THE EVOLVING CONSUMER PAYMENTS MARKET (Dec 2016)

Cash, Checks, and Cards

Online and Mobile Payments

New Competitors

Key Finding from Previous SYNERGISTICS Research Surveys:

Based on findings from previous SYNERGISTICS surveys, it becomes evident that consumer usage of online PC bill payment has experienced incredible growth over the past decade and has now stabilized.  Are there opportunities for further growth.

Prop Graphic

Highlights of the Study

This study examines consumer payment behavior at the point of sale and online, as well as for bill payment. Current usage of various payment methods and consumer reaction to innovative payment options and technology are assessed.

 

National Internet Survey – The survey will include 1,000 Internet interviews with consumers age 18 or older.

Key Dates

September 23, 2016 – Charter fee/Intro pricing ends.

September 23, 2016 – Final acceptance of comments on questionnaire.

December 2016 – Project Report available.

Strategic Questions

  • How do consumers approach the wide array of options that exist for making payments and transactions? What are the preferences and relative share of activity for cash, checks, debit cards, credit cards, and prepaid cards? What perceived benefits and drawbacks do consumers associate with various payment methods?
  • Do consumers’ payment preferences vary among different point-of-sale locations? Does cash still hold a primary position for certain locations or purposes?  Can these preferences be shifted with new payment options or technology?
  • What is the overall profile of consumers’ bill payment behavior? Is bill payment via mobile phones and tablets displacing some PC-based activity?   How can financial institutions react to preferences for biller sites/apps vs. FI sites/apps?
  • What are consumers’ payment preferences for online purchases and transactions? Does this vary with type of transaction?  Have alternative payment options – such as PayPal Credit, Visa Checkout, or MasterPass – captured a significant share of this activity?
  • How are developments in payment technology – such as mobile payments at the point of sale, mobile person-to-person payments, and mobile card readers – impacting consumers’ payment behavior? Do consumers’ perceptions of the implementation of chip card (EMV) technology require a response from providers?
  • Which payment methods or options do consumers see as most – and least – secure against fraud and misuse?  How should providers respond to these perceptions?
  • Which customer identifiers – such as household demographics, attitudes, or current payment choices and behavior – are useful in evaluating the potential for new payment methods and options?  How should customers committed to traditional payment options – particularly checks and cash – be marketed to?

Research Issues

  • The consumer payments market continues to evolve as numerous innovations in technology and payment alternatives are introduced.  The adoption of EMV standards – chip cards – in the United States in response to widening concerns over payment security is one of the more significant developments in recent years.  Concurrent with this is the ongoing progress toward a digital wallet – a concept discussed for a decade or more but never quite realized.  The introduction of Apple Pay, Google Wallet, and similar options represent a significant “leap” in this area.  The eventual impact of these developments on contactless card products is a question of great interest among issuers, processors, and merchants.
  • At the same time, traditional payment options still have a role in consumers’ payment behavior.  Both industry and government data show that check writing frequency is declining.  However, previous findings by SYNERGISTICS suggest that there will be segments and purposes wedded to check writing for some time to come.  Similarly, recent data from the Federal Reserve indicate that the usage of cash for small value payments at the point of sale is far from dead, despite long enduring proclamations to the contrary from industry observers.  In addition, credit cards and debit cards are widely used and popular forms of payment.  Prepaid cards have found a particular niche for certain types of everyday expenses.
  • The emergence of third parties – such as telecommunications companies, Internet content providers, and P2P organizations – may pose a challenge to the traditional dominance held by banks in the payments area.  This study examines the scope of consumer payment behavior. [F248]

ENRICHING PREMIUM CARD PROGRAMS (Sept 2016)

Upscale Rewards; Enhanced Services

Revenue Potential

Marketing Strategies

Key Finding from the SYNERGISTICS Report:

Results reveal notable near-term potential for premium cards in the higher income market, with potential being particularly strong among those with income of $400K+.

A90 Prop Graphic

Highlights of the Study

This study examines consumer experience with premium credit cards.  Consumer reaction to upscale rewards, enhanced services, and pricing is also assessed.

National Internet Survey – 750 consumers age 18 or older with household income of $100K+.

Key Dates

September 2016 – Project Report available.

