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

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/territories

Note: Balances as of February, 2012; volume based on the trailing four quarters ending 1Q2012
2


Today’s Agenda

 Perception of Economy
 How Consumers Intend to Spend
 Card Usage
 Credit
 Debit and Prepaid
 Generational Marketing
 Q&A

3


Perception of the Economy

4


Discover US Spending Monitor Results
2010 - 2012

Apr-10 Apr-11 Apr-12 June-12

Discover US Spending Monitor Index 91.5 89.4 96.7 90.7
US 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 year

Source: Discover US Spending Monitor, May 2012
5


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


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%

7


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%

8


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%

9


Key Takeaways

1. 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-members

2. 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


How Consumers Intend to Spend

11


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%


12


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%

13


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 '12

14


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%

15


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%

16


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%


17


Key Takeaways

1. Both credit union members and non-members demonstrate a
strong intent to spend on discretionary entertainment

2. 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


Credit Usage

19


Always/Almost Always Pay Entire Balance
3-Month Period
60%
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%
CU
20%
Non-CU
10%

0%

Source: Millward Brown, 2012 20


Revolver – Usually Pay Less Than
Entire Balance
3-Month Period
60%
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%
CU
20%
Non-CU
10%

0%



Concerned About Credit Card Interest
Rate Rising
3-Month Period
60%
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%
CU
20%
Non-CU
10%

0%



Don’t Trust Any Credit Card Company To
Treat Me Fairly
3-Month Period
30%
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%
CU
10%
Non-CU
5%

0%



Key Takeaways

1. 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 declined

3. There is an opportunity to leverage the reputation credit
unions enjoy with consumers by positioning themselves as
trusted financial consultants

24


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 Cards

Source: TNS’ Consumer Card Study 2007 - 2011
25


Five Most Important Reasons Non-Credit Union
Card is Primary

35.0%
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 Bank

26


Five Most Important Reasons Credit Union
Card is Primary

30.0%
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 Fee

27


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


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%

29


Have You Ever Redeemed Credit Card
Rewards?

82%
Yes
70%

16% Redemption =
No engaged
28%
cardholders

Don't 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


Key Takeaways

1. Consumers regularly report that rewards are key to driving
payment use indicating that cardholders are engaged –
cashback is most popular

2. To target transactors you need to have a competitive and
meaningful rewards program to drive member usage and build
long term loyalty

3. Consider adding marketing programs offering additional
bonus rewards points to encourage specific transaction
behavior

31


Debit and Prepaid Usage

32


Growth Expectations Long term trend:
debit, credit &
prepaid will
Percent of Consumer Payment Transaction Volumes by Type of continue to drive
Payment growth
100% 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


Household Card Ownership Trends
Credit card ownership
80% 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% 2010
20% 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


Number of Times Each Month Respondents
Used Debit Cards
30%
27%

25% 23%
24%

21%
20%

15%

10%

5% 3%

0%
Don't Use 1 to 4 5 to 10 10 to 19 20+

Source: 2011 TSYS Consumer Debit Research Survey
35


Payment Type Used Most Often and Where
Groceries, Gas and
Discount stores are
70% best categories for
63%
rewards & loyalty
60% 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


Consumers That Own a Prepaid or Payroll Card

20%
18% 18%
18% 17%

16%
14% 13%

12%
10% 9%

8%
6%
4%
2%
0%
Underbanked Gen Y Gen X Boomers All
Consumers

Source: 2012 Javelin Strategy & Research
37


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


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
41
39 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


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 40

A 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 4

Base: 1,021 internet users aged 18+ who have purchased prepaid or gift cards in the last 12 months
Source: Mintel 40


Key Takeaways

1. Long term trends indicate that debit, credit and prepaid will
continue to drive card growth

2. 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 cards

3. Leverage partnerships with retail merchants to offer prepaid or
gift cards at a local credit union branch or in the merchant
location

41


Generational Marketing

42


Generational Marketing

The method of marketing to consumers in a way that
appeals to the unique needs and behaviors within
each generation – emphasize impact over reach

43


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


Baby Boomers

 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


Marketing Example

46


Generation X

 Born between 1961 and  Remember Value
1981  Emphasize Lending
million Gen Xers (30% of  Be Authentic
population)  Technology is Important
 Formed by technology
 Define themselves as
individuals

47


Example (Spirit of America FCU)

48


Generation Y

 Who They Are  How You Reach Them
 Born between 1982 and  Leverage Technology
2003  Focus on Value
million Gen Years (26% of  Personal Loan Offers
population)
 Culturally diverse and
technology driven
 Media savvy, educated
and financially smart

49


Marketing Example

50


Social Media Sites Visited At Least Once Per
Month
80%
71%
70% 62% 64%
58%
60%
50%
40% 2010
30% 2011
20% 13% 12% 10%
10% 8% 7% 9%
4% 2% 2%
0
0%

Source: Mercator Advisory Group CustomerMonitor Survey Series 2010, 2011
51


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


Key Takeaways

1. Change your marketing strategy based on the generation you
are targeting - communicating effectively between generations
is essential when doing business today

2. Identify key generational segments within your member base –
understand the intricacies of each group and focus your
marketing, advertising and branding efforts to reach them

3. Speak their language - create a marketing plan that speaks to
each generation in a way they will understand

4. Use technology – no matter which generation you are
targeting, choose the right technology to reach your audience
(Facebook, Twitter, YouTube, blogging)

53


Questions?

For more information contact:
Kevin O’Donnell, Vice President
Discover Network
Phone: 1-866-847-2344
Email: creditissuer@discover.com

54


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

Recommended

Recommended

More Related Content

What's hot

What's hot (11)

Viewers also liked

Viewers also liked (20)

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

Similar to Study of Debit, Credit & Prepaid Programs. Member Preferences and Marketing Segmentation by Generation (Credit Union Conference Session Presentation Slides) (20)

More from NAFCU Services Corporation

More from NAFCU Services Corporation (20)

Recently uploaded

Recently uploaded (20)

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