Industry: Banking

Banking and Payments Intelligence Report
December 2023

Financial Malaise Forces Bank Customers in the U.S. to Revamp their Holiday Plans 

While the United States economy experienced virtually an across-the-board rally in November, financial sentiment among bank customers in the U.S. remains stubbornly low, and it is leading to many re-thinking their 2023 holiday plans.

According to JD Power, the percentage of U.S. bank customers that are financially healthy^[1] has fallen to an all-time low. As a result, some customers are pumping the breaks on their plans to spend and travel this December. 

Financial Erosion Continues                         

Customers’ financial health has sunk to an all-time low. Just more than one-fourth (28%) of respondents are financially healthy, while 48% fall into the vulnerable category. Those numbers paint a bleaker picture than two months ago, when the previous grim benchmarks were established.

Customer sentiment regarding financial health status, stress levels and empowerment to improve one’s financial situation all remain stubbornly low, as a sense of malaise has begun to affect a wide swath of consumers.

Santa Maybe

With the holiday season upon us, 35% of customers say they plan to spend less on holiday shopping than last year. That is down from 40% a year ago, but still reflects a significant number of customers looking to cut costs by skimping on the holidays. Just 17% said they plan to spend more than a year ago. Somewhat confoundingly, the overextended population (29%) is the more likely to say they plan to spend more than they did in 2022.

Despite persistent price concerns and eroding financial health, the proportion of customers who budget for the holidays is not increasing over time. Nearly one-third (31%) said they do not budget for holidays spending, a rate that included 36% of the vulnerable population and 32% of the stressed population. 

Home for the Holidays

Customers appear to be content to remain in their own homes for the holidays, as 39% said they do not plan to travel during the season. That’s in line with two years ago (41%), but it’s worth nothing that the 2021 season still included widespread lingering concerns about the pandemic, a variable that is likely not a factor with the bulk of customers anymore. 

For those that have decided to take a holiday trip, the majority are changing the way they travel. Nearly one-fourth (23%) of customers that intend to travel are changing their destination to somewhere local and/or less expensive, while 18% say they are changing when they travel, and another 18% say they are changing how they travel (i.e., driving instead of flying).

Early Financial Resolutions

Just like a month ago, it seems like there is a disconnect between the positive financial reports from the press and the muted reality that many customers in the U.S. are living. Holiday spending and travel are usually good indicators of how healthy most Americans are, and these data make that a sobering thought.

Still, as the calendar prepares to turn to the new year, there are plenty of opportunities for banks to help their customers navigate their way through a tenuous time of year. For example, budgeting solutions are desperately in need for the bulk of the population. Customers that find that this assistance can be beneficial now may develop healthier habits, which can help banks forge more meaningful relationships and customers into better financial situations. 

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in November 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

 

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

 

^[1] JD Power measures the financial health of any consumer as a metric combining their spending/savings ratio, creditworthiness, and safety net items like insurance coverage. Consumers are placed on a continuum from healthy to vulnerable.

There’s a clear and urgent need to win over emerging affluent customers. It’s not just about providing regular banking services anymore; it’s about giving them personalized financial advice and guidance. In this second webinar of the Stop Selling, Start Advising series, dedicated to shifting the mindset from sales to advisory services, Jennifer White, a Senior Director of Banking & Payments Intelligence at JD Power, and Evan Siegel from eGain delve into the strategies for capturing the business of the emerging affluent. They reveal the financial challenges the emerging affluent face and their unique needs in today’s banking landscape.

How can you train your frontline teams to provide effective advice strategies to engage this highly desired audience?

Who Are the Emerging Affluent and Why Should You Target Them?

In order to successfully market to this specific group, it is crucial to understand who the emerging affluent are and what drives them. This demographic includes individuals under 40 with an annual household income exceeding $80,000. According to JD Power data, 9 out of 10 emerging affluent customers are interested in receiving proactive advice from their primary bank. However, despite 60% of this group recalling receiving advice or guidance in the past year, only 30% feel that the advice they received was beneficial to their needs.

Why Add Advice Delivery to Your Retail Banking Strategy?

Understanding the significant impact of not providing financial advice to this group: A bank’s failure to provide advice can negatively impact customer satisfaction, retention, and loyalty by up to 390 points.

What Can You Learn with Powerful Consumer Insights? 

• Financial advice preferences among the emerging affluent: This group wants to receive advice on topics such as in-depth financial reviews, tax planning, and home-related matters to help them prepare for major life events.
• Top channels for effectively reaching and engaging with emerging affluent: While email communication is the top preferred choice,  in-branch experiences remain valuable to them—strategically balance in-branch and digital channels to increase engagement proactively.
• Understand the crucial role of personalized financial advice and guidance in creating a positive customer experience: Banks and credit unions can win relationships with emerging affluent customers and compete against larger banks and fintech companies by enabling resources to address customers’ need for valuable financial guidance fully.
• Harness the power of AI-Powered superior advice and solutions: Take the guesswork out by delivering advice by creating tailored recommendations, making the process efficient, consistent, and compliant.
• Using consumer research to enhance your strategy: To create positive customer experiences, it’s important to consider customer segmentation, channel strategy, banker rewards and scorecards, compensation, hiring profiles, HR model adjustments, marketing strategy, and differentiation from competitors.

