Tag Archive for: covid-19

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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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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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