Three Things We’re Hearing
- One year later…
- What’s going on with credit card growth?
- Online savings rates showing no love
A three-minute read
One Year Later…
- It seems like just yesterday that banks were scrambling to discontinue marketing programs in the face of spiking unemployment caused by the COVID epidemic
- One year later, new customer solicitation volumes for financial products have rebounded from the summer lows, but generally remain at levels of roughly half of pre-pandemic numbers for many products
- As banks sit on excess deposits amid an environment of stagnant loan growth, these trends are due to change in the coming months – more below
What’s Going on with Credit Card Growth?
- Credit card direct mail acquisition advertising has rebounded faster than acquisition advertising for most financial products, bottoming out in June at a level 80% below pre-pandemic numbers and recovering in the fall to a level that is still ~25% below 1Q 2020 volumes
- Direct mail still accounts for ~60% of all credit card advertising spend
- Several positive developments have occurred in the credit card sector in the past year
- The widely and logically held view that consumer delinquencies and bankruptcies would spike as a result of the unprecedented rise in unemployment never materialized, and in fact, the opposite happened
- New rounds of government stimulus along with a forecasted jump in GDP later this year and a decrease in unemployment would indicate that the worst is behind us in consumer delinquencies
- At the same time, card portfolios have shrunk as consumer spending slowed and cardholders used stimulus checks to pay down debt
- Those issuers who have returned to the new customer acquisition market have been rewarded with response rates that are 75% - 100% higher than “normal”
- One would think issuers would be looking to reverse the shrinkage in their portfolios, and many issuers have indicated a desire to not be left behind and to resume “normal” levels of marketing, so…
Online Savings Rates Showing No Love
- Rapidly declining online savings rates have finally stabilized, but at a level 60 – 100 basis points lower than pre-pandemic rates
- Consumer deposits have skyrocketed, fueled by lower spending, government stimulus payments, and overall cautionary behavior in an uncertain time, while rates have fallen
- Online search traffic has tapered off for savings and money market accounts, and financial institutions have reduced checking solicitations by 58% since the months prior to the pandemic
- With rates generally starting to tick up, savings rates may follow
Quick Takes
- After steady growth over the past 20 years, digital servicing became even more prominent in the past year as the pandemic restricted in-person customer interactions with banks and financial services companies adjusted to avoid the risks of having large groups of customer service representatives work in congregate settings
- Insider Intelligence predicts digital servicing penetration will continue to grow 1-2% a year
- While it seems like digital servicing is all you read about these days in banking circles, InsiderIntelligence.com also notes that call center usage is projected to remain steady, with 30% of U.S. consumers interacting with their financial institutions via phone at least once a year
- Meanwhile, Self predicts that all bank branches will disappear by 2034
- As branch design and utility continue to adapt, we think this is one of those predictions that will not come true
- Further, while the number of traditional branches may be shrinking, the number of non-traditional physical banking locations may not be
- For example, months after launching a credit and prepaid debit card, Walgreens has announced that it will also offer deposit accounts through a relationship with MetaBank – accounts that can be serviced both online and in Walgreens’ 9,000 stores
Thank you for reading.
Moving forward, we will be publishing the Epic Report on a monthly basis. The next Epic Report will publish on May 1st.
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Jim Stewart
www.epicresearch.net
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