To learn more about capturing the business of the emerging affluent and the strategies discussed in this conversation, listen to the full webinar by clicking the link below.

View Full Webinar

Banking and Payments Intelligence Report
October 2023

American Bank Customers Express Troublingly Low Confidence in their Financial Status

Despite the inflation rate in the United States dropping more than 5 percentage points in the past year, the financial health scores of banking customers in the U.S. are the lowest they’ve been in a 12-month span.

According to the latest JD Power data, the percentage of customers that are financially healthy has declined to its lowest point in a year. What’s more, customer satisfaction with their financial situation is the lowest it has been in 40 waves since this data tracking began.

Now, as more customers find themselves in precarious financial situations, retail banks need to start addressing how to help customers navigate their current troubles without compromising their future financial goals.

All-Time Lows

There has been a concerning dip in overall financial health. Less than one-third (29%) of respondents say they are financially healthy, while 46% say they are vulnerable. The number of financially healthy customers matches a 12-month low, while the 46% of vulnerable customers is the highest mark in the past year.

Customer sentiment regarding financial health status, stress levels and empowerment to improve their financial situation also fell to a 12-month low, with satisfaction is at the lowest mark since data tracking began. It’s a discouraging trend as customers entered the final quarter of 2023.

The Anatomy of Customer Savings

As customers watch their financial health deteriorate, there is a renewed focus on savings outside of employer-sponsored retirement accounts. Nearly one-half (44%) of customers say their non-retirement funds are in either a savings or higher yield account at their primary bank, while 24% say an investment/wealth management firm, and 15% say a secondary bank. Additionally, (41%) say they do not have any savings outside of a retirement account.

Predictably, the vulnerable population (60%) and those under 40 (48%) are the most likely groups not to have any non-retirement savings, a stunning 37% of bank customers over the age of 40 and 18% of those who make more than $100,000 annually say they do not have any non-retirement savings.

Emergency in Name Only

While retirement may seem like a far-off aspiration to customers that are just trying to make it from month to month, emergency savings funds may be a more realistic target. Bank customers often think of their savings in buckets and while 41% say they do not have any non-retirement savings; they are more likely to say they have some form of an emergency savings account. Only 10% of bank customers say they do not have an emergency savings account, while 44% have their emergency funds in a savings account at their primary bank.

While the intended use of these funds may be for an emergency, some customers have had to pull funds from them to pay for everyday expenses. More than one-fourth (28%) of customers say they’ve used their emergency savings account in the past 90 days to pay for gas, food or rent. This helps explain why customers do not view these accounts as being a long-term savings fund. 

More than one-third (36%) have transferred money into these types of accounts in the past 90 days, and 30% have checked the interest earned on their account, which may imply an opportunity for banks to reach out to their customers with incentives or other high-yield options to help grow these funds all while hoping to stave off any rate shopping these customers may be inclined to do. 

Surviving Now, Preparing for Later

This month’s data illustrate how harsh economic conditions can linger for months long after the initial crisis is over. While most analysts see inflation and its corresponding complications as an issue of the past, many banking customers in the U.S. are still grappling with the aftereffects. 

As customers look to move forward and try to find ways to safeguard against another bout of turbulence in the future, they are turning their eyes towards savings and how to best optimize these funds when they’re still trying to dig themselves out of a hole. Banks could ingratiate themselves to customers by helping in this regard, actively reaching out with tools, advice and options that would help in both the short and long term. Those banking institutions that can forge more meaningful customer relationships will be less vulnerable to rate and shopping and deposits leavings leaving, too. 

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in September 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

Banking and Payments Intelligence Report
October 2023

Reasonable Repayment Terms Drive BNPL Usage

It’s been several years since financial services upstarts reimagined buy now pay later (BNPL) as a point-of-sale (POS) payment method. Since then, this once-obscure way of transacting has been placed front and center at the checkout by merchants worldwide, and 28% of U.S. consumers now say they’ve used it at least once in the previous 90 days. 

But who, exactly, are these BNPL customers and why are they choosing this form of payment over countless other options? While many reports have suggested that BNPL has been most attractive to financially vulnerable consumers who are already overextended on their credit cards, the real BNPL customer profile is decidedly more nuanced. In fact, according to findings from the JD Power 2023 POS Choice Satisfaction Study, BNPL is attracting consumers from across the financial health spectrum, and most consumers are drawn to it for the same primary reason—they like the repayment terms.

