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Study of Debit, Credit & Prepaid Programs. Member Preferences and Marketing Segmentation by Generation (Credit Union Conference Session Presentation Slides)
 

Study of Debit, Credit & Prepaid Programs. Member Preferences and Marketing Segmentation by Generation (Credit Union Conference Session Presentation Slides)

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The Discover Spending Monitor is a quarterly report that polls over 8,000 consumers on a monthly basis. This survey details the spending intentions of consumers and reports trends about their outlook ...

The Discover Spending Monitor is a quarterly report that polls over 8,000 consumers on a monthly basis. This survey details the spending intentions of consumers and reports trends about their outlook of finances and their perception of the economy. It is unique because it is the only survey of its kind to measure the behavior of credit union members. Lately, there has been a spike in consumer confidence, which opens the door for credit unions to grow and market their products. So how sharp is this increase in consumer confidence? How can your credit union take advantage of this opportunity? This presentation will provide a detailed analysis of current trends and point out how your credit union can take advantage of the improving economy. Learn more at: www.nafcu.org/discover

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    Study of Debit, Credit & Prepaid Programs. Member Preferences and Marketing Segmentation by Generation (Credit Union Conference Session Presentation Slides) Study of Debit, Credit & Prepaid Programs. Member Preferences and Marketing Segmentation by Generation (Credit Union Conference Session Presentation Slides) Presentation Transcript

    • 2012 Study of Credit, Debit and Prepaid Trends, Member Preferences and Marketing Segmentation by Generation Kevin O’Donnell, VP Credit Issuance 1©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Discover Overview Payment Services  $113Bn volume  30+ issuers +8%  $143Bn volume  4,300+ issuers +19%  840,000+ ATMS  100+ countries  $29Bn volume  80+ franchises +9%  185 countries/territoriesNote: Balances as of February, 2012; volume based on the trailing four quarters ending 1Q2012 2 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Today’s Agenda Perception of Economy How Consumers Intend to Spend Card Usage  Credit  Debit and Prepaid Generational Marketing Q&A 3 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Perception of the Economy 4 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Discover US Spending Monitor Results 2010 - 2012 Apr-10 Apr-11 Apr-12 June-12Discover US Spending Monitor Index 91.5 89.4 96.7 90.7US Economy Improving 34% 26% 33% 29%Personal Finances Improving 23% 21% 27% 23% The Monitor Index saw a significant gain year-over-year in April – However, recent economic news resulted in a 6 percentage point drop in June The outlook on the economy and personal finances showed a similar decline from April of this yearSource: Discover US Spending Monitor, May 2012 5 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Non-Members Rate The US Economy 16.0% 14.0% 13.7% 12.3% 12.6% 12.0% 10.2% 10.0% 9.5% 9.2% 8.4% 7.9% 8.0% 7.1% 7.4% 7.2% 6.4% 6.1% 6.0% 4.0% Good 2.0% Excellent .0%Source: Discover US Spending Monitor April 2012 6 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Credit Union Members Rate The US Economy Up 9 percentage points from same time in 2011 20.0% 17.6% 18.0% 16.0% 13.5% 14.0% 11.6% 12.0% 10.7% 10.1% 10.0% 8.7% 8% 8.1% 8.0% 6.9% 6.4% 6.6% Good 6.5% 5.6% 6.0% Excellent 4.0% 2.0% .0%Source: Discover US Spending Monitor April 2012 7 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Non-Members Rate Personal Finances 40.0% 36.1% 35.0% 32.1% 33.3% 31.4% 31.3% 31.9% 30.5% 30.5% 29.6% 30.0% 28.2% 28.1% 27.1% 25.2% 25.0% 20.0% 15.0% Good Excellent 10.0% 5.0% .0%Source: