Three Things We’re Hearing
- Growth for near-prime cards
- Consumer checking account preferences
- Uneven growth in various loan...
Three Things We’re Hearing
- Activity in the HELOC market
- Card mail volume continues to climb
- Ed refi poised for growth
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Activity in the HELOC Market
- As noted in a previous Epic Report, home equity lines of credit (HELOCs) fell out of favor following the 2008-2009 housing crisis as both consumers and lenders were scarred by the negative effects, resulting in current HELOC balances stalling around half of the pre-recession level
- We have seen an increase in recent market activity from both consumers and lenders, fueled by increased home values and banks’ desires for organic growth
- We recently surveyed consumers who acquired a new HELOC about their preferences and experiences
Card Mail Volume Continues to Rise
- Overall credit card mail volume has fully recovered and is now at 2019 levels
- Capital One has taken a firm lead as the top card mailer in the past six months, with 12-month rolling volume 75% higher than number two Citi
- Online search traffic for “travel credit cards” fell dramatically in April 2020, however consumer interest has steadily tracked upward since spring 2021
- While mail volume for credit cards bounced back and volume for education lending never really dropped, mail volumes for personal loans, deposit products, and HELOCs are still well below pre-pandemic levels
Ed Refi Poised for Growth
- With student loan payment deferrals resulting from the CARES Act and federal loan payment holiday, consumers are enjoying extra money in their pockets and are perhaps a bit less likely to refinance student loans
- Lenders are responding to this inertia with an avalanche of new perks and promises to try to grab market share before CARES expires in January
- One result has been a steady decrease in the “lowest advertised rates” by many issuers
- Additionally, issuers are offering:
- payment holidays of their own, such as SoFi’s “no payments until February”, and
- cash-like incentives, such as Citizens’ $500 Amazon gift card, SoFi’s $350 cash offer, and Splash’s $25 Amazon gift card offer just for checking your rate
- With the rate wars at an all-time high, SoFi is offering a rate match coupled with a $100 incentive
- Despite the CARES Act implications, direct mail is still highly competitive with lenders sending 75MM pieces through July 2021, down 30% vs. 2020, driven by reduced volume from SoFi; meanwhile, other large lenders have continued to invest in incremental volume
- While remaining a niche product, education refinance lending is less competitive than most and, over the past several years, has shown a continuing high level of asset quality
Quick Takes
- Big BNPL news as Affirm and Amazon announced a new partnership
- Affirm’s stock shot up on the news, however the Amazon payment space is going to be busy with its Chase co-brand card, Synchrony private label card, gift cards, direct debit, pay-with-points, post-payment installment options from Citi and others, and other cards
- While benefitting from the “network effect”, with millions of additional users added to their platform, Amazon is a notoriously aggressive negotiator and Affirm’s margins will likely be thinner than is typical
- Some analysts predict that BNPL will ultimately settle at around 3% market share in the US
- American Express and Goldman Sachs led the 2021 J.D. Power U.S. Credit Card Satisfaction StudySM – Discover was just behind Amex among large issuers, but Goldman ran away with the Midsize Issuer category
- Barclays announced its purchase of the $3.8 billion Gap card portfolio from Synchrony, significantly increasing the size of its $20-something billion portfolio and strengthening its already strong position in the co-brand market
- As consumers have paid down debt over the past 16 months, their credit scores have improved accordingly – FICO reported that the average FICO score has reached 716, up 8 points in just a year, with those in the subprime 550-599 range up 20 points
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