Repayment is Top of Mind

Both credit cards and BNPL allow consumers to make purchases they may not be able to pay for immediately. However, differences in consumer perceptions about repayment terms help explain why BNPL is attaining prominence at the checkout. One-third (33%) of consumers indicate a primary driver for using BNPL is “repayment terms are reasonable,” more than any other factor and significantly more than the 6% of consumers who say it’s a primary reason they use credit cards.

Having reasonable repayment terms may also explain the second most common reason consumers use BNPL: budgeting/avoiding overspending and debt. One-fourth (25%) of consumers indicate they use BNPL because it is helpful for budgeting, while only 8% say the same about credit cards.

As one JD Power survey respondent wrote, “[My BNPL plan] is easy to use. There are no complicated terms. It does exactly what it says it will. It’s split into four payments…and that’s that. No tricks, gimmicks, or little details lurking.”

BNPL Isn’t Just for Those Who Are Financially at Risk

Industry watchers have been rightfully concerned about the potential for BNPL to make it easy for consumers to add to their already bloated debt loads. Fifty-five percent (55%) of U.S. consumers are currently at risk of being unable to cover their basic financial needs according to the August JD Power U.S. Polaris Pulse report. Rising costs and increasing debt burdens are affecting people’s ability to pay, and proliferating BNPL loans could worsen matters.

Unsurprisingly, these at-risk consumers are more likely to use BNPL than others. According to the JD Power data, 32% of consumers at risk of being unable to cover their basic financial needs used BNPL in the previous 90 days; this is higher than the 28% usage rate among the total population.

However, these consumers are not alone in using BNPL at the POS. Nearly one-fourth (23%) of consumers who can cover their basic financial needs also use BNPL. Like their at-risk peers, they are drawn to the repayment terms and budgeting benefits, but also BNPL’s low cost of use. They appear to use BNPL to purchase out of preference rather than necessity, an observation likely attributable to many at-risk consumers as well, given the relatively low loss rates on BNPL loans industry wide.

Financially Healthy Customers are Happiest with BNPL

Compared with their at-risk peers, financially healthy consumers also have higher overall satisfaction with BNPL brands and are more likely to be repeat users.

In the JD Power 2023 BNPL Satisfaction Study, administered simultaneously with the POS Choice Study, financially healthy consumers had an overall satisfaction score of 704 (on a 1,000-point scale) with BNPL brands. At-risk consumers, on the other hand, averaged 577.

Financially healthy consumers are also more likely to use BNPL again. More than half (61%) indicated they’d used BNPL more than once in the previous 90 days. This was 5 percentage points higher than the percentage of at-risk consumers who had used it more than once.

While the study results reveal that overall satisfaction scores and reuse rates vary significantly between BNPL brands, financially healthy consumers are happier and more likely to reuse on average. These findings indicate that BNPL has even more room to grow if lenders make targeted improvements and further accentuate dimensions of their offerings that consumers are more satisfied with.

Where Lenders Can Help

Despite using BNPL for its reasonable repayment terms, consumers want lenders to do more. They indicate that the reasonableness of terms is more important than other dimensions of the overall BNPL experience. Yet, consumers have lower satisfaction with those terms than with less important dimensions, such as the security of their account information.

BNPL lenders should do more to explain and administer their repayment terms clearly and without any surprises, particularly for consumers who are financially at risk. The study also reveals that some BNPL lenders have more work to do than others as satisfaction with the lowest-rated brands was significantly lower than the highest-rated brands.

And, not to be forgotten, other dimensions of the BNPL experience also matter to consumers. Differences between lenders vary significantly across these dimensions as well, indicating targeted opportunities exist for each lender to make improvements that drive even more satisfaction, loyalty and demand for BNPL.

Find out More

This Banking and Payments Intelligence Report is based on responses from the JD Power 2023 POS Choice Satisfaction Study and the JD Power 2023 BNPL Satisfaction Study, which included 45,768 and 4,004 responses, respectively. It is authored by Miles Tullo, Managing Director of Banking and Payments. Please contact us at the numbers below to connect with Mr. Tullo or to learn more about the underlying research.

 

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

Banking and Payments Intelligence Report
September 2023

 

Even as Economic Hope Increases, American Bank Customers Remain Worried about Rising Cost of Living

As the summer begins to wane and banking customers in the United States start to look toward the final quarter of 2023, some are taking heart in the burgeoning signs of economic improvement. 

According to the latest JD Power data, financial health scores  have remained stable for months, and customers say they have been given hope by lowering inflation, wage increases, and a robust job market.

Still, some customers remain discouraged. One in five said they do not see any signs of hope, and many are still concerned that the rising cost of living and an inflated housing market will force them to accumulate more debt and, in some cases, delay retirement.

The New Baseline

There has been no significant change in overall financial health. Nearly one-third (32%) of respondents are financially healthy, while 44% are vulnerable.

