No area, aside from the mortgage industry, has seen a greater impact from the credit crisis than has the credit card industry.
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What’s changed?
• It’s not just the economy – CARD Act • Debit card usage recently exceeded credit($ and trans):
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– Displacing cash and check – Picking up small ticket transactions – Not stealing much from credit Generation Y: – More comfortable with debit – Very engaged in social networking and “green” initiatives Consumers are taking control of their money: – They are more aware of the costs of credit – Have been reducing debt and spending within their means – More engaged in their credit score and how to improve it
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What’s changed?
• Card offer trends:
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– More cards offered with annual fees – Many offers have higher APRs – Lower credit lines Small business: – Same as above – No protections from CARD Act Most issuers have reduced credit lines(as much as 30%), very few doing “opt in” Penalty pricing – really tough to execute Consumers payment trends – Cards first More difficult to price risk – fewer cards, lower profitability
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What’s the same?
• Credit cards can still be a profitable product for financial institution. • It’s a mature market which means cut-throat competition. • Multi product customers tend to perform better across all products. • Two-thirds of cardholders surveyed said they would consider switching their primary credit card if a better feature were offered. (Source: ComScore, September 2008)
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Community Financial Institution Opportunities • The current economic situation has created new opportunities for community
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financial institution: – Increased interchange – New customer acquisitions – Better positioning against larger institutions – Stable balance sheets – Increased consumer demand to do business with community financial institutions – Loan origination growth This is something that community financial institutions need to capitalize on now In the area of credit cards, this means a focus on Cardholder Lifecycle Management
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Cardholder Lifecycle Management
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Acquisition
What features are important? • To better understand the state of credit in the U.S., Forrester surveyed consumers who have recently opened a new credit card account.
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What’s important?
• No annual fees – 57% overall • Brand name I can trust – 29% overall • An attractive intro offer – 26% • Cash back rewards – 23% • Rewards choice – 15% • Other rewards, discounts, etc – important
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Direct Mail
• Direct mail solicitations are on the increase.
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– Increased 47% in Q4 2009 compared to Q3 (source Mintel Comperemedia) Industry stats for direct mail card solicitation programs result in a response rate of