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2012 Study of Credit, Debit and Prepaid
Trends, Member Preferences and
Marketing Segmentation by Generation
Kevin O’Donnell, VP Credit Issuance
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Discover Overview
Payment Services
$113Bn volume
30+ issuers
$143Bn volume
4,300+ issuers
840,000+ ATMS
100+ countries
$29Bn volume
80+ franchises
185 countries/territories
Note: Balances as of February, 2012; volume based on the trailing four quarters ending 1Q2012
+8%
+19%
+9%
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Today’s Agenda
Perception of Economy
How Consumers Intend to Spend
Card Usage
Credit
Debit and Prepaid
Generational Marketing
Q&A
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Perception of the Economy
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Discover US Spending Monitor Results
2010 - 2012
Apr-10 Apr-11 Apr-12 June-12
Discover US Spending Monitor Index 91.5 89.4 96.7 90.7
US Economy Improving 34% 26% 33% 29%
Personal Finances Improving 23% 21% 27% 23%
The Monitor Index saw a significant gain year-over-year in April –
However, recent economic news resulted in a 6 percentage point drop
in June
The outlook on the economy and personal finances showed a similar
decline from April of this year
Source: Discover US Spending Monitor, May 2012
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Non-Members Rate The US Economy
.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Good
Excellent
9.5% 9.2%
7.1%
6.1%
7.4%
6.4%
12.3%
Source: Discover US Spending Monitor April 2012
13.7%
7.2%
8.4% 7.9%
10.2%
12.6%
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Credit Union Members Rate The US Economy
.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Good
Excellent
8.7%
17.6%
10.1%
6.9%
8%
5.6% 6.6%
Source: Discover US Spending Monitor April 2012
6.5% 6.4%
10.7%
11.6%
13.5%
Up 9 percentage
points from same
time in 2011
8.1%
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Non-Members Rate Personal Finances
.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Good
Excellent
36.1%
31.3%
28.2%
31.9%
25.2%
32.1% 33.3%
Source: Discover US Spending Monitor April 2012
31.4%
27.1% 28.1%
30.5% 29.6%
30.5%
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Credit Union Members Rate Personal Finances
.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Good
Excellent
Source: Discover US Spending Monitor April 2012
37.8%
41.7% 40.1%
37%
34.8%
36.7%
35%
32.4%
38.6% 38% 37.5%
41.9% 40.5%
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Key Takeaways
1. Consumer perception of the economy and their personal
finances is improving among both members and non-
members, with member confidence trending consistently
higher than non-members
2. As consumers gain confidence, there is an opportunity to
grow across all product lines i.e., cards, personal loans, car
loans, etc.
3. Build on growing consumer optimism with targeted ads and
promotions that focus on major personal purchases such as
vacations - discretionary spending is another strong category
that consumers are ready to spend e.g., sporting events
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How Consumers Intend to Spend
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How Non-Members Plan to Spend on
Household Expenses Next Month
36.5% 36.3%
46.2% 44.9%
49.9% 47.5%
51.9%
47.0%
53.3% 51.6%
42.0% 40.6%
44.7%
53.8% 51.4%
42.7% 44.0%
37.2% 37.9% 35.5%
42.1%
36.7% 37.4%
46.4%
50.5%
44.8%
.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Same
More
Source: Discover US Spending Monitor April 2012
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How Credit Union Members Plan To Spend on
Household Expenses Next Month
30.0% 33.1%
46.6% 47.6% 50.1%
48.1%
51.4% 49.7%
53.0% 53.0% 50.1%
35.7%
47.0%
60.9%
57.0%
44.3% 43.4%
39.0% 40.1% 38.5%
41.1% 38.4% 37.6%
42.4%
55.5%
44.9%
.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Same
More
Source: Discover US Spending Monitor April 2012
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How Non-Members Plan To Spend on