 

 [1] JD Power measures the financial health of any consumer as a metric combining their spending/savings ratio, creditworthiness, and safety net items like insurance coverage. Consumers are placed on a continuum from healthy to vulnerable.Customer sentiment regarding their financial health status, stress levels, and empowerment to improve their financial situation are mostly unchanged since the beginning of the summer as well.

 

Hopes and Fears

While overall sentiment remains unchanged, customers expressed an array of concerns that they have about the economy. The most common worry (21%) is the rising cost of living, not including housing or healthcare. That was consistent across all segments. 

Not having enough money to retire (9%), the rising cost of renting a place to live (9%), incurring more debt (6%) and not being able to reduce existing debt (6%) are also prevalent fears.  
 

 

Customers didn’t express total gloom and doom, though. Nearly one-fifth (17%) said they are heartened by lowering inflation, while 8% said wages have increased in their respective field of work and 7% said there are a high number of job openings.

Somewhat troubling is the 25% of customers for whom none of the options provided offered any hope. The most financially unhealthy—and customers over age 40—were the most likely to express hopelessness.

Money on the Move

As customers contend with these mixed sets of emotions, some continue to move deposits from their primary bank accounts. Deposit movement proportions are staying constant month over month, however the percentage of deposits moved changes with greater frequency. 

 

Interestingly, these deposits are not necessarily being moved to high yield accounts (HYAs). While awareness of HYAs is increasing over time, there are fewer accounts of this type being opened. What’s more, fewer customers are moving from one HYA to another to chase rates, and fewer are saving automatically into their HYAs. As banks try to discern where the deposits are going, these trends illustrate a need for banks to reach out to their customers to increase engagement and, ultimately, keep more deposits in-house.

Personalizing the Path

This month’s data is a mixed bag of optimism and malaise, and the variance underscores the importance of personalized solutions. The economic landscape in the U.S. is currently akin to a Rorschach test: customers are interpreting hope and fear through their own individual lens. As a result, banks must be proactive in tailoring not only their outreach, but their tools and assistance to each individual customer.

The benefit of this personal engagement is that customers’ future actions become more predictable, with banks being able to better anticipate the next need of their customer before they go looking at another institution. Banks can’t simply rely on broad swaths to improve their customer satisfaction. While the economy is in a holding pattern, they’ll need to be proactive about helping customers read the tea leaves and take the next steps.  

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in August 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

Media Contacts
Brian Jaklitsch; East Coast; 631-584-2200; [email protected]
Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

Banking and Payments Intelligence Report
August 2023

 

American Bank Customers Trying to Make Inroads in Paying Down Debt, Even as Inflation Recognition Increases

Compared with this time last year, banking customers in the United States must feel at ease. All financial indicators seem to indicate that inflation is waning, the Dow Jones Industrial Average is up nearly 1,000 points year over year. Finally, it appears customers have a chance to breathe, right? Not quite.

According to the latest JD Power data, even as economic indicators improve, customer response is not showing a slowdown in the effect of higher prices. Nearly two-thirds (64%) of consumers postponed a bigger purchase in the past month due to lingering inflation, compared with 48% in October 2021, and the rate of customers who said the cost of goods is increasing faster than their income reached a six-month high.

Still, customers are trying to course correct from the past 18 months of financial volatility. Bank customers are trying to use some newly found wiggle room at the checkout counter to help pay down any debt they accrued to keep their finances afloat. Unfortunately, most are doing it on their own, without the help of their financial institutions or card issuers. 

Inflation Fatigue

There has been no significant change in overall financial health. Nearly one-third (31%) of respondents are financially healthy, while 44% are vulnerable.

Despite inflation continuing to ease, the overall level of inflation recognition among customers rose sharply to 70%—the highest mark in the past six months. There was an increase in all customers segments when asked if the price of goods is increasing faster than their income and, surprisingly, the biggest increase was among health customers (8 percentage points). 

With the current inflation rate hovering close to 3% (down from more than 8% a year ago), these numbers may be a cumulative effect, suggesting fatigue among bank customers.

Budgeting Assistance

To help customers through this malaise, banks have begun to be more proactive in offering budgeting assistance. Overall, 46% of banking customers say their bank has proactively reached out to them about budgeting assistance. That number increased to 65% among customers under age 40, and 71% of customers that are classified as financially overextended. 

The most common occurrences of banks offering budgeting assistance were ads on their website or mobile app (19%); a mailer about budgeting assistance (16%); directed customers to where budgeting tools are located on their website or mobile app (16%); and offered incentive to customers to encourage use of their budgeting tools (12%).

Paying Down Debt

Some customers have managed the 2022 inflation explosion by taking on more debt, and many are now trying to take steps to dig out of these deficits Three-fourths (75%) of customers indicate they have paid down debt in the past 12 months, while 33% are not aware of any credit card services to aide in this quest. 

When asked how customers are paying down debt, 30% said they have stopped adding new debt (a strategy likely aided by easing inflation). More than one-fourth (26%) said they have cut expenses and used the extra money for repayment, and 18% said they have found a new source of income (18%). Nearly one-fifth (19%)  said they are only paying their minimum due.

