Mercator Blog

Should Payments Companies Be Worried About the Shrinking Middle Class?
Date: April 2, 2015
Ben Jackson
Director, Prepaid Advisory Service

Income inequality and the shrinking of the middle class in the United States have been hot political topics lately, and now there are signs that these issues are becoming business topics.

In a recent article in Colloquy, a publication focused on the loyalty business, author Lisa Biank Fasig notes:

“In short, organizations that target this shrinking segment are tasked with making their value propositions immediately relevant and attainable, or risk failure.”


Her article nicely covers a variety of approaches that companies are taking that use loyalty programs, rewards, and perks to hang on to customers. Along with this, the companies are working to win some of the hard-earned dollars of consumers who have fewer dollars to spend. The companies profiled in the piece are retailers and service providers, and financial services companies get a nod, though none stand out as shining examples.

The Colloquy article should serve as a wake-up call for banks, credit unions, prepaid card providers, and others who work with the shrinking middle class. People want to hang onto their middle class status and need more help than ever before in managing their money and credit.

In regard to retailers, restaurants, and hotels, Biank Fasig writes,

“For loyalty marketers managing in an unstable economy, this translates into a constellation of opportunities in high-value, but low-cost perks.”


Financial service providers should read the article and think about what kinds of high-value, low-cost perks might be useful for their customers and other consumers. Banking and other financial services have become commodity games in that the primary differentiator is often price. Finding ways to deliver value, whether it is gift cards, card-linked offers, or something simpler like a budgeting app, can help change customers’ minds when choosing an account or deciding whether or not to shift financial services providers or products.

Additionally, financial services providers should look for opportunities to increase the wealth of their customers. With their knowledge of the spending, savings, and borrowing habits of their customers, banks, credit unions, and other providers are in a unique position to attract the kind of customer they want. This is a concept that I will explore in future research. If you have questions, ideas, or quibbles with this idea, please contact me.

The Colloquy article can be found here.