Transcription
Credit Card Trends, Issuesand OpportunitiesJennifer LintonFebruary 1, 2019
In This SessionThe credit card business has become increasingly competitive andcommoditized. Protecting your valuable member relationships anddelivering high-value services has never been more crucial.Understand the changing landscape and identify areas of opportunity togrow your portfolio.In this session, we will discuss: The latest industry trends Emerging issues and challenges Strategies to address new opportunities 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Industry Trends 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Competition for New Accounts Has Never BeenHigherIt is becoming increasingly challenging to differentiate card products in a rewardssaturated market.1.5% and 2% cash backprograms are flooding the market1Acquisition offers are atan all time highAverage Rewards Cost (bps)Top Cashback Products135The average acquisitionincentive has been increasingsteadily 16458% 149 14389The share of card offerswith an acquisitionincentive20102017 138Q32016Q42016 140Q12017Q22017Source: Mintel Group. US Consumer Credit Card Acquisition Marketing Overview 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018Q32017
Net Charge-Offs and Consumer CreditCard Debt are forecasted to continue climbingRevolving consumer credit debtYoY change (%) OctoberNet charge-off rates as a percentage ofaverage outstandings – ces: Federal Reserve G.19 Report released December 7, 2018. Revolving debt is seasonally adjusted.5 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 20182018
Where did the profits go?Return on Assets: All Commercial Banks vs. Credit Card Banks vs. Credit Unions2014–2020FROA Net 40%0.80%20140.75%20150.76%20160.78%2017FCredit Card Banks0.96%2018F2019F2020FAll Credit UnionsSources: Federal Reserve Bank, Mercator Advisory Group August 2018, NCUA September 20186 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Interest Rates Continue to RisePrime Rate – Last 10 YearsNow at5.50% as ofDecember18, 20189 Rate hikesin past 3yearsFixed or VariableRate pricing?7 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDPrice for Risk?Do you re-score yourportfolio for changesin risk?FORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Capital One – Re-Launched August 14, 2018123Source: www.capitalone.com 08/20/18 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Source: CNBC.com website August 21, 2018 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
“Navy Federal Re-Launches Visa Signature Flagship Rewards Credit Card” – September 5, 2018The card now offers 3X points on travel* and 2X on everything elsegiving members enhanced travel rewards*Travel is defined as: Airline and train tickets, hotel stays, car rentals, travel agencies, cruises, campgrounds and RV parks, timeshares, boat rentals, motor home rentals and travelrelated arrangement services, ride-sharing services, bridges, tolls and ferries, parking garages and lots, bus lines, limos and taxis, commuter transport, passenger railways, publicgolf courses, amusement parks and tourist attractions including museums, vineyards and aquariums. 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Challenges 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Some of the Challenges We Face As IssuersCompetitionProfitability Who is it? Strategies forgrowth Price orrewards Increasingfraud Loan losses Valueproposition 2019 Fiserv, Inc. or its affiliates. Rising cost ofrewardsCONFIDENTIAL – LIMITEDRegulations Dodd-FrankChange Interchange? Impact tocurrentcardholders CECL (CurrentExpectedCredit Losses) Impact to yourportfolioperformance Pricing Analyze data Interchangecompression ResourcesFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Opportunities 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Relationship MattersQ. Is the rewards credit card that you use most often, from the financial institution youconsider to be your primary FI? (The FI you use for your primary checking account.)Not Sure2%Yes36%No62%Source: Aite Group survey of 1,464 U.S/ Consumers. September 2017 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Rewards MatterRewards are still a critical driver of credit card acquisition and spending.87%76%92%of cardholders own arewards cardof revolving balancedollars are carried onrewards accountsof consumer creditcard spend is on arewards cardSources: 2016 credit card monitor report, credit card rewards, redemption & merchant loyalty programs, April 2016JD Power 2014 U.S. Credit Card satisfaction study; US affluent community panel, June 2016. 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Premium Rewards – Affluent Card Are your members looking for apremium rewards product? Can you offer a unique valueproposition? Can you link your reward to otherproducts/relationship criteria? Can you waive an annual feebased on other Credit Unionbehavior? Most competitive part of themarket – Super Prime Higher interchange rates Spend 24K annually Affluent households do revolve –32% of HHs 150K revolvers11 AiteGroup survey of 1,669 U.S. credit card users, September 2017 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Small Business Credit Cards Average small business spends 43K a year on their cards Businesses are looking for: Spending flexibility Improved cash flow Rewards Convenience Controls Higher interchange rates Spend growing 15% YoY Rewards are not as rich (yet) 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Data and Analytics Is your card processing partnerproviding you with the data youneed to analyze your portfolio? KPIs & Benchmarks Are they advising you on data? Are you creating goals &strategies based on theperformance of your portfolio? Are you creating a holistic viewof your member relationship? Are you measuring profitability atthe HH or member level? 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Summary Credit card issuing is becoming much more complex As issuers, we need to actively manage our card business byinvesting and partnering for success Come and talk to us in the Solutions Center if you have anyquestions about your card business 2019 Fiserv, Inc. or its affiliates. CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies 2014 2015 2016 2017 2018
Flagship Rewards Credit Card" -September 5, 2018 The card now offers 3X points on travel* and 2X on everything else giving members enhanced travel rewards *Travel is defined as: Airline and train tickets, hotel stays, car rentals, travel agencies, cruises, campgrounds and RV parks, timeshares, boat rentals, motor home rentals and travel
