August 8, 2020

Changing Climate in the Consumer Lending Marketplace: What We’re Seeing and Hearing​

Jim Stewart

Jim Stewart

CEO, Epic Research

Three Things We’re Hearing

  • Areas of opportunity for local banks
  • Advertising spend down across channels
  • Auto insurance spending won’t slow down

A two-minute read

Areas of Opportunity for “Local” Banks

  • Epic surveyed 1,339 consumers across the U.S. and found differences in checking account preferences for consumers with “Local”, “National”, and “Online” banks
Epic Research Checking Account Survey
  • Other areas of difference include:
  • Online Bank checking customers are twice as likely to have a personal loan, student loan, or investment account with the same bank than customers at their National and Local Bank competitors
  • Local Bank checking customers put less importance on digital capabilities than others, with only 14% of Local Bank customers having chosen their banks for that reason vs. 28% for National Bank customers and 44% for Online Banks

Advertising Spend Down Across Channels and Products

  • The Epic Marketing Intensity Index (EMII) – which measures advertising spending across direct mail, online search, and paid digital channels – shows a consistent spend drop across most products through the end of Q2
  • Student loans are the exception, given the seasonal nature of the product
  • Both direct mail and online search were down 60%, with paid digital faring somewhat better, down only 14% from Q2 2019

Auto Insurance Acquisition Spending Won’t Slow Down

  • Unlike consumer loan products, insurance and investment mailings are growing year-over-year, with insurance mailings leading the pack with a 13% increase over last year and investments up 75% (on a much lower base)
  • Given the number of insurance ads we’re seeing on TV (Liberty Mutual, GEICO, Progressive, State Farm, Allstate, USAA, etc.), this doesn’t come as much of a surprise – GEICO auto insurance alone mailed 10.4 million mail pieces in June
Acquisition and Customer Mail Volume (1)

Quick Takes

  • As noted above, Student Loan demand always picks up in mid-summer, however the shape of the curve has been lower this year due to uncertainty surrounding the pandemic and back-to-school plans
PSL online search vol YoY by week (1)
  • The question remains as to whether the curve is elongated, or if there will simply be less loan demand this year – to date, anecdotal data shows fewer loans at higher average balances

Going Forward

  • Consumer lending executives are currently in a similar situation as educators when planning for the fall, with most waiting to see if they will execute on their “normal” or “hybrid” plans

Thank you for reading.

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Jim Stewart

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