Three Things We’re Hearing
- Consumers prefer to have most banking products with one bank
- Mega mailers leave growth opportunity for regional banks
- Consumer financial marketing maintains upward trend
A three-minute read
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Consumers Prefer to Have Most Banking Products with One Bank
- Epic recently surveyed 1,363 consumers regarding their credit card banking preferences, which revealed that most consumers prefer to have most of their banking products with one bank
- Although 57% of respondents who use a local bank as their primary bank preferred to have most of their banking products with one bank, they were only half as likely to have a credit card with their primary bank as those banking with larger institutions
- While many may presume that the “mega mailers” – Capital One, Chase, Citi, American Express, etc. – are vastly preferred by consumers, our survey reveals that many consumers may prefer a card issued by their primary local bank, but may have not opened one due to lack of awareness or non-competitive products
Mega Mailers Leave Growth Opportunity for Regional Banks
- The findings above reveal an opening for regional banks to grow their credit card portfolios
- Additionally, branch-based banks frequently have a large brand affinity advantage over their national competitors within their market area
- The current direct mail landscape, which accounts for 60%+ of new credit card account generation, shows that the top six mailers account for two-thirds of the volume YTD through May 2022 – a consistent trend across all regions
- While mail volume among all issuer categories fell sharply in the early part of the pandemic, all recovered to volumes higher than before COVID
- Volume for the top six mailers fell signficiantly more than the others, possibly because existing customer mailings, which constitute a higher proportion of mail volume for branch-centric banks, remained less affected by the pandemic than prospect (non-customer) mailings
- Cash back credit cards, which scored highly in our consumer preference survey, comprise nearly half of the mail volume for the top six mailers but only around 25% of regional bank offers
- When looking at the competitive landscape for cash back cards, some regional issuers offer products competitive with those of the top six, while others do not
- Many regional banks face barriers to effectively competing in the credit card market, including:
- The absence of testing capabilities (e.g., testing the incremental response and usage lift for various rebate categories or introductory rates), hampering the ability to optimize trade-offs in product features
- Systems limitations within application processing platforms
- The lack of a credit card specific risk management capability
- An absence of expertise in “prospect” (i.e., non-customer) mailing
- Challenges in delivering various offers within the branch itself
- Despite the barriers, regional banks have a significant growth opportunity marketing a competitive cash back credit card product
Consumer Financial Marketing Maintains Upward Trend
- Credit card mail volume continues to approach the highs of 2016 and is up 33% vs. 2021
- Cash back and near-prime offers dominated May mail
- Despite the fact that many lenders have scaled back education refinance marketing due to the government’s extension of CARES Act forbearance, mail volume remains up 21% vs. 2021
- Credit card, personal loan, and education refinance mail volumes YTD through May 2022 exceeded pre-pandemic 2019 levels
Quick Takes
- Online savings rates continued their recent climb, with top APY’s reaching 1.25% and higher – triple the rates of just three months ago
- PayPal announced the PayPal Business Cashback Mastercard for small businesses
- The new card offers unlimited 2% cash back on purchases
- The card will be integrated into PayPal’s merchant platform and issued by WebBank
- BNPL du Jour
- Apple announced its BNPL offering “Apple Pay Later” in partnership with Goldman Sachs
- Consumers manage the feature through the Apple Wallet and can split purchases into four interest-free installments over six weeks
- Apple Pay has 45 million users in the U.S., but is currently accepted at only 1 million of the 10.7 million U.S. merchants that accept credit cards
- Apple’s offering joins a very crowded BNPL space
- The Epic team has conducted many product, offer, and creative tests over the past three decades, and one of the more interesting findings resulted from a test involving consumer options
- One bank-branded credit card offered a check box allowing respondents to choose either a Visa or Mastercard
- While thinking the choice would make the offer more attractive to the consumer, we tested the choice option against a Visa-only offer with all other product features being the same (we also tested a Mastercard-only offer against the choice offer)
- We were shocked when both the Visa and Mastercard-only offers generated significantly higher response rates than the creative offering a choice
- The lesson: the fewer decisions a consumer has to make, the more likely they are to choose your product
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Thank you for reading.
Jim Stewart
www.epicresearch.net
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