Mercator Blog

Credit Advisory Service Update - April 2019
Date: April 1, 2019
Brian Riley
Director, Credit Advisory Service

Welcome!

This Service’s first research report of the quarter, The 2019 Credit Card Data Book: Key Indicators of a Slowing Economy, projected slower growth in U.S. revolving debt. If January 2019 is any indication for the year, our forecast will be spot on as the metric moved slowly from $1.055 trillion to $1.058 trillion after the close of winter holidays from December 2018 to January 2019. The mature credit card market is likely near its peak, which makes attrition management as important as account acquisitions. We cover that point in a recently released Viewpoint titled Adding an Old Banking Feature to the Credit Card: The Case for Installment Lending. The focus of that research is on new offerings of an installment loan feature by American Express and by Chase. Amex’s Plan It Pay It and My Chase Plan are countermeasures to non-card lending from companies such as Affirm, and they provide a new feature that will help cardholders isolate large transactions and pay them off quicker.

If you have an American Express, Capital One, Chase, Citi, or Discover card in your wallet (as most of America does), the chances are that your account is not owned by those issuers but rather by a trust sold to investors, particularly if you have a good FICO score. Most asset-backed securitizations rely on FICO scores to give investors a sense of the portfolio risk, and more often than not issuers pool good-scoring accounts into trusts that get sold to institutional investors. The process of creating asset-back securities (ABS) is important for you to understand, whether or not your firm securitizes today. This is a way that top issuers can use their scale to decrease expenses. Read more about it in our research report Asset-Backed Securities: A Primer for Credit Card Managers, released by Mercator Advisory Group in February.
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Keep an Eye on Industry Trends in Real Time


So many hot topics, so little time. The payments industry is very lively these days. When we mentioned that 2019 would likely see consolidation, we did not expect the year to jump off to a start with two historic mergers, which can read about on PaymentsJournal. My colleagues, Raymond Pucci, talked about the Fiserv-First Data marriage here, and the FIS-Worldpay union here. It is only March, so expect an action-packed year ahead.

If you follow PaymentsJournal (PJ), you will find views on payment events every day. Here are our favorites published since the first of the year:

You can subscribe to PaymentsJournal here.
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See you in New Orleans

I will be speaking at Card Forum on May 22 on the never-ending saga of credit card rewards, in a session titled Credit Card Rewards: 7 Industry Issues & What to Do About It. We won’t be giving out spoilers, but even though rewards are alive and well, they are more costly than ever.
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Upcoming Research

Forthcoming research this year includes an update on the private-label credit card (PLCC) market, which is a very hot topic these days. Long-time player Synchrony made a disruptive move with its Home and Car credit cards that we think will rock the industry. Instead of a single-store plastic, users will be able to enjoy a PLCC card that can transact at many stores. Discover’s payment rails are used, but the product is not a general purpose card. More to follow.

We also plan to cover issuer-side card fraud, perhaps in a vendor review if you give us feedback that indicates interest. Other topics include our annual view on credit card profitability after the Federal Reserve reports to the U.S. Congress and our perspectives on European regulation and credit card interchange. Much more to follow.
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Stay in Touch!


2019 will certainly continue to be exciting. We surely have not seen the end of the merger frenzy and have a few views on ones we expect and others that probably won't happen but should. While we won’t share every detail we know, we are always happy to talk to Mercator Advisory Group members. If you haven’t set up time to talk shop yet this year, now is a good time. Either contact your account rep or contact me directly here.

Next stop, Second Quarter. By then, all of 2019’s credit write-offs will be in the collection work queues!

Brian

Brian Riley
Director, Credit Advisory Service
Mercator Advisory Group
781.419.1720
briley@mercatoradvisorygroup.com