Discover US Spending Monitor April 2012 8 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Credit Union Members Rate Personal Finances 45.0% 41.9% 40.5% 41.7% 40.1% 38.6% 40.0% 37.8% 37% 36.7% 38% 37.5% 34.8% 35% 35.0% 32.4% 30.0% 25.0% 20.0% Good 15.0% Excellent 10.0% 5.0% .0%Source: Discover US Spending Monitor April 2012 9 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Key Takeaways1. Consumer perception of the economy and their personal finances is improving among both members and non- members, with member confidence trending consistently higher than non-members2. As consumers gain confidence, there is an opportunity to grow across all product lines i.e., cards, personal loans, car loans, etc.3. Build on growing consumer optimism with targeted ads and promotions that focus on major personal purchases such as vacations - discretionary spending is another strong category that consumers are ready to spend e.g., sporting events 10 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • How Consumers Intend to Spend 11 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • How Non-Members Plan to Spend on Household Expenses Next Month 60.0% 53.8% 53.3% 51.4% 51.9% 51.6% 50.0% 49.9% 50.5% 46.2% 47.5% 47.0% 46.4% 44.7% 44.9% 42.7% 42.1% 42.0% 44.8% 44.0% 40.0% 40.6% 36.5% 36.3% 37.2% 37.9% 36.7% 37.4% 35.5% 30.0% Same 20.0% More 10.0% .0%Source: Discover US Spending Monitor April 2012 12 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • How Credit Union Members Plan To Spend on Household Expenses Next Month 70.0% 60.0% 60.9% 57.0% 55.5% 53.0% 53.0% 51.4% 50.0% 46.6% 47.6% 50.1% 48.1% 49.7% 50.1% 47.0% 44.9% 44.3% 43.4% 42.4% 41.1% 40.0% 39.0% 40.1% 38.5% 38.4% 37.6% 35.7% 33.1% 30.0% 30.0% Same 20.0% More 10.0% .0%Source: Discover US Spending Monitor April 2012 13 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • How Non-Members Plan To Spend on Discretionary Entertainment Next Month 45.0% 40.9% 40.9% 40.0% 39.8% 38.2% 37.5% 36.5% 36.4% 37.2% 36.2% 35.0% 34.3% 33.9% 35.2% 33.0% 30.0% 25.0% Same 20.0% 15.0% More 11.0% 10.8% 11.4% 10.0% 10.5% 10.3% 10.8% 9.7% 8.3% 8.6% 9.1% 7.4% 8.1% 6.1% 5.0% .0% Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr 11 11 11 11 11 11 11 11 11 12 12 12 12Source: Discover US Spending Monitor April 2012 14 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • How Credit Union Members Plan To Spend on Discretionary Entertainment Next Month percentage Up 10 points year- 50.0% over-year 46.4% 45.0% 42.7% 41.0% 40.9% 40.0% 39.2% 38.4% 37.5% 37.4% 37.3% 35.9% 36.2% 35.0% 34.3% 32.4% 30.0% 25.0% Same 20.0% More 15.0% 12.9% 12.5% 11.7% 11.6% 10.0% 8.7% 9.2% 10.1% 9.0% 9.1% 9.4% 9.4% 8.1% 6.9% 5.0% .0%Source: Discover US Spending Monitor April 2012 15 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • How Non-Members Plan To Spend on Major Personal Purchases Next Month 45.0% 40.0% 38.7% 37.9% 38.2% 35.9% 36.0% 36.3% 35.0% 34.5% 32.7% 33.1% 33.2% 31.7% 31.1% 30.0% 30.6% 25.0% Same 20.0% More 15.0% 14.5% 15.1% 14.8% 12.6% 12.6% 11.8% 11.8% 12.3% 11.3% 11.5% 10.0% 10.2% 10.8% 9.8% 5.0% .0%Source: Discover US Spending Monitor April 2012 16 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • How Credit Union Members Plan To Spend on Major Personal Purchases Next Month 45.0% 42.5% 42.0% 41.4% 40.0% 40.0% 37.7% 37.2% 36.8% 35.0% 35.4% 34.9% 35.5% 33.5% 34.0% 34.4% 30.0% 25.0% Same 20.0% More 16.0% 16.3% 15.3% 14.4% 15.0% 14.6% 13.6% 13.2% 14.7% 12.8% 12.5% 11.0% 11.0% 11.9% 10.0% 5.0% .0%Source: Discover US Spending Monitor April 2012 17 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Key Takeaways1. Both credit union members and non-members demonstrate a strong intent to spend on discretionary entertainment2. The credit, debit and prepaid card space is where consumers may look to execute their discretionary spending intentions – leverage merchant funded offers and promotions. Your networks, processors and partners may be sourcing these for you at no charge – maximize all of your relationships.3. Credit unions should create partnerships with local movie theatres, restaurants, ice cream stands, etc. to give members discounts when visiting at these types of merchants. For example, free appetizer with dinner or free popcorn at a local movie theatre. This encourages credit unions to promote the shop local concept and keep money within the community. 