Tag Archive for: Grocery

(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.

(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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