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From the September 2002 Issue of CardTrak |
Credit card solicitations have dropped off this year, falling from 2.2 billion in the first six months of 2001 to 1.6 billion in the first half of this year. Nevertheless, direct mail remains the king of credit card marketing. A new study by Maryland-based Vertis found that 48% of consumers said they learned about a credit card company via direct mail. Other sources include friend or relative (7%), at their bank (7%), special event/in-person promotion (4%), Internet (3%), or telemarketer (3%). Half the number of seniors said they read financial/credit card direct mail compared to Generation Y respondents (21% vs. 42%, respectively). When selecting a credit card, 22% of adults were attracted to money back incentives, while 19% liked to earn points for merchandise, airline tickets and hotel stays. Other incentives, such as a sign-up bonus or higher membership level, appealed to less than 10% of the adults. Vertis also found among credit card holders, that 51% pay off their balance in full each month, while 35% make partial payments and claim that their balance is reducing. Senior adults (81%) are more inclined to pay off credit card balances each month compared to Young Baby Boomers (42%) and Generation X and Y adults (39% for both). Vertis says 36% of adults surveyed said that they did not even own a credit card.
Credit card advertising has also trailed off sightly this year. Howevr, U.S. issuers spent $442.7 million on ads to promote credit card products during the first half of this year. VISA led the pack, shelling out $145 million while Capital One plunked down nearly $95 million over the first six months of 2002. VISA spent $93 million promoting consumer credit cards and $49 million advertising debit cards, according to CMR. MasterCard spent $73 million on consumer credit card advertising and about $4.6 million for debit card ads. MasterCard also spent $24 million promoting its Web site, "Exclusives" program, and its business cards. Meanwhile, American Express shelled out approximately $28 million on consumer credit card ads, in addition to $3.5 million to promote the "Delta SkyMiles" card, and $2.1 million on the "Blue" smart credit card, during the first half of 2002. Discover spent $21.5 million on credit card ads in the first and second quarter of this year. CMR said that overall advertising spending for all media was down 0.2% for the first half of 2002 compared to first-half revenues in 2001.
Email, which now produces about 3% of all new accounts, is becoming more surgical. This month, Experian introduced a new service which will enable credit card issuers to fine tune email solicitations based on credit risk. To take advantage of Experian's new "Email Prescreen," issuers provide to Experian their lists of prospect email addresses and their intended online offers. After credit information about each prospect is extracted from the company's nationwide database of more than 230 million credit-active consumers, they are segmented using up to 12 different levels of prescreen criteria to determine acceptable levels of risk according to each customer's wishes. On behalf of issuers, Experian then deploys the credit offer to the pre-approved prospects through the company's email center. When an email offer is returned without being delivered, Experian sends a printed offer via the post office to the prospect's physical address. Automatic tracking of responses allows up-to-the-minute availability of activity reports via a password-protected, remote access Web response portal, with the majority of responses coming within 48 to 72 hours post-launch. Experian says a recent test campaign using "Email Prescreen" to reach out to 650,000 online prospects enjoyed a 1.9% click through rate.
The nation's top consumer credit reporting firm is getting into mass email. Equifax this month announced the acquisition of Naviant, Inc. for $135 million. Naviant has an email database of more than 100 million unique permission-based addresses. The email lists include physical address, demographics and purchasing power on consumers who have given their consent to receive marketing information. Equifax says the deal will accelerate growth in Equifax's marketing services business and enable it to reach into new industries and further penetrate Naviant's 3,000 customers. The company also said the acquisition will provide a significant new distribution channel for Equifax's rapidly growing direct-to-consumer business.
Experian also introduced this month the first fully FCRA-compliant daily cross-sell campaign capability that enables lenders to identify and respond quickly to credit active customers in their portfolios has been launched by Experian. "Cross-Sell Triggers" enables users to identify credit-related activity initiated by their customers on a daily basis then respond by sending firm offers of credit within just 24 hours of notification. Key features include the use of daily inquiry and trade triggers coupled with credit scoring models and attributes to identify highly responsive, credit-active customers seeking additional credit products. The solution also includes running all triggered consumers through Experian's "Do Not Solicit" database to ensure appropriate consumers receive offers of credit. "Cross-Sell Triggers" has the additional capability of running multiple campaigns simultaneously. Last week, Experian introduced "Email Presecreen," a new service which will enable credit card issuers to fine tune email solicitations based on credit risk.
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| B2N BARRIERS |
The barriers to electronic payments across large, medium and small companies include the lack of information with payments and the perceived loss of check float, according to a new study. Currently, one seventh of all payments are accompanied by enough electronic remittance information for automated reconciliation. The survey, by The New York Clearing House, also found that across the revenue segments 65% of companies were "likely" to "certain" to adopt a service that integrated the remittance information with the payment. Results also show that while companies like using direct debits for collections, businesses do not like being debited by other companies as a form of payment. Instead, they prefer to control the timing and amount of payments. Many companies said they were reluctant to give out their account numbers, which is required to initiate electronic payments. The NYCH survey showed 38% of large revenue companies had experienced unauthorized debits to their accounts in the past six months.
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| CHECK VOLUME DOWN |
Checkwriting has been declining based on revised check volume data released by the Federal Reserve System in August. The FRS lowered its estimate of the number and value of checks written by American consumers, businesses and government agencies in 2000, suggesting check use may have peaked in the mid-1990s. The revised annual check volume in 2000 is 42.5 billion checks valued at $39.3 trillion compared to a previous estimate of nearly 50 billion checks, valued at $47.7 trillion. In 1995, a peak of 49.5 billion checks was reached, while the volume in 1979 was 32.8 billion checks. Check use as a percentage of retail noncash payments, which includes credit card, debit card, automated clearinghouse payments and other electronic payments, declined from 85.7% in 1979 to 77.1% in 1995 to 59.5% in 2000. The Federal Reserve System was initially released in November of last year. Based on the initial study, some industry consultants/newsletters projected a checkwriting peak in 2005
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| CARD HABITS |
Gay, lesbian, bisexual and transgender consumers carry a slightly higher balance on their credit cards and use their cards more on the Internet than non-gay consumers. According to a new survey, the typical gay and lesbian consumer carries a median credit card balance per card of $556 as compared to $374 for non-gay consumers. The study by Witeck-Combs Communications and Harris Interactive also found that GLBT consumers use their credit cards most frequently for these five activities: Internet purchases (30%), general shopping (27%), gas/fuel (21%), entertainment expenses (15%), and travel expenses (13%). Other findings: gay consumers were more likely than non-gay cardholders to have two or more of the following types of credit cards: VISA, MasterCard and American Express. On average, VISA is the most commonly held credit card brand among gay and non-gay consumers alike. The study was conducted online within the USA in late July and involved a nationwide cross section of 2,091 adults.
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| HOLIDAY OUTLOOK |
One research firm went out on the limb this month predicting a significant jump in consumer spending during the upcoming holiday season. Deloitte Research says its index forecasts a rise in spending from 2.5% in the first half of 2002 to a more robust 5.5% to 6.0% by year end. The firm says consumers are coming into a great deal of cash, based on various economic factors, and historically when consumers find themselves with this much additional cash, they spend it. The index draws on four indicators, including initial unemployment claims, real wage gains, taxes (personal income burden) and real home prices.
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