Strategic Questions

  • What is the overall environment for consumer usage of premium credit cards – including such aspects as number of cards used, monthly frequency of transactions, and charge volume?
  • Are there certain features or services that, from the consumer perspective, distinguish premium cards from other credit cards?  Do factors such as pricing, types of rewards, special services, credit line, and co-branding affiliation influence the perception of premium or prestige card status?
  • How strong is the potential for premium or prestige cards in the next year?  What features or services are considered “ideal” for such a card?
  • How large is the revenue potential for premium card programs?  To what extent do current premium card users pay annual fees?  How willing are prospects to pay fees for a premium card with the features and benefits they value?
  • What are the motivations – such as rewards, larger lines of credit, or distinctive appearances – for obtaining a premium card?  How widespread is usage of upscale services such as concierge, airport club access, travel upgrades, and special event tickets and are these services valued – particularly in terms of paying fees?
  • By what channels did users of premium cards get product information prior to obtaining a card?  Which channels were used for applying for an account?
  •  Can the premium card market be segmented on the basis of demographic traits, financial behavior, or consumer attitudes?  Which may be best to identify potential new adopters?

Research Issues

  • Whether gold, platinum, or titanium, premium credit cards remain popular among affluent consumers and frequent travelers. Competition is intense as card issuers scramble to stand out in the premium card market. These premium or prestige cards are attractive products for providers to offer and in most cases can provide guaranteed revenue from annual fees.
  • However, consumers are now beginning to look more closely at the premium card offerings to determine if the high-end features and services offered are worth the price.  The strongest competition among issuers tends to be in the realm of travel-related features and services and consumers are now gravitating toward those cards that can offer the greatest return in terms of travel-related rewards and benefits.
  • Marketing premium or prestige card offerings can be a challenge as card programs need to be fresh and unique, especially for the more affluent consumer. SYNERGISTICS survey will examine the features or benefits upscale consumers consider to be premium level, the marketing strategies necessary to attract these consumers to a particular card, and the revenue opportunities that exist for card issuers. [A90]

DEBIT CARDS: STRATEGIES AND TACTICS (Apr 2015)

Role in the Payments Mix

Value-Added Services and Rewards

Security and Privacy Issues

Key Finding from a Recent SYNERGISTICS Research Survey:

In SYNERGISTICS 2013 survey, Payment Cards: Credit, Debit, and Prepaid, it was revealed that while rewards are abundant for credit cards fewer mention earning rewards via debit cards and prepaid cards.  Can reward programs be used to boost usage of debit cards even further?

F231 Prop Graphic

Highlights of the Study

This study examines consumer usage of and reaction to debit card programs, including pricing, rewards, special services and product innovations.  Security and privacy issues are also evaluated.

National Internet Survey – 1,000 consumers age 18 or older.

 

Key Dates

January 30, 2015 – Charter fee/Intro pricing ends.
January 30, 2015 – Final acceptance of comments on questionnaire.
April 2015 – Project Report available.

Strategic Questions

  • How has debit card activity changed in the past year, if at all? For what reasons have consumers increased or decreased their usage of debit cards?  Are debit cards preferred for some purchases instead of credit cards?
  • How should financial institutions respond to customers’ concerns over privacy and security? Have debit card users changed their shopping behavior in response to security breaches at major retail chains?
  • Is debit card user attrition a factor in the market? How large is the ex-user segment and is there potential for reactivating their usage?  Should nonusers overall be targeted for user base expansion?
  • Do rewards still have a role in debit card programs? To what extent are debit card users receiving rewards?  What are the perceived advantages and disadvantages of rewards?  Is there fee income potential for reward programs?
  • How do technological innovations impact how consumers use their debit cards? What is the experience with and reaction to contactless payments – both with cards and mobile phones – at the point of sale?  Are consumers ready for the implementation of chip enabled/EMV debit cards?
  • What is the position of debit cards – competitive or complementary – with other payment cards consumers use? What motivations drive the preference for one type of card over another?
  • What are the best variables or identifiers for segmenting the debit card user base for marketing efforts?  Are demographic traits or behavioral variables such as types and frequency of purchases effective targeting criteria?

Research Issues

  • Debit cards have experienced great success in recent years.  According to industry experts, the number of debit cards in circulation in the United States in 2012 was 283 million.  Electronic transaction volumes continue to soar as consumers write fewer checks and use cards more.  A number of providers have been implementing instant-issue programs to put debit cards in the hands of customers on the spot when checking accounts are opened at the branch.
  • The debit card product itself continues to change as providers add value-added services to attract consumers.  EMV implementation is beginning and issuers are adding chips to their debit card products.  What is the consumer response to chip debit?  There are also debit card programs that offer airline rewards, cash rebates, merchandise points, and charitable donations.  Debit card reward programs and value-added services may be implemented to help debit cards compete or collaborate with other available card products.
  • Prepaid cards are increasing in popularity, and credit cards continue to be widely used.  Of the 775 million general-purpose payment cards in the United States in 2012, 334 million were credit cards and 159 million were prepaid cards.  What role do debit cards play in the card product mix?  In addition, the increased usage of debit cards has made them more vulnerable to being targets for fraud and raised some issues for providers.  In this dynamic market, knowing the consumer perspective is essential to designing and optimizing debit card strategies. [F231]