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What’s Behind that Paper Shortage?

Jim Stewart

Four Things We’re Hearing

  • Online savings accounts revive
  • Card originations reach decade high
  • Credit card portfolios are healthy
  • Marketing spend at pre-pandemic levels

A three-minute read

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Online Savings Accounts Revive

  • After several years of declining savings account rates, APYs have reversed course, rising .20% - .25% in the past three months
  • Consumer interest has correspondingly increased with online search volume for "savings account" rising in the past six months
  • Epic recently surveyed 1,179 consumers to assess their attitudes regarding high-yield savings accounts

Card Originations Reach Decade High

  • The May 30, 2020 Epic Report highlighted the dramatic effect of the pandemic on credit card direct mail volume
  • Online search activity for the keyword “credit card” has also trended upwards since Q4 2021

Credit Card Portfolios are Healthy

  • The decline in card balances has reversed due to a combination of lower consumer paydown rates and increased spending
  • April's bankcard delinquency rate of 1.58% is lower than the April 2021 level of 1.67%
  • Following the relatively benign card asset quality environment of the past two years, Credit Suisse predicts a return to pre-pandemic credit loss rate levels by 2023

Marketing Spend at Pre-Pandemic Levels

  • The Epic Marketing Intensity Index (“EMII”), which measures financial services acquisition spending in the direct mail and online channels, shows that total spending has finally reached 2019 levels
  • Recent data from Comperemedia shows direct mail returning as the most prevalent channel for receiving new credit card offers, with the digital channel dominating applications
  • Consumer interest in personal loans for receiving new credit card offers, was rather sluggish during the pandemic, however recent months have seen a spike in online search activity
  • Although personal loan direct mail volume also recovered at a slower pace than credit cards, it too has recently increased with Q1 2022 up 56% from Q1 2021

Quick Takes

  • As noted in previous newsletters, paper shortages will impact mail volumes to some degree throughout 2022 – did you know that part of the issue was a union strike in Finland that closed paper mills and especially affected envelope production?  The good news is that the strike is over!
  • BNPL News
  •  Klarna
  • Klarna, the Swedish BNPL company, and Europe's most valuable startup with a recent $46 billion valuation, is raising up to $1B in new funding at a valuation in the "low $30-billion-range" – one third lower than the prior valuation
  • Klarna also announced it will lay off 10% of its staff
  •  Affirm
  • Debit+, a new Visa debit card from Affirm, allows consumers 24 hours to split eligible purchases into an interest-free loan repayable within four installments due every two weeks
  • Early results show the card fares best with Walmart shoppers buying groceries
  • First mortgage interest rates have recently jumped to levels in excess of 5% from the previous 3% range
  • First mortgage originations in Q1 2022 were down 44% from Q1 2021

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The Epic Report is published monthly, with the next issue publishing on July 9th.

Thank you for reading.

Jim Stewart
www.epicresearch.net

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