Consumer Payments in the U.S.: Trends Driving the Credit, Debit, and Prepaid Card Industries
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Displacement of cash and checks in combination with the nation’s formerly increasing disposable income has long served to grow the market for payment products. As that displacement has slowed and the nation’s per capita income has declined, participants in the consumer payments industry can succeed only by growing market share. Organic growth in the U.S. industy is not in the cards for the foreseeable future.
Consumer Payments in the U.S.: Trends Driving the Credit, Debit, and Prepaid Card Industries examines the demographic, payment product and channel preference changes driving a profound transformation of the payments industry.
This new report provides historical market size, industry and product revenue forecasts for both traditional and new payment products and channels. It also drills down to product and brand preferences as well as bill payment behaviors and financial attitudes specific to seniors, older and younger Baby Boomers, Generation X and Millennials.
For each cohort, disposable income is broken out by spending categories, allowing payment industry participants to identify recurring payment changes over time and to target those categories most susceptible to new marketing initiatives.
Specific trends addressed both in macro and generational cohort specific terms include responses to debit card fees and debit card loyalty programs cancelled by issuers in the wake of debit interchange caps. Consumers have rejected new debit fees and as they have been deluged with credit card offers, they have quickly switched their product preference from debit to rejuvenated credit cards.
With household incomes declining even as healthcare costs and student loan debt are rising, the overall payments pie is shrinking, prompting payment providers to base profit growth strategies on taking market share from their competitors.
The overall economy will remain stalled until 2013 or 2014, and Millennials as the newest adult generational cohort have brought with them novel payment and channel preferences. This report guides issuers, retailers and marketers in optimizing the potency of each product differentiating feature, mastering new payment and communication channels, and building loyalty programs based on cost sharing with merchants to maintain or grow market share.
Consumer Payments in the U.S.: Trends Driving the Credit, Debit, and Prepaid Card Industries examines the demographic, payment product and channel preference changes driving a profound transformation of the payments industry.
This new report provides historical market size, industry and product revenue forecasts for both traditional and new payment products and channels. It also drills down to product and brand preferences as well as bill payment behaviors and financial attitudes specific to seniors, older and younger Baby Boomers, Generation X and Millennials.
For each cohort, disposable income is broken out by spending categories, allowing payment industry participants to identify recurring payment changes over time and to target those categories most susceptible to new marketing initiatives.
Specific trends addressed both in macro and generational cohort specific terms include responses to debit card fees and debit card loyalty programs cancelled by issuers in the wake of debit interchange caps. Consumers have rejected new debit fees and as they have been deluged with credit card offers, they have quickly switched their product preference from debit to rejuvenated credit cards.
With household incomes declining even as healthcare costs and student loan debt are rising, the overall payments pie is shrinking, prompting payment providers to base profit growth strategies on taking market share from their competitors.
The overall economy will remain stalled until 2013 or 2014, and Millennials as the newest adult generational cohort have brought with them novel payment and channel preferences. This report guides issuers, retailers and marketers in optimizing the potency of each product differentiating feature, mastering new payment and communication channels, and building loyalty programs based on cost sharing with merchants to maintain or grow market share.