What’s noteworthy is that many customers are pursuing this debt repayment without any professional advice. Less than 10% are getting professional advice about their repayment. When asked what specific services card issuers offer to help in debt repayment, 43% said they were not aware of any service to manage debt. The rate was highest among customers over age 40 (41%) and customers that are stressed (39%).

This seems like a lost opportunity for banks and card issuers to not only improve relationships with their customers but forge a deeper level of trust, particularly among younger customers and those who are currently struggling financially. That’s because, when prompts do occur and customers act, the outcomes are largely positive. 

Lending a Hand

While the macro-economic landscape is improving, the ripple effects of the past 18 months will continue to show up in customer sentiment. Some bank customers have gotten creative to bridge the gap, and it’s clear that many are now making strides to get back on solid ground.

As they do, both banks and card issuers could earn plenty of goodwill by recognizing these goals and being even more proactive about helping customers achieve them. Customer outreach can build trust in both financial assistance tools and a bank or issuer’s overall brand. That trust will likely result in loyalty and increased satisfaction over time. As the storm eases, customers will remember who helped them rebuild. Now is the time to forge that bond.

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in July 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

 

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

Banking and Payments Intelligence Report
July 2023

 

Why Apple Pay Later is Gaining Market Share So Quickly—And Who Should be Concerned

The entire buy now pay later (BNPL) industry was put on notice when Apple announced the launch of Apple Pay Later in March. The new BNPL offering allows users to split purchases into four payments over six weeks with no interest or fees. 

And while it has only been a few short months since its release, a recent JD Power survey of 8,000 consumers shows how quickly Apple is making its presence in the market known.

Strong Out of the Gate

According to JD Power survey respondents, Apple Pay Later has been used by more consumers than established brands such as Sezzle and Zip since its launch. Nearly one-fifth (19%) of BNPL customers used Apple Pay Later in its first three months. PayPal was still the most-used BNPL brand over the same period (39%), with Afterpay (33%) as the next-most used brand.

The average Apple Pay Later user tended to be more financially healthy than most other BNPL customers, potentially giving it a more sustainable user base than its competitors. That said, Apple did attract a higher percentage of overextended users vs. other brands in its early days, which may have resulted from existing BNPL users’ willingness to try a new payment option from what they consider a trusted brand.

Leveraging the Apple Name

It should come as no surprise that Apple was able to gobble customers up from BNPL competitors almost immediately. Even after a tough 2022, the Apple brand is valued at $297.5 billion, making it the second most valuable brand in the world.

The company is known for consistently delivering quality technology products that customers love, as seen in other JD Power studies. Customers report relatively high satisfaction with new Apple products when compared to solutions from companies with decades of experience in the same industry.

With its BNPL solution, Apple continues strengthening its financial services catalog. But the company’s power doesn’t just come from its brand name. It also has a global network and vast resources to help it enter new markets seamlessly.

Scaling Quickly

Apple has some sizable advantages over its BNPL competitors, who had to attract users and build merchant acceptance one at a time. Apple was able to instantly tap its army of Apple Pay users and existing global acceptance footprint to create instant scale.

The company immediately made Apple Pay Later available to millions of potential customers when it launched in March. That’s because Apple Pay Later can be used wherever Apple Pay is accepted, including over 85% of U.S. retailers, making it easy for consumers to access the service.

From a technological standpoint, Apple Pay Later can be directly managed within Apple Wallet, available to any customer with a compatible iPhone, iPad, Apple Watch, or Mac. The company will also integrate the BNPL solution into its app store, which saw more than 650 million average weekly visitors in 2022.

A New Crop of Customers

The research also suggests that Apple may be attracting first-time customers who otherwise may never have considered BNPL as their preferred payment method.

JD Power survey responses indicated that early adopters of Apple Pay Later were more skeptical of BNPL. They were more likely to agree with the sentiment that “BNPL lenders are predatory.” They also responded with a lower-than-average agreement with the statements “BNPL options are helpful to consumers” and “BNPL is an option I wish I always had when buying things.” 

This suggests many Apple Pay Later users may not have used BNPL through another provider before. Apple may be leveraging its strong brand image and easy-to-use solution to attract BNPL users who would never have otherwise considered it a viable payment option.

Taking a Bite Out of the Competition

Of its competitors, PayPal and Zip users were likelier than users of other BNPL brands to try Apple Pay Later. Seventeen percent of survey respondents who paid with PayPal most often and 17% who paid with Zip most often during the period said they tried Apple Pay Later as well. 

Apple’s ability to attract shoppers who skew healthier and more skeptical of BNPL options may be most problematic for PayPal, which has traditionally attracted similar users. Meanwhile, Zip has a higher proportion of young customers who may be more likely to move to Apple Pay Later because of their affinity for Apple-branded products.

