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Some Cardholders Are Interested in Advice from an AI Financial Assistant

Artificial intelligence (AI) tools can be used to provide budgeting advice, but 68% of debit cardholders don’t like that AI can access their data. Creating a monetary value in sharing that data (like Andrew Yang proposes in his Data Dividend Project) could create greater interest in such tools. Currently, 34% of cardholders express interest in an AI tool that has access to their financial information and gave budgeting recommendations based on a cardholder’s income and expenses.

Products on the market currently offering this type of function, less the incentive, include:

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Artificial Intelligence Could Speed Up Live Chat, But Many Want a Human Touch

Many cardholders expect to talk with a live agent when interacting via live chat. For the tool to be viewed as successful, however, cardholders expect it to seamlessly solve their issues and provide easy connection to a live agent when needed.

34% of debit cardholders say they have used live chat. Of them, 64% believe they communicated with a human throughout the full interaction and only slightly fewer say they expect to interact with a human from start-to-finish. Yet, the most common activities that have been attempted via live chat could be completed via an artificial intelligence tool:

  • Checking an account balance
  • Reviewing transactions
  • Activating new/reissued cards
  • Checking the status of a payment

 

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Auriemma Talks POS Installment Plans with NBC DFW

Auriemma’s Jaclyn Holmes discusses our recent point-of-sale installment plan data:

Full article available on nbcdfw.com.

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4 Ways COVID-19 is Creating a New Normal for Consumers

(New York, NY) COVID-19 changed consumer purchasing behavior in the short-term, but will changes be long-lasting or temporary? It is a question often asked within the payments industry, and one that Auriemma Group’s research has been asking consumers for months. Auriemma’s latest Mobile Pay Tracker study (fielded April-May 2020) uncovered that the answer may be a little bit of both—purchase frequency could level, but preferred methods, channels, and services may shift to create a new normal going forward.

1. Shopping habits will likely level out, but methods may change

In the early days of COVID-19 consumer spend was reoriented to household purchases (e.g., food, cleaning supplies). While specific categories of purchases saw notable spikes, spend overall declined. Auriemma’s research found that in April and May two-thirds (65%) of cardholders said they were spending less over the past 30 days than they would have before COVID-19. When asked about the next 30 days, however, this figure drops to 44%, and a similar proportion (42%) expect their spend to return to pre-COVID-19 levels by that point.

Although spend may return to normal, there may be a new normal for how consumers make payments. More consumers are trialing contactless and mobile payments than ever before, and some are shifting their purchase channel preferences. For example, consumers have historically preferred in-store shopping for groceries, and while most still do, a notable 31% now say they prefer using digital channels (i.e., websites, mobile apps) to make grocery purchases.

“COVID-19 has given consumers strong incentive to try new payment methods and purchase channels,” says Jaclyn Holmes, Director of Research at Auriemma Group. “The disruption it has caused may be the catalyst that propels more innovative shopping and payment experiences moving forward.”

2. COVID-19 has not only changed how consumers shop, but also where

Staple household items were in high-demand at the start of COVID-19, and the need for those items trumped merchant and brand loyalty. Many consumers said stores they regularly shop at were out of many items (76%), that they needed to switch from their preferred brand to purchase an item they needed (67%), and that they have visited stores they don’t normally shop at to find what they need (35%).

This sentiment extends to the online shopping experience, with 40% of those shoppers saying they have tried shopping with new merchants or websites since the COVID-19 outbreak. Overall, COVID-19 has motivated consumers to try different merchants, items, and experiences. Nearly two-thirds (64%) of consumers say they are willing to try new ways to shop, including using apps and curbside pick-up.

“Brand loyalty is often a strong purchase motivator, both when purchasing products and selecting a merchant,” says Holmes. “In recent months, many consumers have tried new merchants and products out of necessity. While some will understandably revert back to their preferred brands, some have expressed they’ve been pleasantly surprised by these alternatives and will continue to utilize or purchase from them looking ahead..”

3. Some industries and products will thrive, while others will struggle

With consumers staying and/or working from home, there were many services that gained popularity. Unsurprisingly, consumers reported increased usage of video chat platforms, online food delivery, and online workouts. At the same time, however, cardholders report a notable decrease in usage of deal/discount services or apps.

Groupon has been hit particularly hard—in February, the company announced they were shifting their focus away from products and back to experiences. The timing was unfortunate, given that just a month later consumer spend shifted away from in-person experiences because of COVID-19. By March, the company reported decreased demand for their offerings and significant increases in refund levels.