- CHAPTER 1: METHODOLOGY AND EXECUTIVE SUMMARY
- Scope and Methodology
- Report Methodology
- Chapter 1: Executive Summary
- Chapter 2: Market Overview
- The Switch From Credit Cards to Debit Cards
- Consumers Now Switching From Debit to Credit
- Table 1-1: 2011 ¨C Credit Card Use Growing More Quickly than Debit Card
- Online Bill Payments
- Chapter 3: Demographics of Cardholders by Generational Cohort
- Seniors
- Older Boomers
- Younger Boomers
- Generation X
- Generation Y (Millennials)
- Chapter 4: The Marketing of Payment Products
- Revamping Debit Cards
- The Impact of New Channels
- Social Media is Made for Retail Card Issuers
- Chapter 5: Inter-Relationship of Payment-Related Behaviors
- Bill Paying Channels Used by Race/Ethnicity
- Bill Pay Channels Used by Household Income
- Figure 1-1 Online and In-Person Bill Pay Channels Correspond to Household Income
- Bill Pay Channels Used by Education
- Debit, Prepaid and Credit Card Ownership by Race/Ethnicity
- Debit, Prepaid and Credit Card Ownership by Income
- Debit, Prepaid and Credit Card Ownership by Level of Education
- Credit Card Used Most Frequently by Race/Ethnicity
- Credit Card Used Most Frequently by Household Income
- Credit Card Used Most Frequently by Level of Education
- Relationship Among Payment Behaviors
- Correlations between Channels and Other Channels Used for Bill Payment
- Correlation between Credit Card Ownership and Bill Payment Channels
- Conclusion
- CHAPTER 2: MARKET OVERVIEW THE AMERICAN CONSUMER: EXPENDITURES AND PAYMENTS
- Introduction
- Table 2-1: Aggregate Household Disposable Income ($ Billions), 1990-2011
- Table 2-2: Characteristics of Households, 2010
- Table 2-3: Consumer Expenditures by Category and CAGR, 2008-2010 (Average Household)
- What We Buy With Our Money
- Figure 2-1: Average Household Expenditures By Category, 2010
- Declining Disposable Income Drives Changing Purchasing Behaviors
- Pressure on Household Expenditures: Food Price Outlook, 2011 and 2012
- Global Pressure on Economy Is Growing
- Consumer Expenditures by Age
- How We Pay
- Table 2-4: Number of Noncash Payments, 2006-2009
- The Switch from Credit Cards to Debit Cards
- Figure 2-2: U.S. Household Savings Rates, 1990-2010 (percent saved)
- Table 2-5: Third Quarter 2011 Savings Rates Begin to Return to More Typical (Low) Levels
- Outstanding Receivables for Credit Cards Decline
- Table 2-6: Post-Recession, America¡¯s Credit Card Debt Has Been Declining
- Figure 2-3: Credit Card Debt Has Declined Despite Population Growing at a CAGR of .75%
- Table 2-7: 2011 ¨C Credit Card Use Growing More Quickly than Debit Card
- Our Credit Cards
- Table 2-8: Frequency of Credit Card Use By Brand, 2011
- Table 2-9: Credit Card Preferences by Income, 2011: Credit Card Used Most Frequently
- Credit Card Issuers
- Table 2-10: Largest Credit Card Issuers (By Purchasing Volume), 2010
- Our Debit Cards
- Table 2-11: Largest Debit Card Issuers (By Purchasing Volume), 2010
- Table 2-12: Debit Cards in Circulation, Purchase and Transaction Volumes, VISA and MasterCard, 2010
- Table 2-13: Debit Cards: Ownership and Usage for Cash Withdrawals, 2011
- Table 2-14: Debit Cards: Ownership and Usage for Purchasing, 2011
- Prepaid Cards
- Figure 2-4: The Face of the Card: Prepaid and Credit Cards Demonstrate Different Relationships Among Partners
- Table 2-15: Brands of Open-Loop Prepaid Cards Used in the Past 12 Months)
- Table 2-16: Prepaid Card Use by Income in the Past 12 Months
- Growth of Electronic Payments Category
- Table 2-17: Payment Volumes and Forecast: Debit, Credit and Prepaid, 2006-2016
- Payment Channels: Online and Mobile
- Table 2-18: Popularity of Online Alternative Transaction Providers, 2011
- Growth of Online Retailing and Mobile Payments
- Table 2-19: PayPal¡¯s Payment Transaction Volume ($ billion)
- Table 2-20: PayPal Mobile Transaction Volume, 2010 - 2013
- Mobile Commerce Hits the Mainstream
- Social Media, Mobile Commerce and a Vente Latte
- Figure 2-5: Step One: Starbucks Rewards
- Figure 2-6: Step Two: Mobile Starbucks
- Alternative Payments
- Creating Truly Mobile Commerce
- Paying Bills: Mail, Online or Phone
- Table 2-21: How Do You Pay Your Bills? Channels Used, 2011
- Table 2-22: Bill Payment Channels by Income, 2011
- Table 2-23: Bill Payment Channels by Age, 2011
- After All That Buying, How Do We Feel?
- Table 2-24: Consumer Attitudes About Their Personal Finances
- Conclusion
- CHAPTER 3: DEMOGRAPHICS OF CARDHOLDERS BY GENERATIONAL COHORT
- Introduction
- Figure 3-1: Generations in the Workforce, 2011
- Seniors
- Who Are They?
- Oldest Seniors ¨C Who Are They?