Ultimately, no other BNPL company currently compares with Apple’s brand recognition, technological cachet, and network effects. Even PayPal, a traditional payments juggernaut with a large base of active BNPL users and a brand valued at $75 billion, has its work cut out to withstand Apple’s entry into this space. Time will tell if Apple’s growth in BNPL is fueled more by new users or migration of existing users from other brands but, either way, the tech-giant-turned-fintech is off to a conspicuous start.

Find out More

This Banking and Payments Intelligence Report is based on responses from 8,000 consumers in the United States and was fielded in May and June 2023. It was authored by Miles Tullo, Managing Director of Banking and Payments. Please contact us at the numbers below to connect with Mr. Tullo or to learn more about the underlying research.

 

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

 

Neobanks and direct banks are redefining the traditional banking experience by offering convenient and personalized services. However, these innovative institutions are facing a challenge in the form of a decline in account origination.

Despite these significant gains in customer satisfaction, the number of new customers opening direct bank accounts declined 2% this year, according to the JD Power 2023 U.S. Direct Banking Satisfaction Study^SM. The decline in new customer volume is most pronounced (-6%) among neobanks, a subset of the online banking sector that consists of fintech companies that offer online banking services through a partnership with an established bank.

Watch Now

To overcome this hurdle and achieve strategic growth, it is imperative for neobank and direct banking leadership teams to adopt a client-centric strategy with a focus on client segmentation. In the short video, Paul McAdam, senior director of banking and payments intelligence at JD Power reveals changes in top reason that drive account origination.

Actionable Insights

Neobank and direct banking leadership teams must address the decline in account origination by adopting a client-centric strategy. Client segmentation plays a vital role in this endeavor, enabling banks to tailor their offerings and experiences to different customer segments. The insights provided by JD Power’s Direct Banking Study offer a valuable resource to inform decision-making and drive strategic growth. By embracing client segmentation and leveraging custom research, neobank and direct banking leadership teams can position themselves for success in the evolving banking industry.

Connect with a JD Power Banking and Payments Intelligence expert.

Contact Us

In an increasingly digital world, understanding consumer payment preferences has become vital for organizations striving to stay ahead of the curve. Recognizing this, JD Power, has expanded our consumer payments research to include four new integrated studies:

• Point of Sale Satisfaction Study
• Debit Card Satisfaction Study
• Buy Now Pay Later Satisfaction Study
• Digital Wallets Satisfaction Study

The results of this research shed light on the evolving landscape of consumer payments, emphasizing the need for organizations to develop effective point-of-sale strategies to capture and retain cardholders, foster organizational growth, and drive payment innovation.

Watch Now

Discover the in-depth details on the new JD Power Consumer Payments Satisfaction Study powered by 47,000 consumers. we invite you to watch our exclusive video.

Client-Centric Strategies

JD Power’s research underscores the critical role of point-of-sale strategies in capturing and retaining cardholders. With the payment landscape evolving rapidly, organizations must adapt and optimize their in-store and online payment experiences to cater to consumer preferences. By embracing innovative and customer-centric point-of-sale strategies, businesses can foster growth and cultivate long-term customer loyalty.

Armed with a deeper understanding of consumer preferences, businesses can proactively develop strategies to meet evolving needs, enhance customer satisfaction, and drive financial performance. Furthermore, this research acts as a springboard for innovative payment solutions, encouraging organizations to explore new technologies, partnerships, and business models that propel the industry forward.

Gain firsthand access to the compelling data insights consumer payment preferences with vast sample size, ensuring the inclusion of a wide range of demographic groups, geographical locations, and socio-economic backgrounds. Connect with a JD Power Payments Intelligence expert.

Contact Us

Banking and Payments Intelligence Report
June 2023

Debit Card Security Takes Spotlight as Point-of-Sale Payment Options Proliferate

“Debit or credit?” Not too long ago, the question was a ubiquitous refrain from store clerks nationwide. If asked today, the question would be more complicated. That’s because U.S. consumers have more choices than ever when checking out—and the list may soon grow again. In addition to the litany of credit cards, debit cards, digital wallets, and buy now pay later options, pay-by-bank schemes may finally begin to scale in the U.S. with the introduction of the Federal Reserve’s FedNow Service.

As the point-of-sale payment landscape becomes more crowded, and banks and other payments providers continue to evaluate customer preferences and patterns of usage across these different platforms, it’s an excellent time to take a closer look at the humble debit card as a guide to the future of payments. 

Understanding exactly how customers interact with debit cards and how secure they perceive those cards to be is the key to unlocking successful pay-by-bank use cases leveraging FedNow and will help define product strategy for optimizing all real-time payment options, old and new.

Security is a Pain Point

One of the most significant issues confronting debit card users today is security. Nearly 1-in-3 non-users of debit cards report “security concerns” as the reason they don’t use a debit card at the point of sale, more than any other reason. They are concerned about transacting directly from the account that, in many cases, holds most of their liquid assets.