4. Consumers aiming to support local businesses may skip third-party apps

Third-party apps like Groupon and Seamless may also see decreases in usage among those aiming to support local businesses. 31% of consumers have donated money to local businesses and 24% have purchased gift cards to support their local businesses during this time.

Additionally, consumer awareness for hidden fees and commissions are driving some to purchase directly from the end merchant. Auriemma’s research identified that some consumers avoid using food ordering or delivery apps to better support local businesses. One 33-year-old male said:

“We’ve been bothered by the commission the food delivery apps are making so we are making a conscious effort to order directly from the restaurant. It had crossed my mind prior to the outbreak but now, it is more top of mind.”

COVID-19’s Overall Impact

COVID-19 will create some long-lasting impacts on consumer behavior, but some behaviors will return to normal. While overall spending is expected to lift as people get back to work and regain confidence in the economy, where they spend their money, what they spend money on, and the methods they use to make purchases may change. Issuers may see further increases in contactless payments and digital spend, as in-person purchasing (particularly via swiping or dipping)  remains low.

“Now more than ever consumer behaviors and attitudes are in a state of flux,” says Holmes. “Our continued research into the impact of COVID-19 will give us a forward look into these shifts and provide a roadmap for future expectations.”

 

Survey Methodology

This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in April/May 2020 among 2,022 adult Apple, Google, or Samsung Pay eligible 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 27 minutes.

Additionally, ten in-depth interviews (IDIs) were conducted in May 2020 via telephone. All were recruited from the quantitative web survey from parts of the country that had seen at least some impact (either business closures or social distancing rules). The goal was to understand the impact of the COVID-19 epidemic on shopping behaviors and attitudes.

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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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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Auriemma 2019 Annual Letter: Year in Review and What’s Coming in 2020

December 2019

Welcome to the 2019 version of our annual market update. I wrote the first such letter thirty years ago, in 1990! My, how times have changed.

While we typically talk about industry happenings and then pivot to updates in our own company, we are going to turn that around this year. I think you’ll agree it adds a bit of perspective to this year’s commentary.

Despite the negative connotation implied by Juliet when she proclaimed, “A rose, by any other name would smell as sweet,” I think it is a fitting quote to describe the state of all things “Auriemma.” Last year, I told you we were changing our name by dropping the word “Consulting.” Well, we did that. But then we did more. Many of you have heard the news by now. But, I know not everyone received, or read, our email communications in August.

While we were wrapping up the process of our name change in late 2018 and early 2019, we were also beginning a process to bring on some outside investment in order to expand and improve our offerings to the market. That effort was consummated on August 1st. As a result, we split into two companies… Auriemma Roundtables, which will operate our US Roundtables practice, and Auriemma Group, which will operate our Partnerships, Research, and Finance lines of business, as well as our UK Roundtables.

Two new presidents have been named. Tom LaMagna for Auriemma Roundtables and Mark Jackson for Auriemma Group. Both have been part of our team for many years and have been gearing up and being groomed for these appointments. I’m excited to pass on the baton(s)!

With that as the backdrop, here are some of the stories and trends we’ve been tracking and expect to continue into 2020.

This was a strong, but mixed, year from a macroeconomic perspective. In the U.S., the Dow hit record highs this year, and the U.S. added 266,000 jobs in November, outpacing predictions. U.S. unemployment is at a record low, and there may still be room for growth, given that labor force participation remains below pre-recession levels. It’s a similar picture across the Atlantic, with UK employment at record highs and a healthy growth in household spending, thanks to stronger wage growth.

Other factors, however, lead to a more uncertain economic picture. The Federal Reserve cut rates three time this year. Trade tensions are impacting business and consumer confidence. Business investment has slumped due to global economic slowdowns and uncertainty about the outcome of the U.S.-China trade war. Consumer credit increased at a seasonally adjusted annual rate of 7.7 percent in October, while revolving credit increased at an annual rate of 10.7 percent, and non-revolving credit increased at a 6.7 percent annual rate, according to ABA Banking Journal. In the UK, the number of job vacancies have started to fall in 2019, and the number of jobs created have decreased, indicating the labor market is potentially cooling. But with many consumers shrugging off the negative indicators the industry pores over, I tend to agree with Michael Corbat that the biggest threat to the economy might be talking ourselves into the next recession.

For their part, industry leaders are thoroughly prepared, with many anticipating a mild recession in the next 12 to 18 months. Clients are interrogating key internal metrics to discern false signals from true indicators, including changes in payment ratios, minimum payment frequency and early delinquency rates. Many are already tightening on credit exposure in some portfolios, and anticipate some future tightening going into 2020. Recession playbooks for pricing, term adjustments and collections/recovery strategies are in place—although triggers have not yet been tripped. Indeed, predicting the future recession appears to be more art than science, with many questioning if the typical indicators – unemployment, for example – are really the ones to be watching in the upcoming cycle.

Delinquencies, a traditional indicator, are slightly on the increase for credit cards. However, the future direction of travel is anyone’s guess. This is clear in the fact that just over half (56%) of issuers in Auriemma Roundtables’ Card Collections group expect an increased delinquency rate going into 2020. The other half expect delinquencies to be flat or down next year. Certainly, nothing in the data reflects systemic alarm or anything fundamentally surprising. In fact, delinquency levels are aligned with industry expectations, based on vintage and composition of portfolios. Additionally, because of the lessons learned from 2008, there’s a more cautionary approach to underwriting in this pre-recession era, and fundamental exposure is more limited than in the past.

Delinquencies for auto lenders have increased steadily across all credit tiers in 2019, although the bulk of delinquencies are unsurprisingly in subprime. The increase is a byproduct of strategic decisions to expand acceptance criteria, rather than an indicator of broader market conditions. To underscore the point, 75% of Auriemma Roundtables’ Auto Collections group members say 2019 net credit losses are below forecast, showcasing the success of collections operations and loss mitigation programs.

What remains to be fully seen is any impact that could be felt amid a downturn if the CFPB’s proposed debt collection rules go into effect, which would cut the number of call attempts per day for most lenders and collectors. In preparation, many first-party collectors are ramping down their call caps and deploying self-service and digitized collections tools. With a potential recession and this proposed regulatory action, the stars are aligning to make investments in more strategic contact management.

This proposed rule represents one of the more significant pieces of proposed legislation from the Bureau, which has been quieter than in years past. (Of course, that posture could change yet again, depending on the outcome of the next election.) While the industry has seen fewer big-ticket enforcement actions from the CFPB this year, there’s concern of growing coalitions among state AGs and legislators who are working to fill the perceived regulatory void. For example, state litigation is attacking banks’ preemption and rate exportation rights, which will need to be solved by federal legislation supporting the concept of “valid when made.” There has also been tremendous scrambling to comply with the data-centric California Consumer Protection Act, which goes into effect January 1 and could very well be adopted by other states going forward.

The U.K.’s regulatory scene has been quite active: Persistent Debt is causing waves, GDPR has claimed its largest big-ticket enforcement actions to date, and the deadline for compliance with PSD2 has passed with several FIs not fully compliant. Of course, there are the results of the UK’s general election – a sweeping win for the Conservative party, signaling an imminent departure from the European Union. The pound surged in trading against the dollar and the euro in response to the vote. Businesses will be working through operational challenges associated with an 2020 exit, and consumers could respond to uncertainty with changes in spending, saving and a potential shift from credit onto debit. A no-deal Brexit could be bad news for jobs, wages or both. Certainty, in any guise, is likely still months away.

Overall, it’s been a strong year for credit card lenders. While falling interest rates may have squeezed fixed-rate lending, credit cards have held strong as an asset class, helping fuel the industry’s solid financial results this year.

Additional positive news: Year-to-date gross and net fraud rates have remained stable, with the average gross fraud rate at 0.27% and the average net fraud rate at 0.13%, according to Auriemma Roundtables’ Card Fraud Control benchmarking. Meanwhile, 85% of Roundtable members reported a flat or decreasing gross fraud rate between FY ‘18 and YTD ’19. As EMV cards have become ubiquitous in the marketplace, the security benefit of the technology has been realized and is reflected in the normalization seen within the distribution of fraud types.

While fraud losses have stabilized, fraud remains a painful reality to consumers, with data breaches and the associated financial ramifications becoming routine. The everyday nature of fraud means consumers are often not proactive in taking preventative measures, with more than one-quarter of cardholders feeling comfortable making online purchases from unfamiliar websites, and more than four-in-ten of cardholders reporting that they haven’t changed the password for their debit or credit card account in over a year, according to Auriemma Research. Other precautions, like fraud alerts, identity theft protection, and two-factor authentication are not overwhelmingly used by consumers, according to the research. (Incidentally, this kind of irrationality is exactly what Auriemma Roundtables is looking to understand in its Behavioral Economics Initiative with Duke University’s Center for Advanced Hindsight – a joint venture focused on identifying opportunities to shift consumer behavior for more positive financial outcomes.)