Discretionary Entertainment Next Month
36.2%
33.0% 34.3% 33.9%
36.5% 35.2%
36.4% 38.2%
37.2%
40.9%
37.5%
40.9% 39.8%
7.4%
11.0% 10.8%
8.3% 8.1% 8.6% 9.1%
11.4% 10.5%
6.1%
10.3% 10.8% 9.7%
.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Apr'11
May'11
June'11
July'11
Aug'11
Sept'11
Oct'11
Nov'11
Dec'11
Jan'12
Feb'12
Mar'12
Apr'12
Same
More
Source: Discover US Spending Monitor April 2012
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How Credit Union Members Plan To Spend on
Discretionary Entertainment Next Month
35.9%
32.4%
37.5% 37.4% 36.2%
34.3%
39.2% 41.0%
38.4%
40.9% 42.7%
37.3%
46.4%
8.7%
11.6% 12.9%
8.1% 9.2% 10.1%
6.9%
12.5% 11.7%
9.0% 9.1% 9.4% 9.4%
.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Same
More
Source: Discover US Spending Monitor April 2012
Up 10
percentage
points year-
over-year
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How Non-Members Plan To Spend on Major
Personal Purchases Next Month
32.7% 31.7%
33.1%
30.6%
33.2% 31.1%
34.5%
37.9% 35.9%
38.7%
36.0% 38.2%
36.3%
12.6% 14.5% 15.1%
11.3% 12.6% 11.8%
10.2% 10.8% 11.8%
9.8% 11.5%
14.8%
12.3%
.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Same
More
Source: Discover US Spending Monitor April 2012
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How Credit Union Members Plan To Spend on
Major Personal Purchases Next Month
35.4% 34.9% 33.5%
35.5% 34.0% 34.4%
37.7%
40.0%
37.2%
42.5% 41.4%
36.8%
42.0%
14.6% 16.0% 16.3%
15.3% 13.6%
11.0% 11.0% 11.9% 12.8%
13.2% 12.5%
14.7% 14.4%
.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Same
More
Source: Discover US Spending Monitor April 2012
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Key Takeaways
1. Both credit union members and non-members demonstrate a
strong intent to spend on discretionary entertainment
2. The credit, debit and prepaid card space is where consumers
may look to execute their discretionary spending intentions –
leverage merchant funded offers and promotions. Your
networks, processors and partners may be sourcing these for
you at no charge – maximize all of your relationships.
3. Credit unions should create partnerships with local movie
theatres, restaurants, ice cream stands, etc. to give members
discounts when visiting at these types of merchants. For
example, free appetizer with dinner or free popcorn at a local
movie theatre. This encourages credit unions to promote the
shop local concept and keep money within the community.
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Credit Usage
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Always/Almost Always Pay Entire Balance
50% 54%
50% 52%
46% 48%
44% 45% 47%
51% 53% 52%
54% 56% 56% 56% 55% 55%
53% 55% 55% 55% 55% 55%
57% 57%
0%
10%
20%
30%
40%
50%
60%
CU
Non-CU
3-Month Period
Source: Millward Brown, 2012
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Revolver – Usually Pay Less Than
Entire Balance
50%
46%
50% 48%
54% 52%
56% 55% 53%
49% 47% 48% 46%
44% 44% 44% 45% 45% 47%
45% 45% 45% 45% 45% 43% 43%
0%
10%
20%
30%
40%
50%
60%
CU
Non-CU
3-Month Period
Source: Millward Brown, 2012
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Concerned About Credit Card Interest
Rate Rising
53%
49%
52% 50%
53% 52% 53% 51%
49% 47%
47% 47% 45%
49% 49% 48% 47% 48% 49% 49% 49% 47%
46% 43% 42% 41%
0%
10%
20%
30%
40%
50%
60%
CU
Non-CU
3-Month Period
Source: Millward Brown, 2012
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Don’t Trust Any Credit Card Company To
Treat Me Fairly
26% 25% 25%
26% 26% 25%
26% 25%
24% 24% 24%
26% 25%
25% 23%
22% 21%
22% 22% 22% 22% 22% 22% 21%
20% 20%
0%
5%
10%
15%
20%
25%
30%
CU
Non-CU
3-Month Period
Source: Millward Brown, 2012
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Key Takeaways
1. Both members and non-members are slightly more inclined to
“pay as you go” with more of them indicating they prefer to
pay balances in full and less likely to revolve – does your
credit union have a strategy and product, particularly a
rewards product, to offer to transactors?