As for debit card users, they have significantly higher customer satisfaction with their primary banks when they feel their debit card is “safe and secure to use.” On average, bank customer satisfaction scores are 174 points higher (on a 1,000-point scale) when customers feel good about security. They are also more likely to have opened new business at their primary bank within the past year. However, just 40% of consumers feel strongly that their debit card is safe and secure. 

The stats echo the results of a recent JD Power Banking and Payments Intelligence Report, which found that more than one-third (36%) of all banking customers in the United States say they have experienced some financial fraud in the past 12 months. Incidence is highest among consumers under 40, who also happen to be the most prolific users of debit cards and need to adopt pay-by-bank solutions for them to scale. As the potential for fraud grows due to digitization and economic conditions, it will influence customers’ payment choices at the point of sale.

Building Trust

The good news for banks is that there is a clear roadmap to developing higher trust levels with debit cards and, eventually, pay-by-bank offerings. The obvious first course of action is to continue ensuring that payment offerings connected to customers’ primary accounts are safe to use with limited instances of fraud.

According to JD Power research, trust is also earned through timely communication. When asked how a bank can demonstrate it cares about its customers, nearly two-thirds (64%) of customers say they want to be alerted to suspicious activity on their accounts. That is almost double the second-most cited response of “offer a grace period before a late fee or overdraft fee is charged” (36%). It’s a pressing need, as only 31% say they receive alerts about their account activity today. 

Consumers take many other factors into consideration when choosing a payment method, according to the research. But ultimately, the key to building trust lies in securing the payment method and the underlying account while proactively alerting and helping customers when potential fraud is identified.

Debit Card Security Paves the Way for Pay-by-Bank

As banks scale pay-by-bank solutions, security will significantly determine adoption rates and customer satisfaction. The introduction of FedNow, and continued expansion of RTP^® from The Clearing House, have the potential to dramatically scale real-time payments, creating a game-changer moment  for banks—if consumers become comfortable with the security of that format.

A big part of building that reputation for security will come from steps that banks can take now to shore up debit card security. Now is the time to double down on fraud protection, response, and conflict resolution. If banks can successfully demonstrate continued improvements in their ability to protect their customers’ debit card accounts, they will have a better chance of convincing them to try pay-by-bank solutions as they begin to grow.

Find Our More

This Banking and Payments Intelligence Report is based on responses from two JD Power analyses. The debit card data was collected from January to October 2022 as part of the 2022 U.S. Retail Banking Satisfaction Study. It included 77,696 responses. The fraud data was collected as part of the May 2023 edition of the JD Power Banking and Payments Intelligence Report, “With Bank Customers Still in a Tenuous Financial Position, Fraud Takes Centerstage,” which included 4,000 responses. This Banking and Payments Intelligence Report is authored by Miles Tullo, Managing Director of Banking and Payments. Please contact us at the numbers below to connect with Mr. Tullo or to learn more about the underlying research.

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

Banking and Payments Intelligence Report 
June 2023
 

Growing Weary of Financial Challenges, Bank Customers Reluctantly Turn to Buy Now, Pay Later

While the dog days of summer won’t be here for a few months, it seems that financial fatigue has bank customers in the U.S. feeling the heat.

Whether the culprit is a steady diet of ominous news about the recently resolved debt ceiling crisis or the persistent (albeit improving) presence of inflation, customers are back in the doldrums about their finances. According to the latest JD Power data, customer satisfaction with their financial condition declined to levels not observed since December 2022, even as financial health scores remain steady.

Against this backdrop, customers have become more receptive to alternative loan programs, with Buy Now, Pay Later (BNPL) options quickly gaining acceptance. Interestingly, though, customers are turning to BNPL even as they believe it to be contrary to their own self interests.

Fatigue Sets In

After four consecutive months of no noteworthy change in overall financial health, 44% of respondents say they are vulnerable (up from 41%) and just 31% are financially healthy (down from 34%). 

The overall level of inflation recognition rose slightly to 67%: a mark that is largely in line with the previous four months. The percentage of customers who said the price of goods is increasing faster than their income also mostly remained stable. Still, that didn’t prevent customer sentiment about their financial health from taking a precipitous fall. Customer satisfaction with their own financial health is the lowest it has been since December, and lower than it was at any point during the peak of inflation last summer.

As customers try to manage their financial situations, BNPL programs have piqued their interest as an option to alleviate their stress. Overall, 80% of customers say they are aware of BNPL products, and many are utilizing these options. More than one-third (34%) say they have used a BNPL program in the past 90 days.

Predictably, customers who are overextended are most likely to use BNPL options (55%), but even 30% of customers that have healthy financial situations are utilizing BNPL. For customers that haven’t used BNPL in the past 90 days, though, the overextended and stressed customers are less likely to be familiar with the products. Overall, only 31% are completely unfamiliar with BNPL.

