Guest blogger Paul Sammer reviews U.S. consumer use of cards to pay for transactions, fund loans, and receivables and transaction volume in Q1 2018.
As purchase volume and receivables continued to rise during the recent quarter, several issuers reported material increases in returns resulting from tax reform. Read more about the key themes and notable happenings below.
- Purchase volume in Q1 2018 continued to increase at a significant pace year-over-year, along with strong growth in receivables.
- Chase, Capital One, Bank of America, and American Express reported robust purchase volume growth year-over-year, while American Express, Discover and Capital One led in terms of receivables growth.
- Banks cited increased consumer confidence and tax reform as drivers of strong purchase volume.
- Loss rates continued to normalize although several banks suggested that losses may be stabilizing.
- ROAs were bolstered by tax reform, which had a substantial impact on reported returns.
Investment is ongoing in digital, mobile and self-service capabilities.
- American Express and Citi complete sale of Citi’s $1.2 billion Hilton portfolio to American Express.
- Starbucks launches a new credit card with Chase; Synchrony announces partnership with Crate and Barrel to offer a new private label credit card and co-brand card; Alliance Data and Lucky Brand agree to introduce a new private label credit card; Synchrony becomes preferred financing partner for Mahindra Powersports.
- Due to retail partner bankruptcies, Synchrony replaces qualifying Toys “R” Us credit card accounts with a 2 percent cash back Mastercard and Alliance Data closes Bon-Ton accounts; Synchrony announces that it plans to onboard the PayPal Credit portfolio in 3Q18.
- Amazon introduces 5 percent back at Whole Foods on Amazon Prime Rewards Visa card; Chase announces new ultra-premium Marriott Rewards Premier Plus card and Amex announces new ultra-premium SPG Amex Luxury card (with single loyalty program branding coming in 2019).
Mobile & Tech:
- Synchrony invests in Payfone, provider of identity authentication in digital channels; Goldman Sachs acquires credit card startup Final.
Industry trends (based on non-retail card issuers in scorecard section)
1 Total receivables for non-retail issuers at end of 1Q18. 2 Total purchase volume of non-retail issuers in 1Q18. 3 After-Tax ROA excludes Wells Fargo, Chase, Bank of America and US Bank, which do not report credit specific income. 4 YoY = Year-over-year change versus 1Q18. 5 QoQ = Quarter-over-quarter change versus 4Q17. Note: Purchase Volume is reported volume for the quarter (it is not annualized or TTM)
Issuer Scorecard—Q1 2018 ($ in Billions)
1 Chase no longer discloses an ROA measure directly attributable to Card Services. 2 Citi: Purchase volume includes cash advances. Citigroup data includes Citi-Branded Cards and Citi Retail Services. 3 Capital One: U.S. card business, small business, installment loans only. Purchase volume excludes cash advances. 4 Bank of America: Receivables, purchase volume, and net loss rates are for U.S. consumer cards. 5 Discover: includes U.S. domestic receivables and purchase volumes only. Restated: ROA reflective of Direct Banking segment (credit card represents ~80% of loans) and implied U.S. Cards tax rate of ~22%. ROA denominator estimated from total loans ended figures.
6 American Express: Changed reporting method as of 1Q16. Figures are for U.S. Consumer segment only and exclude small business. 7 totaled $343M as of 1Q18, compared to $309M in 4Q17 8 A/R and PV for Retail Card unit only. 9 Loss rates and ROA include all of SYNCHRONY ’s business lines (i.e., Retail Card, Payment Solutions, and CareCredit). Retail Card accounts for about 70% of total receivables. 10 Average Receivables.
We are excited to share Q1 2018: Credit Card Issuer Snapshot with you. Stay tuned for next quarter’s analysis.
Paul Sammer, Manager