18 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Credit Usage 19©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Always/Almost Always Pay Entire Balance 3-Month Period60% 56% 56% 56% 57% 57% 55% 55% 55% 55% 55% 55% 55% 53% 53% 54% 54% 52% 52% 51%50% 50% 50% 48% 46% 47% 44% 45%40%30% CU20% Non-CU10%0%Source: Millward Brown, 2012 20 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Revolver – Usually Pay Less Than Entire Balance 3-Month Period60% 56% 55% 54% 53% 52%50% 50% 50% 48% 49% 47% 48% 46% 47% 46% 44% 44% 45% 45% 45% 45% 45% 45% 45% 44% 43% 43%40%30% CU20% Non-CU10%0% Source: Millward Brown, 2012 21 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Concerned About Credit Card Interest Rate Rising 3-Month Period60% 53% 52% 53% 52% 53% 51%50% 49% 49% 48% 50% 48% 49% 49% 49% 49% 47% 47% 47% 47% 47% 46% 45% 43% 42% 41%40%30% CU20% Non-CU10%0% Source: Millward Brown, 2012 22 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Don’t Trust Any Credit Card Company To Treat Me Fairly 3-Month Period30% 26% 26% 26% 26% 26%25% 25% 25% 25% 25% 25% 24% 24% 24% 25% 23% 22% 22% 22% 22% 22% 22% 22% 21% 21%20% 20% 20%15% CU10% Non-CU5%0% Source: Millward Brown, 2012 23 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Key Takeaways1. Both members and non-members are slightly more inclined to “pay as you go” with more of them indicating they prefer to pay balances in full and less likely to revolve – does your credit union have a strategy and product, particularly a rewards product, to offer to transactors?2. CU members distrust of credit card companies remains virtually unchanged, while non-member distrust has declined3. There is an opportunity to leverage the reputation credit unions enjoy with consumers by positioning themselves as trusted financial consultants 24 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Average Number of Non-CU Credit Cards In Wallet Opportunity to be 3 top of wallet with 2.6 members 2.5 2 1.5 Non-Member 1.1 1 CU Member 0.5 0 Number of CardsSource: TNS’ Consumer Card Study 2007 - 2011 25 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Five Most Important Reasons Non-Credit Union Card is Primary35.0% 30.2%30.0%25.0%20.0% 16.8%15.0%10.0% 8.8% 8.3% 6.7% 5.0% 0.0% Offer Only Card I Long Time No Annual Issuer Is Rewards Have Customer Fee Primary BankSource: TNS’ Consumer Card Study 2007 - 20011 26 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Five Most Important Reasons Credit Union Card is Primary30.0% 25.6%25.0% 21.9%20.0%15.0% 11.2% 9.8%10.0% 6.4% 5.0% 0.0% Only Card I Issuer Is Low Rate Long Time No Annual Have Primary Bank Member FeeSource: TNS’ Consumer Card Study 2007 - 20011 27 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • What Is The Most Important Reason You Use Your Primary Rewards Card? 49% Earn more rewards 39% Prefer the reward 21% type 23% Almost half of all 12% Lower APR 13% rewards cardholders Earn rewards from 8% desire to earn more my favorite brand/company 10% rewards – what 6% marketing programs Bank that offers me a choice of rewards 8% does your credit 5% union have in place Larger credit line 5% offering additional bonus points earned Other 2% for specific behavior or purchases? Feb 2012 (n=197) Feb 2011 (n=173)Cardbeat Consumer Research & Analysis by Auriemma Consulting Group, Inc., U.S. Edition, 2012:Volume 18, Issue 2 28 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • What Type of Rewards Can You Get on Your Credit Card? Cash Back 11% Discounts/Free Products 8% 31% Air Miles Hotel Rooms 8% Donate to Charity 13% Other 15%Source: TNS’ Consumer Card Study 2007 - 2011 29 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Have You Ever Redeemed Credit Card Rewards? 