May 30, 2020

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

Jim Stewart

Jim Stewart

CEO, Epic Research

Four Things We’re Hearing

  • Credit card acquisition marketing (unsurprisingly) plummeted in April
  • As did marketing for Personal Loans
  • Why do we talk about Direct Mail so much?
  • The student lending market is heating up

Today’s newsletter takes 4 minutes to read

Consumer Credit Acquisition Marketing Volume was Down in April

  • Mail volume in April for consumer financial products was down 35%-45% depending on the product
  • This understates the massive decrease in direct mail due to trailing activity from early March programs that were either in flight or committed
  • May volumes will more fully reflect the pause in consumer credit mail solicitations
  • Digital card acquisition programs shut down much faster

Credit Card Acquisition Programs were Down Across both Mail and Digital

  • Credit card direct mail was down 36% in April vs. April 2019
Credit-Card-DM-Volume-by-Month
  • You can begin to see reductions in individual issuer volumes, especially American Express
Credit-Card-Top-Mailers
  • Online acquisition volume paused even more substantially in April
Digital_Vol_Card_Marketing

Personal Loan Acquisition Volumes were Down Even More

  • Personal Loan mail volume was down 45% in April
unsecured-lending-mail-vol-yoy (1)
  • There were consistent large reductions in mail volume among the top mailers, with the notable exception of OneMain
unsecured-lending-mail-vol-lender
  • While reductions in digital volume were not as widespread
Digital_Vol_PL_Marketing

Why do we Talk About Direct Mail so Much?

  • We have been asked why we focus so much on direct mail activity – isn’t it obsolete compared to digital? The answer is no, no it’s not obsolete – and for good reason
  • We estimate 77% of personal loans and 61% of credit card acquisitions spending came from direct mail in 2019
2019_Channel_Spend_Mix
  • Over the past several years, Credit Card mail has averaged between four and five billion pieces per year
  • Personal Loan mail volume has been growing in recent years, exceeding three billion pieces in recent years
  • 22 of the top 25 mailers in the personal loan segment are non-banks, with only three commercial banks among the top 25 mailers
Unsecured Lending – Rolling-12-Month-Vol-Top-20-Lenders
  • Why all this mail?
  • Lists for credit products are most efficiently produced from credit bureau data, which requires the delivery of a firm offer of credit to access
  • Direct Mail is the only channel through which you can guarantee a firm offer is made to each individual sourced from the bureau
  • Therefore, mail is the most effective way to drive credit-qualified volume in new customer acquisitions

Student Lending Heats Up

  • As student lending “peak season” approaches, the market is beginning to take shape
  • Sallie Mae has reduced its variable rate 25bps to 1.25%, which leads the market as of now
undergrad_rate_changes_052920
  • And Parent Loans from College Ave and RISLA now have fixed loans 66bps lower than Federal Plus Loans, and without the 4.25% origination fee
inschool-parent_rate_changes_052920

Going Forward

  • Most acquisition volume measures are lagging indicators of current activities
  • We are now seeing activity slowly picking up in select segments

Thank you for reading.

Email me with your comments and suggestions on future topics.

Jim Stewart
www.epicresearch.net

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