Poaching, Not Growth, Is in the Cards for Consumer Payments Industry

Press Release
Feb 8, 2012
New York, February 8, 2012 -- In the days before the economic new normal, the nation's rising disposable income combined with the displacement of cash and checks served to grow the market for payment products. But for the foreseeable future, according to Packaged Facts' just-released study on Consumer Payments in the U.S.: Trends Driving the Credit, Debit, and Prepaid Card Industries, organic market growth is just not in the cards.

With household incomes declining even as healthcare costs and student loan debt are rising, the overall payments pie is shrinking, prompting payment providers to base profit growth strategies on taking market share from their competitors. And with that strategy comes a renewed focus on marketing to specific demographics, according to David Sprinkle, publisher of Packaged Facts. Through target marketing, players in the consumer payments industry can optimize the potency of each product-differentiating feature, mastering new payment and communication channels, and building loyalty programs based on cost sharing with merchants to maintain or grow market share.

For example, while mail remains the most commonly used bill pay channel regardless of household income, higher-income households are the heaviest users of online and automatic bill pay. Among consumer credit cards, VISA has its slimmest lead over MasterCard in the case of the highest income earners ($150K or more). Channel preferences similarly vary by levels of educational attainment. Non-high school graduates are the heaviest users of in-person bill pay, while those with graduate degrees are the heaviest users of online payment. But everything is not that simple: as household education levels increase, use of mail and automatic bill payments both increase. Hispanics are the most likely to pay their bills in person, while Asians are the most likely to pay their bills online.

At the same time, as Consumer Payments in the U.S. emphasizes, payment products are used differently by the generational cohorts. These generational cohorts also use payment channels differently, and many of their behaviors and preferences are driven not only by age and payment experience but again by income and education levels.

The accumulation (or lack thereof) of life and financial experiences gives each generation its own voice, a unique receptivity to marketing messages and preferences for technology and channels. These differences create significant challenges but also creative opportunities for marketers who target cohorts with the style and substance to which each responds.

Millennials, for example, may well be the first generation in America that is truly downwardly mobile. On average, younger workers are earning less than previous generations when they were the same age. They are also facing high rates of unemployment. Add to that $1 trillion in outstanding student loans--a 900% increase over 1997. Not surprisingly, then, only 37% Millennials have or use credit cards, compared with 62% of adults overall.

Nonetheless, on which credit card are Millennials disproportionately likely to charge it? American Express, which doubles its market share among affluent households. Youth too has its privileges.

For further information, please visit: http://www.packagedfacts.com/Consumer-Payments-Trends-6497843/.

About Packaged Facts -- Packaged Facts, a division of MarketResearch.com, publishes market intelligence on a wide range of consumer market topics, including consumer goods and retailing, foods and beverages, demographics, pet products and services, and financial products. Packaged Facts also offers a full range of custom research services. To learn more, visit: www.packagedfacts.com. Follow us on Facebook, LinkedIn and Twitter.

David Sprinkle, publisher
dsprinkle @packagedfacts.com


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