May 9, 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

  • Consumers have shifted credit card rewards preferences away from travel rewards and towards cash back on non-travel categories such as groceries
  • Lending executives are generally finding the “work from home” model to be more effective than previously thought
  • Alternative lenders continue to be absent from new customer acquisition markets
  • Lenders continue to back away from select products, including HELOC’s and private student loans

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Consumer Credit Card Behaviors

  • Epic fielded research this week on consumer preferences regarding credit card features
  • The results show a shift towards the cash back feature, with over half selecting cash back as their preferred feature
  • In a nod to the impact of stay at home orders, we’re seeing a significant shift in preferences away from travel, gas, and dining and towards groceries

Click here to view the full report

  • The continued decline in online search volume for “travel rewards card” further reflects this shift, with a decline of over 80% since February

Lending Industry Developments

  • Lenders’ ease of transition to a “work from home” model has varied, with some doing so seamlessly and others having more of a problem
  • Some established banks with a traditional call center model have had more difficulty maintaining service levels
  • “Newer” companies with more agile outsourced servicing models have tended to fair better
  • Executives appear to be in no rush to return to centralized offices, with some, such as Barclays’ Jes Staley questioning the “large downtown headquarters” model’s long-term viability
  • Capital One CEO Richard Fairbank announced that non-essential workers in the U.S., Canada, and U.K. will not return to the office until after Labor Day
  • Banks are actively planning for a return to branch banking by removing seating in lobbies to discourage loitering, providing masks for customers, and erecting additional physical barriers such as plexiglass
  • While the physical modifications are straightforward, the issue of identifying customers wearing masks continues to be a debate without obvious solutions
  • There have not yet been widespread layoffs in the lending industry

Alternative Lenders

  • Many alternative lenders continue to be absent from the personal loan table on LendingTree
  • Most of those still present have higher rates than the competition

Lenders Continue to Back Away

  • In addition to JPMorgan Chase and Figure, Wells Fargo stopped accepting new HELOC applications as of May 1st
  • Bank of America has raised its FICO cutoff for HELOC’s from 660 to 720
  • SunTrust has also discontinued making private student loans

Going Forward

  • After a dramatic shift in lending markets and work environments, lenders are settling into the new paradigm
  • As states begin to re-open, changes in employment and economic trends will further impact the lending markets

Thank you for reading.

Let us know what you think.

Jim Stewart

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