Of course, the Auriemma Group team has remained active in the co-brand arena. As I shared last year, marquee co-brand deals have slowed in 2019, thanks to the increasing prevalence of long-term program contracts. We expect 2020 will be more active, with many programs preparing to go to market. Certainly, 2019 saw pockets of action – including several de novo airline programs (Air Canada, Emirates, and Norwegian Airlines) and an increase in mid-contract negotiations. The opportunities for card issuers during this period of reduced market activity tend to revolve around focusing more closely on existing programs. For some, this includes testing innovations – such as installment payment plan offerings, omnichannel experiences, and data analytics insights. Brands also have opportunities to keep programs fresh by regularly revisiting key program features, such as value propositions and marketing approaches. Meanwhile, with the challenges in the current retail environment, we’re also seeing a diversification within the private label space, with brands moving toward POS installment lending and issuers offering other lending categories, such as medical financing.

Of course, there were new cards, too – perhaps most notably, the Apple Card, which debuted this year to tremendous buzz. (An introductory video for the Apple card uploaded in tandem with its late-March announcement has racked up more than 25 million views… easily more than ten times the number of views for similar videos for other cards.) Although Apple obviously offers a physical card, the product’s core value proposition has been specifically designed to increase usage and adoption of its mobile payment capabilities. As with many mobile offerings, it’s still unclear how successful Apple’s push will be.

Despite the rumors of its inevitable demise, plastic has continued to thrive during the dawn of mobile payments. Some argue that the increase in contactless card availability may actually migrate some mobile-friendly consumers back to physical payments, according to Auriemma Research. This year, contactless  made a meaningful push to mainstream acceptance in the U.S., thanks in part to major transit systems’ acceptance. While it’s not exactly a new technology, the POS experience seems to have improved drastically from previous incarnations.

The simplicity of contactless’ tap is just one example of a customer experience making or breaking a technology. More broadly, a crisp and easy experience has paved the way for an influx of fintechs to sweep both the U.S. and U.K. markets. In the U.S., the unsecured personal loan market continued its dazzling growth, led largely by digital-first fintechs. In e-commerce, snazzy POS financing options like Klarna and Affirm are increasingly popular with consumers who find that borrowing via an installment plan is less intimidating than revolving on a credit card. In the UK, a wave of Challenger Banks, such as Monzo, have developed budgeting tools that are deeply appealing to consumers. Fintechs are eager to garner more market share and have started diversifying into credit cards and other products, such as auto lending. To fuel this growth, fintechs have been bullish on the use of non-traditional data sources, such as utility or cellphone payment information – particularly when scoring consumers in deeper FICO bands or with thin files.

As more data enters the ecosystem however, there are some uncertainties emerging about the integrity of credit reporting. While the vast majority of available information is accurate, reporting complexities and fraudulent consumers are potentially leading to some credit score inflation. In addition, new commercially available scores and alternative data providers will have an unclear impact going forward. To address the reporting complexities, Auriemma Roundtables has spearheaded initiatives with both the CDIA and credit reporting agencies to identify opportunities to improve reporting standards and clarify business processes.

Also distorting the credit reporting environment? An upswing in credit repair agencies enticing consumers to attempt to eliminate or transform negative credit history – often without consumers being fully aware of the process (something the CFPB has taken notice of). It will be crucial for the industry to partner with regulators, such as the FTC and CFPB, to counter predatory players.

While lenders are focused on risk mitigation of all kinds, 2019 has also brought ample opportunities to invest in operational efficiency and automation—areas where both Auriemma Group and Auriemma Roundtables continue to focus energies.

Automation has been more fully deployed in 2019, with speech analytics, AI, machine learning and RPA all focused on eliminating risk and error, increasing efficiency and re-deploying employees toward value-add activities. Banks have rechanneled investment to support these initiatives, with many with new “Transformation” departments popping up. Agile has quickly usurped the traditional waterfall methodology to encourage faster business and technology changes. Automation has made a major breakthrough in credit decisioning across the lending landscape. Speech analytics is being used to tag complaints, identify compliance risk and monitor call quality. Organizations are increasingly using cloud-based technology, including for call recordings and cloud-based dialers. In fraud, machine learning and AI are becoming more prominent, particularly in authentication. And with fraudsters continuing to demonstrate more sophistication and flexibility to overcome authentication hurdles, you can expect more issuers to actively explore solutions like voice biometrics and device fingerprinting in 2020. In collections, alternate collections strategies are actively being expanded, with more than 60% of Roundtable members using one-way texting in pre-chargeoff collections. Debt collections is ripe for further disruption in the UK, with firms looking toward omnichannel engagement tools and testing completely switching off outbound dialing. In customer service, FIs have further nudged customers along the digital migration path, thanks to touch/face ID authentication for mobile logins. IVR systems are being enhanced to drive stronger containment rates, and AI is being explored for real-time call monitoring.