 

Customer Perceptions Vary on Value of BNPL

When asked further about their experiences with BNPL, customers who recently used one of these products were more likely to have a positive attitude. Just 36% of customers that used BNPL in the past 90 days said they “somewhat agree” or “strongly agree” that BNPL benefits the lender, compared with 47% that have not used BNPL.

Interestingly, more than half (60%) of customers who are aware of BNPL say the option is helpful, but the majority (64%) of those customers don’t believe using the option improves their financial health. Even customers that have recently used these products are not convinced that they have helped their financial situation. Less than half (44%) of customers who used BNPL in the past 90 days said they “strongly agree” or “somewhat agree” that it helped their financial health. That speaks volumes about the depths of some customers’ struggles, and the work that still needs to be done by BNPL lenders to sell the benefits of their products to customers.

Educate Now, Benefit Later

Even as overall financial health remains steady, it’s clear that customers are feeling a cumulative effect of the past two years. As a result, banks need to understand that beleaguered feeling and tailor their customer outreach and their product offerings to account for the fact that customers have been barely holding it together for a significant period.

BNPL is a reasonable option for some customers and might not be the right fit for others. As their primary financial partners, banks are uniquely positioned to help customers understand who stands to benefit from leveraging BNPL, and for those that don’t, presenting an alternative option that may be a better fit. If banks can do this successfully, they’ll be able to retain customers, increase the use of their in-house services, and build better relationships.

Find Out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in May 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

 

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

 

Banking and Payments Intelligence Report
May 2023

With Bank Customers Still in a Tenuous Financial Position, Fraud Takes Centerstage

Even after inflation eased to 4.9% in April, there is still plenty to go around and plenty of other issues to keep bank customers in the United States up at night, including the early May collapse of yet another bank. If that wasn’t enough, customers say that incidences of fraud are also on the rise.

According to the latest JD Power data, 36% of all banking customers in the United States say they have experienced some kind of financial fraud in the past 12 months. These incidents include unauthorized credit or debit card usage, a P2P scam, or sending money to someone posing as someone else. Overall, customers with lower financial health scores[1] experienced fraud more often than customers with higher scores.

Somewhat surprisingly, 50% of customers under age 40 have experienced fraud in the past year, as these customers are more likely to engage in electronic transfers and, thus, are more likely to trust online requests for payments. That has left many customers eager for answers from their bank, hoping for a quick resolution to the fraud in question.  

Overall Financial Health Holds Steady

For a fourth consecutive month, there has been no noteworthy change in overall financial health. More than one-third (34%) of respondents are financially healthy, while 41% are vulnerable.

The overall level of inflation recognition rose slightly to 66%: a mark it has hit three of the past four months. The percentage of customers who said the price of goods is increasing faster than their income also rose slightly for most customer segment groups but was largely in line with the previous months.

The Fraud Problem

Overall, 36% of banking customers say they have experienced at least one type of fraud in the past 12 months. That number increased to 50% for customers under age 40, and 51% of customers that are classified as financially overextended.

The most common occurrences of fraud were someone making an unauthorized purchase with a customer’s credit (9%) or debit card (9%), making a purchase with a P2P payment app that ended up being a scam (8%), and customers that made a purchase with their debit card that ended up being a scam (7%).

Conflict Resolution

When asked how the fraud was discovered, 41% of bank customers said they checked their statement for suspicious activity, while 31% said they received alerts about their account activity. Interestingly, the rates for both categories are higher for customers over age 40 than customers under age 40.

The survey also uncovers some brewing dissatisfaction with bank responses to fraud. The rate of customers that were “not at all satisfied” with the response to their experience with fraud was highest for P2P apps (10%), followed by card issuer (8%) and banks (7%). It’s worth noting that 30% of customers for each entity were “somewhat satisfied,” and customers under 40 that experienced fraud more often were less satisfied with their bank, an indication that there is room for improve across the board in fraud resolution.

A Call for Fraud-Focused Customer Education

While there have been some underlying hopes for economic optimism of late, bank customers are still in a tenuous position. An occurrence of fraudulent activity without a positive resolution could certainly push a stressed or overextended customer over the edge, making fraud prevention a key area of interest.

Banks that are not helping their customers prevent fraud by optimizing security settings; encouraging their customers to use tools that allow them to intervene over time, such as alert settings and credit score monitoring; and helping with resolution when fraud does occur, are at risk of alienating a large swath of their clientele. But financial institutions that do execute this three-pronged fraud strategy can build an increased trust in their customer bases. At a time where customers are considering rate-chasing from bank to bank, financial institutions could use all the loyalty and goodwill that they can get.

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in April 2023. It was authored by Jennifer White, senior director of banking and payments intelligence at JD Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

 

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; [email protected]

Geno Effler, JD Power; West Coast; 714-621-6224; [email protected]

 

[1] JD Power measures the financial health of any consumer as a metric combining their spending/savings ratio, creditworthiness, and safety net items like insurance coverage. Consumers are placed on a continuum from healthy to vulnerable.