Data Snacks

Data Snack: Credit cards are earning higher satisfaction scores – but still losing share of spend to competitors

  • Primary card share of spend has fallen to 42%, with customers shifting to novel alternatives like BNPL.
  • Customer experience metrics like call center hold times indicate that issuers need to revisit critical stages in the customer journey to ensure loyalty in the face of competition.

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Data Snack: Credit cards are earning higher satisfaction scores – but still losing share of spend to competitors

2022 has been a mixed bag for credit cards, with issuers making use of the latest and greatest in technology to reach more consumers than ever before, but still struggling to keep adversaries like BNPL, debit cards, and cash at bay.

Overall Satisfaction and Share of Spend
2018: Satisfaction is 801, Spend is 48%
2019: Satisfaction is 805, Spend is 50%
2020: Satisfaction is 811, Spend is 47%
2021: Satisfaction is 805, Spend is 47%
2022: Satisfaction is 810, Spend is 42%

5 Year Change in Monthly SPend (2018-2022) 
Primary Card: 2% 
Secondary Card: 35%
Other major credit cards: 17%
Cash: 49%
Debit Cards: 80%

Source: J.D. Power

Recent research by J.D. Power has much to unveil about this predicament. As the image above shows, despite high satisfaction, credit cards have experienced a marked decrease in spend over the past year. This trend remains the same when you scope out and look at the big picture. In the last five years, credit cards have lost a large chunk of spend to debit cards and cash, and it isn’t immediately clear why.

John Cabell, managing director of payments intelligence at J.D. Power, hypothesizes that while a disruption in consumer spending due to the pandemic may be at play, another reason for this decrease is the rise of alternative payment methods like BNPL.

Our recent coverage unpacks the CFPB report on BNPL, but it leaves out the role this product plays in the lifecycle and value of credit cards. Over the past five years, credit cards have lost their lion’s share of spend not because of stagnancy or lack of innovation, but because of an active search for an alternative on the part of customers. Among the issuers that have lost the biggest chunk of spend, national issuers and co-branded cards top the list, losing five and six points respectively over the last year. And even though customer satisfaction with credit cards is higher than ever before, it doesn’t mean all creases have been ironed out.

Call Center Hold Times (Average in Minutes) 
2018: 5.52
2019: 5.79
2020: 7.74
2021: 7.97
2022: 8.62

Call Center Performance Metrics 
1) Had Information Ready: 2018 (84%) 2022 (79%)
2) Didn't transfer or refer you to another person: 2018 (63%) 2022 (57%)
3) Didn't provide the same information more than once: 2018 (72%) 2022 (65%)
4) Rep didn't place on hold to access account or retrieve additional information or talk to supervisor: 2018 (59%) 2022 (51%)

Source: J.D. Power

For example, the chart above shows the call center hold times and performance metrics. Over the past five years, the average hold time has increased by 3.1 minutes. At the same time, other call center performance metrics tracked by J.D. Power have noted a fall in numbers. This year, consumers found agents to be less prepared to provide the correct information, and noticed more instances of them providing the same information more than once – with one respondent adding:

“I know the point is technology-driven banking, but being able to talk to a TRAINED bank assistant sometimes would be nice. Instead, what we get is some poor soul in a call center reading scripts off a computer, and the only information they can provide me is what’s easily attainable on the app or website.”

In the same vein, the research found that even though credit card issuers may have been working on communicating information about rewards programs and benefits, this information is not necessarily reaching consumers. Understanding of rewards programs in areas like travel, retail, and co-branded cards has taken the biggest hit, with each losing 9-10 points. That’s not all – consumers also feel a gap between the kind of purchases issuers reward and the kind they like to make often, with only 31% feeling that their frequent purchases maximize reward earning.

All of this doesn’t mean that traditional players like Bank of America or Discover aren’t pushing to meet consumers where they are. For instance, Bank of America has made a concerted effort to introduce customizable rewards and flexibility in their credit card products. “Discover and American Express have long-standing customer affinity, and they also have very strong product and interaction features. Benefits was a big area of improvement this year for brands like American Express,” said Cabell. 

Customers in focus

It’s important to note that those hopping over to BNPL to avoid high fees and payments on credit cards are relying on debit cards and cash to make their BNPL payments. This means that the share of spend that leaves the credit card realm for BNPL doesn’t circle back to it at any point in the payment cycle. Moreover, consumer advocates warn against paying for credit with credit, which can in turn set off a toxic cycle of revolving debt. Unfortunately, the jump over to BNPL isn’t a simple one. Despite many consumers of credit cards deferring to alternative methods, Cabell points out that quite a few of these customers are faced with the same cycle of high late fees and interest after making the switch.

This, coupled with the tribulations of the pandemic, has had a notable impact on consumer financial health, with more consumers reporting financial stress than before. At the moment, BNPL players are enjoying a gap in regulation and competition, which may be closing quickly in the coming months. For example, with the recent CFPB study, many speculate impending regulatory oversight in this space.

Similarly, as issuers grow more cognizant of consumer struggles post-pandemic, many are changing their modus operandi in favor of consumers and finally shifting away from charging late fees. “Issuers are now figuring out ways to help consumers budget and manage their funds. In the financial space today, there is more of an element to be responsible with consumers and not just push products that are ripe with fees and interest rates,” said Cabell.

Given the legacy of credit cards, BNPL players have their job cut out for them. However, if known pain points within the customer experience (such as hold times in call centers) aren’t resolved quickly, credit card issuers run the risk of pushing more customers towards alternatives. The coming months will be critical indicators of how issuers, regulators and customers alike are responding to this evolving landscape of payments. Stay tuned. 

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