As we continue through the second half of 2020 and the world adjusts to the ever-evolving situation surrounding COVID-19, the full economic impact is still uncertain. Every brand has been forced to reassess their strategy and direction within their industry to survive.
This deep dive into the finance sector is the first of an ongoing series. Stay tuned for more to come!
Since COVID-19 hit the US, CJ Affiliate has been monitoring how the virus has impacted various sectors, including the credit card industry. Within this subset of the Finance vertical some trends have strengthened or sped up, such as the growth of consumer debt and increased attention to the mobile landscape. Other trends have shifted or disappeared, such as unique rewards and “limited time offers” planned for this year. New trends have also risen, such as an increased focus on content and the deposits space for financial institutions.
Below, we look a few current trends that CJ has identified within the financial industry since March 2020.
Current Trends in the Financial Industry
As unemployment continues to remain high, many Americans are digging themselves deeper into credit card debt as they navigate murky financial waters. The number of people with credit card debt has increased to 47% from 43% since early March. About 28 million US adults have added to their credit card debt as a direct result from the COVID-19 outbreak. Millennials have been hit the hardest with 1 in 3 going into more debt due to the pandemic, compared with 1 in 5 Gen Xers and 1 in 6 Baby Boomers.
Balance Transfer (BT) cards will be at the forefront for users and issuers when the economy begins to re-start. Consumers will turn to BT offers to manage debt accrued during the pandemic. New credit card applications were down 40% in March 2020 as many issuers paused new customer acquisition channels. Although a lot of issuers pulled back on promoting credit cards during COVID-19, some issuers continued to push cards with strong BT offers in the affiliate space. BT cards will also be highly appealing to small business owners as they look for avenues to relieve the financial strain of COVID-19.
Many Gen Z and Millennial views on personal finance, the global economy, and future purchases have changed since the start of the pandemic. More than 80% of Gen Z and Millennials say the coronavirus crisis impacts their view of the economy. More than 50% of Gen Z and Millennials think the economy will bounce back to pre-coronavirus levels. 49% of Gen Z will change their purchasing behaviors in the future versus 53 % for Millennials. 46% of Gen Z plan on saving more of what they earn over the next five years versus 42% of Millennials.
COVID-19 has resulted in a massive increase in media consumption across all demographics. Over 80% of audiences in the U.S. shared that they consume more content since the outbreak. For business and finance articles/news specifically, there has been a 27% increase across all demographics with millennials leading the charge with a 35% increase. Searches for finance related content have increased more than 800% as personal finance and security are at the forefront of consumer’s minds. Many content-heavy publishers have noted increases in traffic across the board as their audiences are more engaged than ever.
Consumers have more access to understanding their credit scores and financial health amid the crisis. Three major credit bureaus have teamed up to help people keep an eye on their financial health during the coronavirus pandemic. Equifax, Experian, and TransUnion announced offered free weekly credit reports. With the ability to monitor their financial health weekly, this will ultimately affect what credit cards consumers qualify or apply for in the future. Out of COVID-19, CJ projects consumers to have stronger foundation in personal financial knowledge to grow their financial health.
Issuers have tightened underwriting rules because of the downturn in the global economy, with increased focus on winning prime consumers. As many issuers take on large losses, increased credit/loan risk, and prepare for the large surge in payment deferment, we anticipate many issuers may start to protect themselves from more credit exposure. Protective measures issuers may take on include (a) increase credit scores/ratings required and (b) increased fees and/or decreased card benefits.
The retail banking industry has been propelled into a digital-first mindset and consumers’ use of mobile and online banking in place of in-person visits has skyrocketed. There is a shift in behavior as customers who have historically not used digital tools are trying them in response to the changing availability of in-branch resources. Businesses and consumers will lean into contactless payments (i.e. mobile-based payments, digital wallets, etc.) as COVID-19 is fueling the online shift in the banking sectors with different payment preference across the globe. A study done early this year expected digital wallets to account for 52% of global ecommerce sales by 2023. This percentage is predicted to grow exponentially due to COVID-19.
Many issuers have temporarily added several “limited time offers” that focus around ‘at home’ themes of staying connected, food delivery, working/running a business remotely, and supporting small businesses. The shift in benefits to necessities is indicative of issuers shifting strategy away from travel and appealing to consumers’ needs in the current climate. Issuers are also providing consumers with annual fee credits, extending welcome bonus and elite status offers, and pushing back rewards expiration dates. Consumer spending has shifted dramatically as many are saving more and only spending in pertinent categories (groceries/food delivery, household essentials, home entertainment).
There has been a rise in demand for deposit accounts across all banks. With the current uncertain situation surrounding the pandemic, people want to hold onto as much cash as possible in their bank accounts due to financial insecurity. Many big banks are reporting a huge increase in their deposits account as of March 31st, 2020, compared to the previous quarter. JPMorgan Chase reported $832 billion in average deposits for 2Q20, up 20% YOY; Bank of America reported $811 billion in average deposits for 2Q20, up 15% YOY; and Citi North America reported $173 billion in average deposits for 2Q20, up 11% YOY. The banks are indicating various reasons for this growth including moving funds to federally insured accounts or customers drawing their existing credit lines and depositing the proceeds. This appears to be widespread as not only big banks are seeing this shift, some regional banks are also seeing this trend in their deposits products.
Recommendations for Financial Advertisers
What to do with this wealth of information? Here are some key recommendations that financial advertisers should consider:
Consider Your Audience
It will be imperative for banks and financial institutions to take actions with Gen Z and Millennials in mind as they are key parts of the industry’s future consumer base. Both generations are closely watching how financial institutions are treating customers, businesses, and employees. Cater your experiences and benefits to this changing consumer base and their evolving behavior (see next recommendation!)
Invest in Content Publishers
As every generation is relying on their devices for information and guidance during this pandemic, this creates a huge opportunity for advertisers to engage a captive audience and invest in content publishers to help consumers understand how to better control their financial destiny and which credit cards are best for them to apply for. This will help issuers ensure that the consumer that is applying for their credit card is better qualified.
Pay Attention to Mobile
Issuers need to ensure that they are focusing on mobile exposure with publishers as more people are spending more time on their mobile devices.
Highlight Relevant Offers
This is a key opportunity for issuers to highlight benefits at the top of the marketing offer bullets and consider working with non-traditional financial publishers who promote these categories with their member base.
Highlight Relevant Products
The increased focus on deposit and savings products is a prime opportunity for financial issuers and banks to promote these products within the affiliate channel and for publishers to target their member base with these products.
Stay tuned for additional articles from this finance series!