All this investment and change means job transformation is afoot across many functions in all markets – which Auriemma Group will recognize with a new sponsored award at the UK Cards & Payments Awards. The award, Excellence in Operational Innovation, will recognize the card issuer, brand, banking acquirer or payment company that has best demonstrated operational innovation resulting in a best-in class customer experience.

While I expect Auriemma’s two new presidents to push their respective companies well beyond the boundaries I achieved, I don’t expect any significant deviations in the types of business they pursue or the quality of services they provide. The same teams remain in place to deliver value to our clients.

What I do expect however, is that these gentlemen will want to write their own annual updates twelve months from now, thus ending my tenure at 30 years! So, I hope you enjoyed what is likely the last letter from me and look forward, as I do, to reading the words of Mark and Tom next December.

Meanwhile, I thank you again for your patronage and look forward to speaking with you soon.

Cheers!

Michael

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Apple Card Poised for Success with Brand Loyalists and May Increase Apple Pay Usage

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

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

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

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

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

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

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

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

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

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

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

Survey Methodology

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

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call Jaclyn Holmes at (212) 323-7000.

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Point-of-Sale Installment Plans Are Redefining What’s Affordable

(New York, NY): Shoppers purchasing a new iPhone have two choices at checkout—pay up to $1,500 up front or go on a $60 per month payment plan. It is a familiar set up for anyone who has taken out a home, auto, or student loan: Buy now; pay over time.

Similar plans are emerging in several consumer categories beyond cell phones. Networks, issuers, merchants, and marketplace lenders offer plans in-store and online for consumers who want to pay in installments. Auriemma Research’s latest issue of The Payments Report asked payment cardholders about their appetite for point-of-sale installment plans and found that consumers who exclusively use or prefer debit cards are most likely to consider using them, even for everyday items.

Installment plans have historically been used for larger purchases like furniture and household appliances. However, offers for small to mid-size purchases have increased in popularity at the point-of-sale and sometimes post-purchase, making a range of purchase types possible. Providers like Affirm, American Express, and Amazon offer consumers the option to buy now but pay over a specified period (with transparent terms and pricing). While the specifics differ slightly by provider, the core offering remains the same: a consumer doesn’t need to pay for their entire purchase at once.

This product has wide appeal but resonates most strongly for debit users. Four-in-ten would consider using an installment plan for everyday purchases like groceries and household items. The option allows them to access credit in a way that provides more control, making purchases more manageable, and ultimately more affordable.

Six-in-ten debit cardholders find point-of-sale installment plans attractive, but many have never been offered one. Only 28% of debit cardholders report being offered an installment plan in-store, while more (45%) recall being offered one online. Regardless of channel, both groups that recalled offers reacted positively. Over four-in-ten debit cardholders enrolled in at least one of their in-store (48%) or online (41%) installment plan offers at the point-of-sale. Installment plans appeal to credit cardholders, as well: Although only 17% of credit cardholders received an offer to pay for purchases in installments, 51% of those offered do enroll.

“The structure of an installment plan is very attractive to debit cardholders,” says Jaclyn Holmes, Director of Auriemma Research. “And while credit cardholders have the option of paying off their card balance at their leisure, they, too, clearly have an appetite for something a bit more concrete.”

For many, borrowing via an installment plan is less intimidating than revolving on a credit card. According to a recent issue of The Payments Report, about seven-in-ten cardholders feel installment plans are helpful in budgeting expenses and that they help alleviate the stress of making large purchases. Overall, cardholders appreciate that installment plans provide a time period to pay off the balance.

Understandably, bigger ticket items like electronics, home appliances, and furniture top the list of purchases placed on point-of-sale installment plans, but nearly one-quarter used the product to purchase clothing, and 17% for a shopping cart of items.

“Whether for purchases large or small, installment plans are redefining how consumers view affordability, particularly for those without credit cards,” says Holmes. “Some cardholders find the uncertainty and responsibility of paying back money borrowed on a credit card intimidating, whereas installment plans provide a clearer path and time frame for repayment.”

Survey Methodology

This Auriemma Research study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in February 2019 among 800 adult debit 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.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call Jaclyn Holmes at (212) 323-7000.

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