Abstract
Boston, MA - July 30, 2009 -- The broad effects of today's economic
environment and how people feel about the utilization of credit could
represent the beginning of a new, different, and persistent credit card
issuing environment. Consumers have been modestly affected by reduced access
to credit on their credit cards, but have nonetheless taken broader actions to
reduce their credit card usage.
In the midst of payment card networks and issuers releasing quarterly
earnings, Mercator Advisory Group has released data focused on consumer
behaviors and opinions as a leading indicator for shifts in consumer payment
product demand. Mercator Advisory Group's newest report The Consumers and
Their Credit Cards: A Cooling Relationship Threatens Post-Recession
Outlook explores changing consumer attitudes and behaviors with regard to
credit cards. This report is the first in a series of four topical consumer
survey reports to be released by Mercator that examine payment card and
banking topics.
The report is based on survey questions that examine the direct impact of
cardholders' reduced access to card-based credit including reduced credit
lines, denied applications, and spending reductions attributed to reduced
credit. Also examined is changing tender preferences driven by changes in
household finances and credit.
Explored in the report are critical concerns for issuers and other
stakeholders as they seek to make sound business decisions that enable them to
identify existing opportunities and develop strategies around an economic
recovery. Every environmental challenge presents opportunities, and Mercator
Advisory Group highlights these. In particular, there may be some real
cardholder loyalty benefits for issuers who serve their current cardholders
well during these difficult times.
Highlights of the report include the following:
- In today's recessionary environment, declining access to card-based credit
is widespread, but not all actions are negative. Of the 27% of respondents
noting they applied for new credit cards, about 6 in 10 were successful.
- Among those who experienced an adverse outcome (line reduction,
involuntary account closure, denied application), 15% of all respondents
indicate they delayed or cancelled purchases (including vacations, major
purchases, daily essentials, or small business purchases) due to reduced
credit access.
- Nearly two-thirds of respondents can be classified as "payment changers,"
indicating they have taken specific actions to reduce credit card use,
including purchases shifting to debit, prepaid and charge cards or cash.
- Women are more likely than men to make changes in payment card use.
- When consumers take actions to reduce credit card use, a vast majority
indicate those specific actions are likely to be permanent, lasting beyond the
recession.
- Credit card issuers may have an opportunity to leverage consumer loyalty
to existing card relationships that carry them through the recession.
“With this survey fielded at what might turn out to be the nadir of
consumer sentiment in the recession, cardholders may be feeling empowered by
turning away from credit and saying they will do so permanently. Future
behavior could definitely depart from consumer expectations, but as a
referendum on the appeal of credit cards today, the consumer point of view is
certainly bearish,” Ken Paterson, VP for Research Operations at
Mercator Advisory Group and the author of the report comments. “This
makes understanding consumer sentiment and behavior critical to card issuers
and other stakeholders, as they seek opportunities today and plan for growth
when the economy improves.”
One of the 14 Exhibits included in this report
The report is 33 pages long and contains 14 exhibits and is
based on a national sample of 1,012 online consumer panel survey responses
completed between May 28 and June 4, 2009.
Subscribers to the Mercator Consumer Payments Survey Research Series will
receive three additional topic reports from this survey. These will focus on
consumer usage and purchase behavior with regard to prepaid cards, consumer
perceptions of payment card security and potential to use mobile devices for
payments, and consumer perceptions of banking and card loyalty programs.
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