Wells’ Woes Grow While Card Growth Withers

Posted By: Elizabeth Rowe | September 16, 2016 | 0 Comments

CONSUMERS AND CONSUMER CREDIT

Ally’s 2016 Credit Card Study Reveals What Customers Really Want: Cash

15 September 2016, India Banking News

Please note that these survey results were released just before Ally’s introduction of a new CashBack Credit Card. In a survey of credit cardholders, 58% of respondents said they preferred cash back to travel and other rewards and that 66% would be interested in a credit card that gives an “additional bonus on cash back rewards if those rewards were placed into a bank account” But here’s the big reveal: 80% of respondents said “they would prefer to have multiple financial products, (such as a bank account, loan or credit card) with the same bank if they earned rewards for doing so.”

CREDIT UNION AND RETAIL BANKING INDUSTRIES

How the Fed’s Coming Rate Hike Might Impact CUs

15 September 2016, Credit Union Journal

With extremely positive economic news hitting the wires earlier his week, the Fed’s overnight interest rate increase looked like a done deal for its September meeting. But that consensus has backed down as additional news indicated that the economy is continuing to cool: Retail sales fell below analyst estimates, auto sales were weaker than expected and August’s manufacturing numbers also disappointed the market. So, while a 2016 rate increase will happen (because the Fed said it would back when it raised rates .25% in December 2015), it will probably not happen until the December meeting. But when that rate bounces up, CUs are prepared. Most CUs have modeled their balance sheets for increases and are also aware that while rising rates excite savers, they take about 18 months to manifest their full impact.

EMV

U.S. Chip Adoption Continues to Grow, Says MasterCard

15 Sep 2016, Payment Eye

MasterCard has released stats from the end of July that show retailer uptake of EMV technology. EMV’s October 1, 2016 deadline is only two weeks away so it’s a great opportunity to check out the state of adoption and POS deployment. MasterCard says that 88% of its U.S. credit cards have chips and that 2 million U.S. merchants have activated their EMV compliant terminals That merchant total represents 1/3 all of U.S. merchants and breaks out as 1.3M are regional/local merchants, while 700,000 are superstore locations.

MOBILE PAYMENTS AND MOBILE BANKING

MCX Is Chase Pay’s Key Cheerleader in Best Buy Deal

14 September 2016, PaymentsSource

Remember the retailer consortium that was going to link the largest retailers to an ACH routing system through a trans-retailer mobile wallet? MCX? CurrentC? And no, it’s not dead – MCX has found a second life as an ISO-ish organization that marries the consortium’s members with Chase Pay, Chase’s QR-code based wallet. The newest enrollee in Chase Pay is Best Buy, which had been the first retailer to break with MCX and accept Apple Pay. Per MCX’s CEO: “The collaboration among MCX, Best Buy, and Chase demonstrates the value of MCX’s core concept: linking top merchants like Best Buy with financial institutions like Chase for the benefit of Best Buy, their customers, and Chase cardholders.” But if Chase Pay becomes the wallet of MCX and its partners, that means a QR-code wallet will be accepted at retailers with sales of more than $1 trillion (oh, and plus Starbucks).

PayPal and Mastercard Expand Partnership to Benefit Consumers, Merchants, and Financial Institutions

9 September 2016, Banking Newslink

After PayPal’s announcement of its strategic partnership with Visa that ensured a payment cash stream to PayPal and promised the end of steering transactions away from the Visa rails to ACH, it was already known that MasterCard had entered similar discussions with PayPal. Two competing forces were at play in MasterCard-PayPal negotiations: 1: MasterCard is so much smaller than Visa that its inability to ensure such a large cash stream to PayPal would hamper the terms of its negotiations vs. 2: MasterCard had imposed its digital wallet operator fee on PayPal which gave it disproportionate clout in those negotiations. And now the MasterCard-PayPal deal has been announced and PayPal will no longer route transactions away from MC and will provide the network with “financial volume incentives” and, as a result of the commitments made under this agreement, PayPal will no longer be subject to the digital wallet operator fee.

REGULATION, JUDICIARY AND LEGISLATION

Suddenly Wells’ Card Growth Doesn’t Look So Impressive

9 September 2016, PaymentsSource

Wells Fargo has been wowing investors quarter over quarter with the growth of its credit card portfolio. For instance, while an average of 18% of credit union members carry a CU credit card, 42.7% of Wells’ retail banking households have a credit card from the bank. But now those numbers look pretty hollow. Wells has built its credit card and loan businesses through the use of employee quotas which were so onerous that for the past ten years, even I have heard Wells employees talking quite candidly about opening new cards, accounts and lines of credit for family members and friends just to hit their “overly aggressive” numbers. It turns out that 1.3M depository accounts and 565,000 unauthorized credit card accounts were opened without the knowledge of Wells customers. That admission led to the firing of over 5,300 employees and a $100M fine paid to the CFPB, $35M to the city and county of Los Angeles and $35M to the OCC. Stay tuned – there may be more coming if it’s true that Wells had a pattern of firing its whistleblowing employees.

Credit Union Legislative Action Stalls

14 September 2016, Credit Union Times

With elections less than eight weeks away, Congress popped into D.C. to pass a government funding bill before another shutdown and seem to have zero interest in getting Dodd-Frank (and Durbin) repealed or in getting other CU-centric legislation passed. But bills are getting teed up for 2017, including an overhaul of financial services regulations and in particular, a revamping of the CFPB. Congress will be looking at legislation that “would restrict the CFPB from issuing rules governing arbitration agreements and payday lending … (and attempt) to rein in the agency by converting it to a commission rather than a body governed by its executive director and to make the agency subject to the annual appropriations process.”

Elizabeth Rowe

Elizabeth Rowe

Elizabeth tracks the shifting payments landscape for both PSCU and its member owners. Focusing on the interstice of the economy, competition, consumers, technology, payment products and channels and regulatory guidance, Elizabeth gleans the key challenges and opportunities facing our industry, our strategic plans and our success fulfilling our mandate of serving the American consumer.
Elizabeth Rowe

 


 

 
 
 

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