- Table 3-1: Characteristics of Oldest Senior Households
- Table 3-2: Oldest Seniors: Consumer Expenditures by Category and CAGR, 2008-2010 (Average Household)
- Younger Seniors
- Table 3-3: Characteristics of Younger Senior Households
- Table 3-4: Younger Seniors: Consumer Expenditures and CAGR by Category, 2008-2010 (Average Household)
- Seniors: How They Pay Their Bills
- Table 3-5: Channels Used by Seniors to Pay Recurring Bills, 2011
- Seniors: Credit Cards They Use Most Often
- Table 3-6: Seniors vs. All Consumers: Credit Card Used Most Often, 2011)
- Figure 3-2: Favorite Credit Card, Seniors vs. All Consumers, 2011
- Baby Boomers ¨C The Oldest Boomers
- Figure 3-3: Age Distribution of Baby Boomers, 2011
- After Years of Privilege, Older Boomers are Struggling
- Figure 3-4: Unemployment Rate by Age, 2011
- Long-term Unemployment Among Older Workers Negative Force on Group¡¯s Disposable Income
- Oldest Boomers Are Downwardly Mobile
- Table 3-7: Characteristics of Oldest Baby Boomer Households
- Table 3-8: Oldest Baby Boomers: Consumer Expenditures and CAGR by Category, 2008-2010 (Average Household)
- Oldest Boomers: How They Pay Their Bills
- Table 3-9: Channels Used by the Oldest Baby Boomers to Pay Recurring Bills, 2011
- Oldest Baby Boomers: Credit Cards They Use Most Often
- Table 3-10: Oldest Baby Boomers vs. All Consumers: Credit Card Used Most Often, 2011
- Baby Boomers ¨C The Youngest Boomers
- Younger Boomers Are Also Downwardly Mobile
- Table 3-11: Characteristics of Youngest Baby Boomer Households
- Table 3-12: Youngest Baby Boomers: Consumer Expenditures and CAGR by Category, 2008-2010 (Average Household)
- Youngest Boomers: How They Pay Their Bills
- Table 3-13: Channels Used by the Youngest Baby Boomers to Pay Recurring Bills, 2011
- Youngest Baby Boomers: Credit Cards They Use Most Often
- Table 3-14: Youngest Baby Boomers vs. All Consumers: Credit Card Used Most Often, 2011)
- Generation X
- Table 3-15: Characteristics of Gen X Households
- Different Marketing Strategies Speak to Xers
- Categories of Declining Spending
- Table 3-16: Generation X: Consumer Expenditures and CAGR by Category, 2008-2010 (Average Household)
- Generation X: How They Pay Their Bills
- Table 3-17: Channels Used by Generation X to Pay Recurring Bills, 2011
- Generation X: Credit Cards They Use Most Often
- Table 3-18: Generation X vs. All Consumers: Credit Card Used Most Often, 2011
- Generation Y
- Figure 3-5: Unemployment among 25-34 year olds, 1968 ¨C 2011 (Numbers in thousands)
- Millennials: Low Wages, Underemployment and a Trillion Dollars in College Debt
- Generation Y of Concern to Payments Industry Participants
- Table 3-19: Characteristics of Gen Y Households
- Table 3-20: Generation Y: Consumer Expenditures and CAGR by Category, 2008-2010 (Average Household)
- Generation Y: How They Pay Their Bills
- Table 3-21: Channels Used by Generation X to Pay Recurring Bills, 2011
- Generation Y: Credit Cards They Use Most Often
- Table 3-22: Generation Y vs. All Consumers: Credit Card Used Most Often, 2011)
- Marketing Approach to Millennials Is Different
- Conclusion
- CHAPTER 4: THE MARKETING OF PAYMENT PRODUCTS
- Changing Landscape for Banks and Retailers
- Marketing Debit Cards
- Bank Revenue on Debit Transactions Cut in Half
- Table 4-1: Debit and Credit Interchange Fees 2006-2010
- Table 4-2: Bank Interchange Profits on Debit Transactions
- The New Math 1-0 = 1+1: Retailers and Banks Refuse to Lose
- Debit Card Exemptions from Dodd Frank
- Traditionally Promoting Debit Cards
- Table 4-3: Signature and PIN Debit Comparables
- Marketing to Retailers and Billers
- Table 4-4: Debit Savings Over Other Payment Options
- Then: Promoting Signature Over PIN Debit
- Now: Signature Debit. Dead? Dying? Feeling Better?
- Pre-Dodd-Frank: Encouraging Use of Signature Debit
- Table 4-5: VISA Check Card Statistics circa 1998
- Marketing ¨DCheck Cards¡¬
- Rewards Offered to Signature Debit Users
- Debit Transaction Trigger Cash to Savings
- Points or Miles Redeemable for Merchandise or Travel
- Eliminating Debit Programs in Q2 2011
- Merchant-funded rewards programs
- MFDs Create Generational Cohorts of ONE
- MFDs and Demonstrable, Provable Marketing Results
- Cardlytics
- How It Works
- Value for Each Participant: Merchant, Bank, Customer
- MFDs: Who Gets the Money?
- Figure 4-1: Merchants Pay 10-15% of a Purchase to the Issuing Bank
- Removing the Carrots for Using Debit Impacts Consumer Behavior
- Table 4-6: New Fees Charged for Formerly-Free Debit Cards
- Overdraft Fee Income Challenged at Same Time
- Principal Features of Overdraft Legislation
- Table 4-7: Bank Income From Debit Cards and Overdrafts in Decline?
- Maintaining Overdraft Income by Tweaking the Income Stream Formulation
- Back to Credit Cards?
- Table 4-8: 2011 ¨C Credit Card Use Growing More Quickly than Debit Card
- Introducing the New and Improved¡-Credit Card
- Driving the New Focus on Credit Cards
- Loyalty Drivers Across the Generations
- Table 4-9: Credit Card Loyalty Differs Across Generations
- Tapping the Changing Credit Card Market: Newest Channels Have Greatest Impact
- Social Media = New Channel for Payments Education, Product Loyalty and Use
- Social Media Is Made for Retail Card Issuers
- Facebook Special Offers for Cardholders
- Figure 4-2: American Express drives customers to its messages with discounts
- Who Uses the Internet/Social Media Best?
- Link, Like, Love
- Facebook Allows Card Brands to Involve Cardholders and Other Fans in Their Charitable Giving Initiatives
- Chase Community Giving Uses Multi-Media Blitz
- Figure 4-3: Chase links its Community Giving program with a multi-media strategy
- Chase Gives Power to the People
- Capital One: Giving, Football and Unedited Consumer Feedback
- Wells Fargo: Can Too Much of a Good Thing Be Too Much?
- Social Media Links Brand Loyalty and Payments
- Conclusion
- CHAPTER 5: INTER-RELATIONSHIP OF PAYMENT-RELATED BEHAVIORS
- Introduction
- Bill Payment
- Bill Paying Channels Used by Race/Ethnicity
- Table 5-1: Bill Paying Channels by Race/Ethnicity
- Bill Pay Channels Used by Household Income
- Table 5-2: Bill Payment Channels by Income, 2011
- Figure 5-1: Online and In-Persona Bill Pay Channels Correspond to Household Income
- Bill Pay Channels Used by Education
- Table 5-3: Bill Paying Channels by Level of Education
- Figure 5-2: Bill Payment Channel Preferences by Education, 2011
- Ownership of Debit, Prepaid and Credit Cards
- Debit, Prepaid and Credit Card Ownership by Race/Ethnicity
- Table 5-4: Debit, Prepaid and Credit Card Ownership by Race/Ethnicity
- Figure 5-3: Use of Payment Products Varies by Race/Ethnicity, 2011
- Debit, Prepaid and Credit Card Ownership by Income
- Table 5-5: Debit, Prepaid and Credit Card Ownership by Income, 2011
- Debit, Prepaid and Credit Card Ownership by Level of Education
- Table 5-6: Debit, Prepaid and Credit Card Ownership by Level of Education
- Ownership of Credit Cards
- Credit Card Used Most Frequently by Race/Ethnicity
- Table 5-7: Credit Card Used Most Frequently by Race/Ethnicity
- Credit Card Used Most Frequently by Household Income
- Table 5-8: Credit Card Used Most Frequently by Household Income
- Credit Card Used Most Frequently by Level of Education
- Table 5-9: Credit Card Used Most Frequently by Level of Education
- Relationships Among Payment Behaviors
- Correlations between Channels and Other Channels Used for Bill Payment
- Table 5-10: Use of Additional Channels in Bill Payment
- Correlation between Credit Card Ownership and Bill Payment Channels
- Table 5-11: Bill Payment Channel Preference by Credit Card Ownership
- Figure 5-4: Bill Payment Channels Used by Credit Cardholders vs. All Consumers, 2011
- Conclusion