2. CU members distrust of credit card companies remains
virtually unchanged, while non-member distrust has declined
3. There is an opportunity to leverage the reputation credit
unions enjoy with consumers by positioning themselves as
trusted financial consultants
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Average Number of Non-CU Credit Cards In
Wallet
2.6
1.1
0
0.5
1
1.5
2
2.5
3
Number of Cards
Non-Member
CU Member
Source: TNS’ Consumer Card Study 2007 - 2011
Opportunity to be
top of wallet with
members
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Five Most Important Reasons Non-Credit Union
Card is Primary
30.2%
16.8%
8.8% 8.3% 6.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
OfferRewards
Only Card IHave
Long TimeCustomer
No AnnualFee
Issuer IsPrimary Bank
Source: TNS’ Consumer Card Study 2007 - 20011
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Five Most Important Reasons Credit Union
Card is Primary
25.6%
21.9%
11.2% 9.8%
6.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Only Card IHave
Issuer IsPrimary Bank
Low Rate Long TimeMember
No AnnualFee
Source: TNS’ Consumer Card Study 2007 - 20011
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What Is The Most Important Reason You Use
Your Primary Rewards Card?
49%
21%
12%
8%
6%
5%
39%
23%
13%
10%
8%
5%
2%
Earn more rewards
Prefer the rewardtype
Lower APR
Earn rewards frommy favorite
brand/company
Bank that offers me achoice of rewards
Larger credit line
Other
Feb 2012 (n=197)
Feb 2011 (n=173)
Cardbeat Consumer Research & Analysis by Auriemma Consulting Group, Inc., U.S. Edition, 2012:
Volume 18, Issue 2
Almost half of all
rewards cardholders
desire to earn more
rewards – what
marketing programs
does your credit
union have in place
offering additional
bonus points earned
for specific behavior
or purchases?
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What Type of Rewards Can You Get on Your
Credit Card?
31%
15%
13%
8%
8%
11%
Cash Back
Discounts/FreeProductsAir Miles
Hotel Rooms
Donate to Charity
Other
Source: TNS’ Consumer Card Study 2007 - 2011
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Have You Ever Redeemed Credit Card
Rewards?
82%
16%
2%
70%
28%
2%
Yes
No
Don'tRemember
Feb 2012 (n=249)
Feb 2011 (n=223)
Cardbeat Consumer Research & Analysis by Auriemma Consulting Group, Inc., U.S. Edition, 2012:
Volume 18, Issue 2
Redemption =
engaged
cardholders
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Key Takeaways
1. Consumers regularly report that rewards are key to driving
payment use indicating that cardholders are engaged –
cashback is most popular
2. To target transactors you need to have a competitive and
meaningful rewards program to drive member usage and build
long term loyalty
3. Consider adding marketing programs offering additional
bonus rewards points to encourage specific transaction
behavior
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Debit and Prepaid Usage
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Growth Expectations
31% 34% 39%
43%
29% 27%
21% 17%
20% 21% 22% 24%
14% 11% 10% 7%
6% 7% 8% 9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009 2011(E) 2013(E) 2015(E)
Prepaid
Check
Credit
Cash
Debit
Source: Debit Processing Solutions: 2012 Review, Mercator Advisory Group estimates
Percent of Consumer Payment Transaction Volumes by Type of
Payment
Long term trend:
debit, credit &
prepaid will
continue to drive
growth
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Household Card Ownership Trends
63%
0% 3%
74%
11%
41%
6%
66%
4% 4%
60%
9%
33%
11%
68%
6% 4%
64%
11%
34%
8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
DebitCard
ATMOnly
GPPrepaid
Card
GPCreditCard
GPChargeCard
PLCC No Card
2009
2010
2011
Source: Mercator Advisory Group CustomerMonitor Survey Series, 2009–2011
Credit card ownership
down 10% in past 3
years – a direct impact
of the recession
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Number of Times Each Month Respondents
Used Debit Cards
3%
23% 24%
27%
21%
0%
5%
10%
15%
20%
25%
30%
Don't Use 1 to 4 5 to 10 10 to 19 20+
Source: 2011 TSYS Consumer Debit Research Survey
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Payment Type Used Most Often and Where
63%
50% 50% 47% 46% 46%
38% 36%
19%
25%
17%
25%
40%
26%
11% 11% 13% 13%
23%
8%
2%
21%
38%
46%
0%
10%
20%
30%
40%
50%
60%
70%
Debit
Credit
Cash
Source: 2011 TSYS Consumer Debit Research Survey
Groceries, Gas and
Discount stores are
best categories for
rewards & loyalty
programs
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Consumers That Own a Prepaid or Payroll Card
18% 18%
17%
9%
13%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Underbanked Gen Y Gen X Boomers AllConsumers
Source: 2012 Javelin Strategy & Research
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Forecast of Prepaid Financial Service Products
$12.0 $19.5
$28.6
$40.8
$57.2
$81.8
$116.9
$167.2
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
Load Value Placed on Prepaid Financial Services Products, 2007–2014E in Billions
Source: Mercator Advisory Group
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Women Most Likely to Both Give and Receive
Base: internet users aged 18+: 973 male; 1,027 female
Source: Mintel
“How many gift or prepaid cards have you purchased in the past 12
months?”
