Five revelations from Card Forum 2016

Card Forum was held in Los Angeles this week (April 12-14). Here are my top 5 takeaways from the event:

1. Biggest paycheck

For a segment of the population – mainly households with incomes below $50K – their tax refund represents the biggest paycheck of the year. The process of getting the refund can be complicated and costly. As a result, tax preparation company, Jackson Hewitt, has partnered with American Express to offer a prepaid card as an alternative to the traditional refund check. Dave Prokupek, CEO of Jackson Hewitt, explained how approximately one third of its customers don’t have a bank account and many are single mothers who appreciate the control of receiving their refund separately from their bank account where there are other demands for the money. There is an opportunity to market prepaid cards to this segment with a simple message and to design products that play down the potentially negative associations of using the word “prepaid.”

2. Pay day loan substitutes

Raj Date, Managing Partner, Fenway Summer, described his company as a venture investment company with the unique advantage of bringing deep financial services and regulatory experience to FinTech investments. Fenway Summer looks for “paradoxical conservativism” in its ventures which Date described as the “zeal, desire and energy to change the world in the most conservative way.” He pointed to the opportunity emerging in the pay day loan market due to the fact that, according to Date, two thirds of payday loan volume will not comply with the regulations being developed by the CFPB. Fenway Summer has recently launched the Build Card – a mass market pay day loan substitute product – to target this very segment.

3. 108 million Americans

According to the Center for Financial Services Innovation (CFSI) 108 million Americans can’t get good credit when they need it either because they have a subprime score or because they are “unscoreable.” There is an emerging opportunity to offer a new generation of secured cards and other subprime products to these consumers in a post financial crisis, post CARD Act environment. Marla Blow, CEO of FS Card, spoke of the recently launched Build Card which targets consumers with a FICO score of 560-620. Blow thinks of “repaying as an opportunity” and offers incentives to cardholders for paying their bills. Steve Carlson, Co-Founder and CEO of Ascend uses behavioral economics and real-time data to actively monitor and reward consumers for positive financial behaviors. Customers can choose an installment loan or a RateRewards loan through which they can save up to 50% on interest payments based on behaviors such as paying on time or increasing their savings. Secured cards represent another opportunity and despite Discover’s recent launch, secured cards make up just 1% of the market according to the CFSI. Issuers need to map out a clear path to a regular credit card for secured cardholders – something that is notably missing in secured card communications.

4. Chase Pay update

Chase Pay was announced at Money20/20 last October. Kim Fitzsimmons, US President Chase Commerce Solutions – the global payment processing, merchant acquiring and offers business of Chase – was on hand to provide an update. Fitzsimmons described how Chase is aiming to control more of the payments ecosystem through its ChaseNet platform which provides an “on ramp” for the launch of Chase Pay. A soft launch is planned for July 2016 with a more extensive roll out in Q4. Chase believes that it is ideally positioned by pairing its 94 million customers with the millions of merchant locations available via its MCX partnership. When questioned about the QR code technology used by Chase Pay, at the point sale, Fitzsimmons indicated that QR codes were “phase one,” and developed as the lowest cost option at the request of merchants but its point of sale technology would “evolve.” Chase wants to be online and in-app and a Chase Pay button is in the works. Given her statement that “marketing the heck out of digital wallets” was one of the paths to adoption we anticipate a big Chase Pay campaign later this year.

5. Learning how to pay

A recurring theme was the complexity and potential for confusion at the point of sale given that consumers can now dip (their chip cards), swipe or use one of “the pays” on a mobile phone. The topic was discussed on a fascinating panel involving Margot Vaughan from MasterCard Advisors and Jason Tinurelli from US Bank (full disclosure – yours truly was the moderator). Vaughan and Tinurelli debated best practices in marketing to be the “default card” across mobile payments and digital wallets as well as in-app and online. Both agreed that educating consumers should be a key part of the strategy. None of the parties – neither issuer, merchant or network – are ultimately taking responsibility for the “total payments experience.” There is a need and, for first movers, an opportunity to educate consumers not only in relation to EMV but also on mobile payments. Those that do will gain the first payment advantage and become the default card in the wallet.

Andrew Davidson is SVP/Chief Insights Officer for Mintel Comperemedia. He is an expert in data-driven cross channel marketing intelligence, consumer behavior and global trends. As a thought leader and expert speaker, Andrew has consistently predicted the evolution of payments marketing for the past 23 years. He speaks at high profile industry events and has presented at conferences in the US, Canada, Australia, New Zealand, Hong Kong and Taiwan. Andrew is passionate about the global role of payments as the first step on the path to financial inclusion.