January 23, 2021

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

  • Stimulus payments continue to boost consumers’ finances
  • Financial services ad spending still lags
  • Three predictions for 2021

A two-minute read

Stimulus Payments Continue to Boost Consumers’ Finances

  • As we reported in the January 9th Epic Report, consumers’ financial situations were helped significantly by the $1 trillion of payments they received from the government and other sources
  • Most of those programs expired by December, and a new wave of stimulus checks have since been issued
  • To assess how the new payments might continue to impact consumers, last week Epic surveyed 1,107 consumers about their current financial situation
SURVEY-Paying Bills During Covid
  • These findings would indicate a continuation of consumers’ responsible financial habits during the pandemic – lower spending, paying down bills, and saving more

Financial Services Ad Spending Still Lags

  • 2020 began with spending on consumer financial services advertising 8 – 10% higher than in 2019; however, in May overall spending dropped by two-thirds
  • Although spending has slowly recovered, November 2020 spending was still 46% below November 2019 levels
  • The Epic Marketing Intensity Index (EMII) measures acquisition spending for consumer finance products (cards, loans, deposits, home equity, education) and channels (direct mail, search, paid digital)
EMII - acquisition spend - consumer finance products
  • The drop was most pronounced in credit cards, HELOC, and personal loans, while student lending spending was up 9%
  • Paid digital spending was on a tear early in the year, with March 2020 spend over 100% greater than 2019, prior to dropping at rates consistent with other channels
EMII - Paid Digital Spend

Three Predictions for 2021

  • 1. Financial services advertising spending will recover to pre-COVID levels by the fourth quarter
  • Credit card mail volume, accounting for the highest expense of any category of any product, has shown a steady recovery close to pre-COVID levels, with other products and channels having also rebounded in varying degrees
  • With the dominant lenders returning to the market in force, the rest of the industry will follow suit rather than risk missing the opportunity
  • 2. Consumer delinquencies will not see a substantial spike
  • Unlike other financial shocks, the COVID-related financial shock was not accompanied by sharp increases in consumer delinquency and credit losses
  • With recent additional government payments and expected future stimulus measures, the worst is behind us and banks will begin releasing reserves
  • 3. Cash back and “generic” rewards cards will gain share
  • Our research shows two-thirds of consumers prefer to have most banking products with one bank
  • It also shows a preference for cash-back and rewards cards and less preference for ones tied to a specific airline or other co-brand partner
  • Retail banks will seize this opportunity to make their card products more competitive and grow their credit card portfolios
  • Let us know what you think!

Quick Takes

  • Synchrony and Walgreens have announced a new credit card that will be connected with Walgreens’ new customer loyalty program, myWalgreens
  • After closing 300 branches in the year preceding September 2020, they closed another 400 in the fourth quarter of 2020
  • Closures have continued into January as temporary pandemic-related closures are becoming permanent

Thank you for reading.

The next Epic Report will publish on February 6th.  

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Jim Stewart

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