39
7
2
52
41
8
4
46
1-5 6-10 11 or more None
Male Female
Purchased, September 2011 Received, September 2011
53
6
2
39
56
8
3
34
1-5 6-10 11 or more None
Male Female
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Where cards are purchased
Base: 1,021 internet users aged 18+ who have purchased prepaid or gift cards in the last 12 months
Source: Mintel
51
40
28
25
20
11
7
4
1
4
A retail store at which the card is to be used
A grocery or drug store
A store that sells cards for many issuers (other than a grocery ordrug store)
A restaurant/coffee shop
Online
A movie theater
A spa/salon
Bank branch
Kiosk/vending machine
Other
%
Where cards were purchased in past 12 months, September 2011 Opportunity to
partner with
retail
merchants
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Key Takeaways
1. Long term trends indicate that debit, credit and prepaid will
continue to drive card growth
2. Leverage prepaid products to initiate relationships with
younger members that will translate into deeper and more
profitable relationships - women, the underbanked, Gen Y and
Gen X segments are strong targets for prepaid cards
3. Leverage partnerships with retail merchants to offer prepaid or
gift cards at a local credit union branch or in the merchant
location
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Generational Marketing
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Generational Marketing
The method of marketing to consumers in a way that
appeals to the unique needs and behaviors within
each generation – emphasize impact over reach
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Swing/WWII Generation
Who They Are
Born between 1925 and
1942
There are currently 27
million Matures (9% of
population)
Known for sacrifice,
devotion to
family/country and old
fashioned values
Defined by WWII
How You Reach Them
Emphasize Savings
Reward Loyalty
Relationship Building is
Important
Remember Investments
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Baby Boomers
Who They Are
Born between 1943 and
1960
There are currently 64
million Boomers (21.5%
of population)
Faded idealists from
1960’s – tend to be
impatient and self-
centered
Defined by work
How You Reach Them
Keep It Simple
Emphasize Savings &
Lending
Focus On Retirement
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Marketing Example
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Generation X
Who They Are
Born between 1961 and
1981
There are currently 89
million Gen Xers (30% of
population)
Formed by technology
Define themselves as
individuals
How You Reach Them
Remember Value
Emphasize Lending
Be Authentic
Technology is Important
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Example (Spirit of America FCU)
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Generation Y
Who They Are
Born between 1982 and
2003
There are currently 78
million Gen Years (26% of
population)
Culturally diverse and
technology driven
Media savvy, educated
and financially smart
How You Reach Them
Leverage Technology
Focus on Value
Personal Loan Offers
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Marketing Example
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Social Media Sites Visited At Least Once Per
Month
62% 58%
0
8% 7% 10%
2%
71%
64%
13% 12% 9%
4% 2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2010
2011
Source: Mercator Advisory Group CustomerMonitor Survey Series 2010, 2011
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Profile of Social Media Website Visitors
85%
70%
63%
69%
75% 73% 72%
65%
77% 74%
70%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Source: Mercator Advisory Group CustomerMonitor Survey Series 2011
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53
Key Takeaways
1. Change your marketing strategy based on the generation you
are targeting - communicating effectively between generations
is essential when doing business today
2. Identify key generational segments within your member base –
understand the intricacies of each group and focus your
marketing, advertising and branding efforts to reach them
3. Speak their language - create a marketing plan that speaks to
each generation in a way they will understand
4. Use technology – no matter which generation you are
targeting, choose the right technology to reach your audience
(Facebook, Twitter, YouTube, blogging)
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Questions?
For more information contact:
Kevin O’Donnell, Vice President
Discover Network
Phone: 1-866-847-2344
Email: [email protected]