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]

REVITALIZING REWARD PROGRAMS (Sept 2016)

Credit Cards, Debit Cards, and Checking

Revenue vs. Relationship Building

Custom and Combined Rewards

Key Finding from the Report:

Results from SYNERGISTICS 2014 study, Optimizing Reward Programs, revealed the extent of participation in various reward programs.  Credit card reward programs were most widespread, followed by debit card and checking relationship rewards. The 2016 survey will reveal any change in consumer participation in various reward programs.

F245 Prop Graphic

Highlights of the Study

This study evaluates the consumer perspective on reward programs for financial services including credit and debit cards and checking.  It examines reaction to pricing, custom reward programs, and combined reward programs.

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

Key Dates

June 24, 2016 – Charter fee/Intro pricing ends.

June 24, 2016 – Final acceptance of comments on questionnaire.

September 2016 – Project Report available.

Strategic Questions

  • How should financial institutions evaluate and assess the current state of their reward programs? What results are the best measures of success – greater market share, strengthened relationships, or increased fee income?
  • What is consumers’ current behavior profile in terms of usage of reward credit cards? Is usage of multiple reward cards a factor in the market and what is driving this?  Is there revenue potential in marketing reward cards?  Do premium or prestige credit cards represent the next step in reward credit cards?
  • Is there potential for a resurgence in debit card rewards? To what extent do consumers participate in these programs and how much appeal do they have?  Are combined debit and credit card reward programs a viable option?
  • How strong is the potential for relationship-based reward programs tied to checking activity? What has been the experience of consumers with these programs?  Are these programs effective in terms of increased customer activity, new account openings, and relationship retention?
  • What is the current attitudinal and behavioral environment impacting the design and positioning of reward programs? Do consumers prefer lower-value rewards that are given quickly or those with higher value that build over time?  What perceived advantages or benefits can be incorporated into marketing strategies and tactics?
  • What is the experience with and potential for innovative reward programs and delivery methods — including customized rewards, experiential rewards, and targeted messages or alerts based on spending patterns and preferences? Is there receptivity to mobile apps for managing and optimizing reward programs?
  • Do certain reward programs appeal to specific market segments in a way that can be used for positioning and targeting?  Are there consumer segments that represent wider potential for strengthened relationships or revenue opportunities?

Research Issues

  • Rewards have become an almost essential element for many financial services, particularly card products.  They have become an expectation among consumers and now represent the cost of doing business for many providers.  Over the years, the types of rewards that are popular have fluctuated, being influenced by economic factors and changing consumer opinions.  Are certain types of rewards now more popular to certain age and household income segments.
  • Rewards can be associated with credit cards, debit cards, checking accounts, and various other financial accounts and services.  Some reward programs are tied to balances, while others depend on frequency or volume of product or channel usage.  In some cases, consumers have the option to customize their reward experience by selecting rewards or other features of a product or service.  In addition, rewards may be combined based on usage of multiple financial accounts and services – such as usage of credit and debit cards.
  • In developing reward programs, providers need to identify their objectives – fee revenue, account acquisition or customer loyalty and retention.  This study examines consumer usage of and reaction to reward programs for financial services such as credit cards, debit cards, and checking accounts. Relationship and balanced-based rewards, as well as opportunities for fee revenue and account retention and acquisition are evaluated.  This study will help providers gain an understanding of consumer preferences, attitudes, expectations, and behavior patterns, which will assist providers in revitalizing their reward programs. [F245]

EVALUATING SECURITY AND PRIVACY ISSUES FOR FINANCIAL SERVICES (Spring 2016)

Consumer Experience

Education and Communication Strategies

Security Measures and Privacy Policies

Key Finding from the Report:

Results from SYNERGISTICS 2014 study, Security and Privacy Issues in a Digital Age, found that a significant minority of Internet households have experienced some type of fraud or identity theft, an increase since 2006.

A86 Prop Graphic

Highlights of the Study

This study examines consumer experience with security and privacy issues related to financial accounts and services.  Consumer reaction to education and communication programs, security measures, and privacy policies is also assessed.

National Internet Survey – 992 consumers age 18 or older.

Key Dates

 

Spring 2016 – Project Report available.

Strategic Questions

  • How do consumers approach security and privacy on a daily basis, if at all?  Have activities such as shredding documents, monitoring balances, opting out of direct mail, and regularly changing passwords become commonplace?  Is there now more concern about financial security and privacy in comparison to two years ago?
  • Which channels for conducting banking activities are consumers most concerned about in terms of security and privacy?  What are consumers’ top concerns for online banking and bill payment?  How wide is consumers’ actual experience with online shopping fraud, identity theft, or account fraud?  Can providers implement measures or procedures that consumers will see as valuable to improve security?
  • Do the privacy policies of financial providers receive any attention from customers?  How proactive are consumers in terms of choosing how personal information is shared by their providers or in opting in or out of receiving marketing messages?  How satisfied are consumers with the security and privacy measures of their financial providers?
  • Do consumers use credit report monitoring services?  Is identity theft insurance widely used?  What providers are used for these services?  How wide is the potential for future adoption?
  • Have security and privacy concerns affected consumers’ payment card behavior?  Are they aware of the liability associated with fraudulent use of their debit or credit cards?  Do they use one particular card for online shopping?  How receptive are they to an “on/off” capability?
  • How do consumers view biometric forms of identification such as fingerprint scanners, facial recognition, or voice recognition?  Are these seen as viable for accessing a payment account at the point of sale or accessing accounts online?
  • Are security and privacy concerns generally widespread or are they heightened among certain demographic or behavioral segments?  Which segments might be more prone to adopt advanced security capabilities such as biometrics?

Research Issues

  • Keeping fraudsters at bay is becoming more difficult in the face of evolving technology, and financial institutions are constantly evaluating new ways to keep their customers’ financial information safe and secure.  Recent security breaches at retailers and other organizations have heightened consumers’ awareness and sensitivity to the possibility that their personal and financial information could be compromised.
  • In response to rising fraudulent activity, many providers have been intensifying their security tactics and exploring new techniques to safeguard consumers’ personal and financial information.  Some providers are considering biometric security measures as a replacement for traditional usernames and passwords.  Many have implemented fraud education and awareness pages on their websites to inform and educate consumers on how to protect themselves from fraudulent activity such as ATM card skimming, phishing, and ID theft.
  • Credit report monitoring, fraud alerts, and identity theft insurance are also available for consumers through various financial institutions and other agencies.  Privacy policies are important in this security-conscious environment.  Some financial institutions are seeking to improve these notices by making them more consumer friendly.  It is important for providers to gain a clear understanding of the current consumer perspective and experience with regard to security and privacy issues in order to optimize their strategies for the future. [A86]

DESIGNING CHECKING ACCOUNTS FOR TODAY’S CONSUMERS (July 2016)

Pricing and Product Design

Online and Mobile Access

Packages; Value-Added Services

Key Finding from the Report:

Results from SYNERGISTICS 2015 study, Checking Account Acquisition and Retention, found that most checking holders believe they have a free account with no monthly fees or service charges, no minimum balance requirements, and no transaction charges. A minority are aware their account has fees or service charges that can be waived by meeting certain requirements.  To what extent do consumers still perceive they have free checking?

F244 Prop Graphic

Highlights of the Study

This study evaluates the consumer checking account market exploring strategies for designing checking products.  It examines pricing, packaging, access methods, value-added features, and online services.

 

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

Key Dates

April 29, 2016 – Charter fee/Intro pricing ends.

April 29, 2016 – Final acceptance of comments on questionnaire.

July 2016 – Project Report available.

Strategic Questions

  • Do household checking accounts continue to fit the conventional image of being a stable financial relationship? What degree of volatility exists in terms of recent account opening or share shifting?  What are the factors or motivations influencing any market movement?  Is multiple checking account usage an issue in the marketplace?
  • Can providers strengthen the checking account relationship with various “value-added” services and benefits? Is there positive response to relationship reward programs?  How important are features such as free ATM access, overdraft protection, and debit card “on/off” capability?
  • To what extent has the checking account become an online or digital experience for certain customer segments? What is the behavior profile in terms of devices used and activities performed in the digital environment?  Does there continue to be growth in adoption of mobile RDC?  Is there potential for digital “no check” accounts?
  • Are there opportunities to improve customers’ satisfaction with the checking account relationship? How wide is satisfaction overall?  What specific features or aspects – such as customer service, pricing, or access channels – represent areas for possible improvement?
  • Should providers be concerned about converting the small segment of consumers who do not have checking accounts? What reasons or motivations drive this non-adoption?  Can this segment’s needs be met by alternative products?
  • What checking account pricing arrangements have been accepted by consumers? Is there still a wide perception of free checking in the market?  How receptive are consumers to alternative fees, minimum balances, or activity requirements for various checking features or benefits?
  • How should checking account design be tailored to specific customer segments?  Can checking account features, services, and benefits be “matched” to certain demographic, behavioral, or attitudinal traits?

Research Issues

  • Checking accounts are the heart of most financial relationships.  Today, depository institutions can offer an array of checking account products ranging from basic to more complex versions. Accounts can be designed and promoted for specific segments such as teens and students, while virtual checking accounts have been designed to appeal to millennials. Additionally, there are premium level checking accounts designed for high balance customers.  Mobile apps that link checking and savings accounts are also appearing. In addition, a variety of features can be provided including overdraft protection, account management tools, and rewards.
  • Checking account providers promote the convenience aspects of checking accounts and the ability to make deposits with a mobile device.  While the days of totally free checking may be behind us, many consumers have accounts that are fee-free but have balance and transaction activity requirements.  Free access to ATMs nationwide can be an extremely attractive checking account feature. Overdraft protection is an important aspect of checking accounts.
  • Providers now offer the ability to apply for checking accounts online, as well as features to encourage switching behavior.  While applying online is convenient, it also represents a missed opportunity for developing a face-to-face relationship.  For some consumers, traditional checking accounts may be a thing of the past.  As new types of accounts and features continue to appear, it is important for depository institutions to measure consumer behavior, attitudes, expectations, and needs. [F244]

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]

MARKETING PREPAID CARDS (Mar 2015)

Pricing Strategies and Revenue Opportunities
New Products, Services, and Features

Target Market Strategies

Key Finding from a Recent SYNERGISTICS Research Survey:

In SYNERGISTICS 2011 survey, The Future for Prepaid Cards, it was found that four in ten Internet households had purchased prepaid cards for personal use, having grown from one-fifth in 2008.  To what extent has this increased, decreased, or remained the same?

Highlights of the Study

This study examines the consumer perspective on prepaid cards.  It examines current usage and demand, new services and features, pricing, and marketing strategies.

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

 

Key Dates

December 19, 2014 – Charter fee/Intro pricing ends.
December 19, 2014 – Final acceptance of comments on questionnaire.
March 2015 – Project Report available.

 

Strategic Questions

  • To what extent do consumers purchase prepaid cards for their own use?  What is the share of market between proprietary prepaid cards that are only used at specific retailers and general-purpose prepaid cards that are used anywhere major cards are accepted?  How strong is the demand for general-purpose prepaid cards among nonusers?
  • What are the behavior patterns of prepaid card users in terms of frequency of usage, amount initially obtained on the card, purchase locations, and purposes?  To what extent are general-purpose prepaid cards reloaded with value?  What are the perceived benefits and drawbacks of prepaid cards?
  • Are general-purpose prepaid cards used as a substitute for other financial services – specifically checking accounts or credit cards – among certain segments of the market?   How wide is the potential for doing this?  Are prepaid card products offered by Walmart a factor in this behavior? How will increasing usage of prepaid cards affect usage of credit and debit cards?
  • How widespread is payment of various fees for acquiring and using general-purpose prepaid cards – such as set-up fees, monthly maintenance fees, ATM withdrawal fees, and reloading fees?  Are consumers willing to pay these types of fees?
  • What is the potential of prepaid cards for specialized applications?  What is consumer reaction to payroll cards?  Are other applications – such as insurance benefits, warranty claims, public assistance, and tax refunds – acceptable to consumers?
  • What is the impact of gift cards on the prepaid card market – from the perspective of both purchasing and receiving?   To what extent are gift cards reloaded with value and used on an ongoing basis?
  • What is the profile of the current and potential user segments for prepaid cards in terms of demographic and behavioral characteristics?   Are certain customer segments associated with reasons or purposes of usage – such as budgeting, travel, and checking or credit card substitution?

 

Research Issues

  • As the newest entrant into the payment card market, prepaid cards are receiving a great deal of attention.  Some of the attention is good; while some can be considered questionable or controversial. Usage of prepaid cards continues to expand as new products are announced on a regular basis.
  • At the same time, prepaid card pricing and features are fodder for legal and regulatory groups as well as others.  Marketing strategies often target the under-banked for prepaid card programs, but affluent consumers are also users of prepaid cards, particularly general-purpose prepaid cards.
  • Marketing prepaid cards is challenging due to the numerous types of cards as well as the variety of purposes for which the cards can be used.  Competition is intense, with major retailers such as Walmart, American Express and large banks as well as others entering the market.  Gift cards also fall under the prepaid card umbrella – further complicating marketing efforts.   How will increasing usage of prepaid cards affect usage of credit and debit cards?  This study examines the consumer perspective on prepaid cards to assist issuers in designing and marketing prepaid card products. [F230]