82% Yes 70% 16% Redemption = No engaged 28% cardholders Dont 2% Remember 2% Feb 2012 (n=249) Feb 2011 (n=223)Cardbeat Consumer Research & Analysis by Auriemma Consulting Group, Inc., U.S. Edition, 2012:Volume 18, Issue 2 30 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Key Takeaways1. Consumers regularly report that rewards are key to driving payment use indicating that cardholders are engaged – cashback is most popular2. To target transactors you need to have a competitive and meaningful rewards program to drive member usage and build long term loyalty3. Consider adding marketing programs offering additional bonus rewards points to encourage specific transaction behavior 31 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Debit and Prepaid Usage 32©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Growth Expectations Long term trend: debit, credit & prepaid will Percent of Consumer Payment Transaction Volumes by Type of continue to drive Payment growth100% 6% 7% 8% 9% 90% 14% 11% 10% 7% 80% 21% 24% 70% 20% 22% Prepaid 60% 17% Check 50% 27% 21% 29% Credit 40% Cash 30% Debit 43% 20% 34% 39% 31% 10% 0% 2009 2011(E) 2013(E) 2015(E)Source: Debit Processing Solutions: 2012 Review, Mercator Advisory Group estimates 33 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Household Card Ownership Trends Credit card ownership80% down 10% in past 3 74% years – a direct impact 68%70% 66% 64% of the recession 63% 60%60%50% 41%40% 34% 2009 33%30% 201020% 2011 11% 11% 11% 9% 8%10% 4% 6% 6% 3% 4% 4% 0%0% Debit ATM GP GP GP PLCC No Card Card Only Prepaid Credit Charge Card Card Card Source: Mercator Advisory Group CustomerMonitor Survey Series, 2009–2011 34 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Number of Times Each Month Respondents Used Debit Cards30% 27%25% 23% 24% 21%20%15%10%5% 3%0% Dont Use 1 to 4 5 to 10 10 to 19 20+Source: 2011 TSYS Consumer Debit Research Survey 35 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Payment Type Used Most Often and Where Groceries, Gas and Discount stores are70% best categories for 63% rewards & loyalty60% programs 50% 50%50% 47% 46% 46% 46% 40% 38% 38%40% 36%30% 25% 25% 26% 23% 21% Debit 19%20% 17% Credit 13% 13% 11% 11%10% 8% Cash 2%0%Source: 2011 TSYS Consumer Debit Research Survey 36 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Consumers That Own a Prepaid or Payroll Card20% 18% 18%18% 17%16%14% 13%12%10% 9% 8% 6% 4% 2% 0% Underbanked Gen Y Gen X Boomers All ConsumersSource: 2012 Javelin Strategy & Research 37 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Forecast of Prepaid Financial Service Products Load Value Placed on Prepaid Financial Services Products, 2007–2014E in Billions$180.0 $167.2$160.0$140.0 $116.9$120.0$100.0 $81.8 $80.0 $57.2 $60.0 $40.8 $40.0 $28.6 $19.5 $20.0 $12.0 $0.0 Source: Mercator Advisory Group 38 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Women Most Likely to Both Give and Receive “How many gift or prepaid cards have you purchased in the past 12 months?” Purchased, September 2011 Received, September 2011 Male Female Male Female 56 52 53 46 4139 39 34 7 8 8 6 4 3 2 2 1-5 6-10 11 or more None 1-5 6-10 11 or more None Base: internet users aged 18+: 973 male; 1,027 female 39 Source: Mintel ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Where cards are purchased Opportunity to Where cards were purchased in past 12 months, September 2011 partner with retail % merchants A retail store at which the card is to be used 51 A grocery or drug store 40A store that sells cards for many issuers (other than a grocery or drug store) 28 A restaurant/coffee shop 25 Online 20 A movie theater 11 A spa/salon 7 Bank branch 4 Kiosk/vending machine 1 Other 4Base: 1,021 internet users aged 18+ who have purchased prepaid or