A NEW LOOK AT THE CONSUMER CREDIT MARKET (Nov 2017)

Cards, Lines, and Loans

Secured and Unsecured Lending

Traditional vs. Alternative Lenders

Key Finding from a Previous Report:

In the 2014 Phoenix Synergistics survey, Revitalization of the Consumer Credit Market, findings revealed that only a minority have at some point received educational material or other information from a financial institution about credit topics – such as building a good credit history or managing debt.To what extent have educational efforts on the part of lenders  improved, and how valuable is it to consumers to receive this type of information?

Research Description and methodology

This study examines consumer usage of credit cards, auto loans, home equity credit, and secured and unsecured personal loans and lines of credit.  Usage of traditional and alternative lenders and the need for credit education are also addressed.

National Internet Survey – The survey will include 1,500 internet interviews with consumers age 18 or older.

Key Dates

August 18, 2017 – Final acceptance of client comments on the questionnaire.

August 18, 2017 – Charter fee date.

October 2017 – Initial results available.

November 2017 – Project Report available.

Strategic Objectives

  • Profile the current credit activity of consumer households in terms of credit products and services used, providers, and outstanding balances.  Assess consumers’ attitudes and perceptions regarding positive or negative outlooks about credit usage.  Measure experience with alternative credit providers.
  • Measure credit needs among consumer households in the next year.  Determine purposes for which credit will be needed.  Ascertain what credit products consumers expect to use for various needs.
  • Examine consumers’ credit card activity – including brands/types used, frequency of usage, and charge volume.  Gauge the extent to which credit cards are used strictly as a transaction device versus a revolving credit source.  Assess competitive factors such as balance transfer activity and proprietary in-store financing.
  • Assess consumer experience with a number of credit products.  Profile automobile financing/acquisition – including loans, leases, cash, or other forms of credit.  Examine usage of personal lines of credit and personal loans – encompassing secured vs. unsecured products, purposes for using, reasons obtained instead of other credit, and outstanding balances. Determine the purposes for which home equity credit – revolving lines and fixed loans – is used by homeowners.
  • Investigate the consumer shopping process for credit.  Evaluate important product features, useful sources of information, expected first steps or contacts, and preferred application channels.
  • Examine consumer experience with and reaction to measures of creditworthiness – including traditional credit (FICO) scores, credit reporting services, and scores provided by FIs.  Determine preferred sources of credit information or education.
  • Determine which demographic, behavioral, or attitudinal traits are best for segmenting and targeting the market for consumer credit services.  Evaluate which segments represent the best future potential for expanding credit relationships.

Research Issues

  • The U.S. credit markets appear to have returned to some semblance of “normality” and there is a more positive outlook for growth than has existed for a number of years.  At the same time, interest rates are gradually increasing.  With this in mind, providers must consider marketing strategies and tactics, as well as product configurations and the positioning of their credit products and services – including credit cards, auto loans, home equity credit, and personal loans and lines of credit. Important provider and product features must be identified that will add value and differentiation for consumers in the credit shopping process. Recently, a number of  lenders have been actively promoting secured and unsecured personal loans and lines of credit.   When consumers today need credit, they have a myriad of choices available.
  • Providers must consider that the variety of information and tools for credit education and debt management may result in smarter shoppers who scrutinize credit products more than ever before.  The role and impact of the wide array of online and mobile information channels and sources – including shopping and comparison sites or apps, blogs, and social media of all types – must be taken into accounts.
  • The availability of alternative providers as a credit source for consumers – such as online-only providers, peer-to-peer lenders, and providers serving higher risk segments – is a potentially disruptive market development that must be assessed.  Traditional banks, credit unions, and lenders of all types must understand the needs, wants, and perspectives of credit users going forward.