beginning of the pandemic, but with the extension of support schemes, that has now switched, and priority is on HMT Breathing Space,” says Louis Stevens, Director of Roundtables at Auriemma Group. “However, the payment holiday conclusion date is looming, which could mean a significant strain on Collections teams.”

In 2020, lenders quickly learned the need for automation and additional headcount to manage volume spikes, and they are now applying these learnings to prepare for the coming months. On average, lenders intend to increase their collections teams by 42% throughout 2021. Additionally, 86% of lenders have invested in their automated decisioning and digital channels to prepare for volume spikes.

Are Lenders Prepared for HMT Breathing Space?

On 4th May 2021 HMT Breathing Space (Debt Respite Scheme) will go into effect, giving consumers in problem debt the right to legal protections from their creditors. The Debt Respite Scheme has two paths: either through “standard problem debt” or through “a mental health crisis” referral. During this moratorium, lenders cannot communicate with customers and must stop interest from accruing.

According to Auriemma Group’s Collections and Recoveries Roundtable, as of April 1st,69% of lenders indicated that they feel somewhat prepared for the regulation, and the remaining 31% still feeling somewhat unprepared. There are a number of remaining concerns affecting preparedness, including the delay of the creditor portal, ambiguity in the regulation and unknown volumes.

To try to estimate the volume of customers who could potentially enrol in the scheme, lenders are utilising data from payment holidays, debt-advice charities and usage rates of other types of breathing space (e.g., CONC). They are also slightly increasing forecasts due to the worsening economy, payment holiday conclusions and the ceasing of furlough programs.

38% of lenders have already, or are planning to, increase their teams due to HMT Breathing Space. Initially, most lenders will use a combination of manual and automated processes to manage the regulation with the hopes of further automating as they get a better grasp on volumes.

How Will Payment Holiday Conclusions Affect Operations?

Although the deadline to enrol in payment holidays was 31st March, consumers have the option to extend their payment holidays until 31st July as long as it is within their six-month allowance for both secured and unsecured products. The number of customers returning to contractual payments after a payment holiday has remained strong; however, 92% of lenders are anticipating an increase in delinquency volumes following the conclusion of payment holidays.

“The primary watchout is the cohort of customers working in particularly hard-hit sectors, such as travel, tourism and food service. As the support ends for these sectors, we could see significant increases in delinquency volumes as many of these businesses are currently overstaffed,” says Stevens. “The magnitude of volume is contingent on the ability of the economy to bounce back and if predictions, such as the travel boom, come to fruition.”

Customers needing additional support will likely look to long-term forbearance plans, which have caused lenders to focus their attention on that process. Investments have been made in streamlining income and expenditure assessments and digitising the forbearance enrolment process as well as increasing the size of Vulnerable Customer teams.

Auriemma Group’s Collections and Recoveries Roundtable is tackling these challenges head on through our executive meetings, workshops and benchmarking exercises. Within the next three months, the group will be meeting six times with two sessions dedicated to HMT Breathing Space. If you are interested in attending any of these sessions, please reach out via roundtables@auriemma.group.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, call Louis Stevens at +44 (0) 207 629 0075.

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COVID-19’s Impact on Travel Has Shifted Consumer Loyalty Needs

(London, UK) Perceptions of loyalty points and miles redemptions has shifted in the wake of COVID-19. The lack of opportunity to travel since the beginning of COVID-19 is eroding the appeal of travel-related benefits from UK loyalty programmes. According to Auriemma’s latest research, 76% of credit cardholders enrolled in a loyalty scheme prefer to use their loyalty rewards for non-travel benefits. Meanwhile, only 35% of programme members intend to use their points or miles for travel-related benefits in 2021.

But how has this change in behaviour been impacting loyalty programmes, and how quickly, if at all, will these patterns return to previous norms?

The large volume of unused loyalty points mean high levels of financial exposure for brands on their balance sheets, which can cause a serious headache for company CFOs. Brands with loyalty programmes which are modelled heavily around offering travel redemptions, such as British Airways, Virgin Atlantic, Hilton Honors or Marriott Bonvoy, are at the highest risk in this scenario. As evidenced in April and May 2020 when Hilton Honors sold $1 billion Honors Points to American Express, and Marriot Bonvoy sold a similar $920 million points to American Express and JP Morgan Chase to build up much needed cash flow and reduce their points liability. This is only a temporary fix, however, and with travel restrictions still in place one year later, the problem of over-exposure persists for brands.

Some loyalty schemes have expanded their partnership approach to maintain member engagement and relevance. IAG Loyalty’s recent partnership with Nectar in January 2021 allows the direct  transfers of points between the two schemes providing low value redemptions to BA Executive Club members, also demonstrated with the launch of Virgin Red in November 2020 and its partnership with Greggs. Despite the apparent strengths of these partnerships, they can present poorer value to consumers which will test the theory as to how viable they are in the longer term, once travel restarts.

There remains hope as Auriemma found that 55% of consumers still enjoy earning travel rewards through their loyalty programme or credit card, many with plans to redeem these for travel-related benefits as soon as possible. With the continued effectiveness of UK’s vaccine rollout and the subsequent easing of restrictions, a return to travel could be around the corner.

“Now is the time for issuers and loyalty programmes to focus on member and cardholder engagement,” says Kate Morgan, Head of International Partnerships at Auriemma Group. “As consumer confidence in the ability to travel rises, the appeal of redeeming hard-earned points for bookings should, too. We have seen that delivering relevant, personalised offers and marketing is key, along with cancellation options that give customers the assurances they need to complete the booking process.”

While foreign holidays remain less of a certainty than domestic travel this summer, the airlines face a larger challenge than hotels who have a greater ability to turn the focus inwards on UK stays and vacations. Premier Inn owner Whitbread, UK’s largest hospitality company, is bracing for strong summer demand.  Nevertheless, as most hotel programmes exist without the cushion of commercial partnerships with non-travel-related loyalty schemes, the reopening of UK hotels might be the only opportunity for a profitable 2021.

“The nation eagerly awaits more clarity on the government’s foreign travel policy beginning on 17th May 2021,” says Kate, “and fingers crossed it is good news for the travel industry and the thousands of employees within this sector.”

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 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 Kate Morgan at +44 (0) 207 629 0075.

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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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