gift cards in the last 12 monthsSource: Mintel 40 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Key Takeaways1. Long term trends indicate that debit, credit and prepaid will continue to drive card growth2. Leverage prepaid products to initiate relationships with younger members that will translate into deeper and more profitable relationships - women, the underbanked, Gen Y and Gen X segments are strong targets for prepaid cards3. Leverage partnerships with retail merchants to offer prepaid or gift cards at a local credit union branch or in the merchant location 41 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Generational Marketing 42©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Generational MarketingThe method of marketing to consumers in a way thatappeals to the unique needs and behaviors withineach generation – emphasize impact over reach 43 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Swing/WWII Generation Who They Are How You Reach Them  Born between 1925 and  Emphasize Savings 1942  Reward Loyalty  There are currently 27 million Matures (9% of  Relationship Building is population) Important  Known for sacrifice,  Remember Investments devotion to family/country and old fashioned values  Defined by WWII 44 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Baby Boomers Who They Are How You Reach Them  Born between 1943 and  Keep It Simple 1960  Emphasize Savings &  There are currently 64 Lending million Boomers (21.5% of population)  Focus On Retirement  Faded idealists from 1960’s – tend to be impatient and self- centered  Defined by work 45 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Marketing Example 46 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Generation X Who They Are How You Reach Them  Born between 1961 and  Remember Value 1981  Emphasize Lending  There are currently 89 million Gen Xers (30% of  Be Authentic population)  Technology is Important  Formed by technology  Define themselves as individuals 47 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Example (Spirit of America FCU) 48 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Generation Y Who They Are  How You Reach Them  Born between 1982 and  Leverage Technology 2003  Focus on Value  There are currently 78 million Gen Years (26% of  Personal Loan Offers population)  Culturally diverse and technology driven  Media savvy, educated and financially smart 49 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Marketing Example 50 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Social Media Sites Visited At Least Once Per Month80% 71%70% 62% 64% 58%60%50%40% 201030% 201120% 13% 12% 10%10% 8% 7% 9% 4% 2% 2% 0 0% Source: Mercator Advisory Group CustomerMonitor Survey Series 2010, 2011 51 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Profile of Social Media Website Visitors 90% 85% 80% 75% 73% 72% 77% 74% 70% 69% 70% 70% 63% 65% 60% 50% 40% 30% 20% 10% 0%Source: Mercator Advisory Group CustomerMonitor Survey Series 2011 52 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Key Takeaways1. Change your marketing strategy based on the generation you are targeting - communicating effectively between generations is essential when doing business today2. Identify key generational segments within your member base – understand the intricacies of each group and focus your marketing, advertising and branding efforts to reach them3. Speak their language - create a marketing plan that speaks to each generation in a way they will understand4. Use technology – no matter which generation you are targeting, choose the right technology to reach your audience (Facebook, Twitter, YouTube, blogging) 53 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute
    • Questions? For more information contact: Kevin O’Donnell, Vice President Discover Network Phone: 1-866-847-2344 Email: creditissuer@discover.com 54 ©2012 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute