Bank customers want to make the most of their credit reports

Card-issuing banks that provide payment advice to their customers may benefit from reduced delinquencies and long-term customer retention.

Data shows that consumers are increasingly using credit cards to process payments. paycheck to paycheck — and industry-wide earnings reports suggest that a good chunk of these cardholders may be chewing up debt they can’t chew.

Growing Consumer Demand for Credit

American Express reported last week’s fourth quarter 2022 earnings report reflected Credit cards continue to be the preferred payment method for all age groups. Billings across Amex customers are up 15% from a year ago, and while loan delinquency and write-off rates have also increased, they are still well below pre-pandemic levels.

wells fargo saw By 2022, new card accounts will grow by 31% and credit card point-of-sale (POS) sales will grow by 17%. However, his 30+ day delays on bank card loans increased over the same period, as did consumer net loan write-offs. This means that while consumers are using their cards more, they are increasingly struggling to pay off these debts.Observed by Capital One resemble However, banks’ loan loss reserves increased $1.4 billion year-over-year, compared with $384 million a year earlier.

JP Morgan too report Credit and debit sales increased 9%, while net charge-offs for this segment were $845 million, an increase of $166 million from the prior quarter.Despite growing use of credit, it’s clear some consumers are struggling to survive: St. Louis Federal Reserve comments highlight The delinquency rate for all banks in Q3 2022 reached 2.1%, up from 1.6% in Q3 2021.

How consumers want FI to help

PYMNTS/Amount collaboration,Bundled Banking Products: How Credit Cards Secure Customer LoyaltyThis increase in card usage comes with increased consumer interest in managing this debt, according to .

Card-issuing banks have a multi-layered opportunity by offering features such as payment method recommendations to their customers.as personal debt Rose November’s seasonally adjusted 7.1% hit, signs point to consumers get nervous To manage debt, this type of guidance helps account holders optimize their payment options and improve their financial health. Run that data through algorithms to create personalized advice. This includes identifying the best card or transaction for a particular merchant, or suggesting methods that are beneficial but unknown to consumers. As an interest-free BNPL option.These programs are designed for this consumer segment Three times You are more likely than others to roll over your monthly debt and hold more balances.

For major banks, leveraging transaction data to provide payment recommendations to card issuing clients has the potential to improve loyalty and retention. This is especially true for younger customers of banks. millennial generation member with Generation Z Shows that you are willing to accept and follow wealth building advice. Acquiring these age groups who seek out reliable sources to begin their financial journey can be vital to their future success.

Payment method recommendations and similar programs are almost a win-win for card-issuing banks, as they strengthen customer relationships and potentially reduce delinquencies through optimization. As consumers continue to use more and more credit and seek help to survive in volatile conditions, FIs that intervene and rapidly deploy recommendations will be the key to gaining affinity over the long term. in the best position.

PYMNTS Data: Why Consumers Are Trying Digital Wallets

According to the PYMNTS survey, New Payment Options: Why Consumers Are Trying Digital Wallets, 52% of US consumers will try new payment methods in 2022, with many choosing to try digital wallets for the first time. bottom.