Here’s a good article from PaymentsSource today. It is not about game-changing news in the credit industry but rather how infrequently thought of verticals can generate profitable niches for credit card spend. And for Private Label Issuers who provide specialized solutions, some big ticket opportunities.
- Providing goods and services to the millions of pet owners in the U.S. and globally is not just dog food, it’s really big business – as in worth billions of dollars.
- Americans own almost 90 million pet dogs, 94 million cats, 158 million fish, 20 million birds and 9.4 million reptiles according to study by the American Pet Products Association and they spent over $72 billion last year feeding and caring for them.
Synchrony and Wells Fargo have human healthcare cards that also address this segment.
- The opportunity for banks and financial services firms, as well as venture capitalists, to serve the pet industry is massive and not being overlooked. Companies such as Synchrony Financial and Wells Fargo have repositioned their human health care credit card programs specifically to serve pet owners to finance their veterinarian bills.
- CareCredit, a unit of Synchrony Financial better known for financing cosmetic, vision, medical and dental treatments, is a leading provider of financial services to U.S. pet owners. CareCredit offers a private label credit card that can be used to financed routine veterinary pet visits as well as emergencies services. The card does not have an annual fee, provides periodic no interest promotional offers and charges a 26.99 percent APR on revolving balances.
- Wells Fargo offers a similar program that is promoted through veterinarians called the Wells Fargo Health Advantage Veterinary Client Financing. Essentially the program is credit card-based, and can be used by both the veterinarian to grow his or her practice as well as by clients to fund pet health care costs ranging from routine visits to emergency and long-term care.
Wells Fargo is a multifaceted global financial institution so getting to their numbers is not as easy as payments-focused Synchrony, but look at how the Synchrony’s CareCredit business operates at this investor link. You will see how purchase volume rose in 3Q18 from $8.7 billion in spend, up 8%, to $9.3 billion. Interest and fees were more than half a billion dollars. The investor report indicates strong growth in veterinary sales.
Call me a credit card dog, but I’d chomp a rawhide bone for that revenue stream.
You will find lots of interesting tables in the PaymentSource article, mostly from the industry group, American Pet Products Association. Dog food spend, now migrating to internet channels like Amazon, grew from $48 billion in 2010 to $72 billion in 2018. Even more interesting is the way numbers parse on pet-spend. 41% goes to food, 22% to Supplies/Over the Counter Medicine, 25% to Vet Care, 3% to Live Animal Purchase, and 9% to Grooming/Boarding.
ASPCA numbers are also cited in the annual cost of ownership, ranging from almost $850 for a bunny or close to $2,000 for a big dog.
- According to the ASPCA, the first year’s pet capital and health care costs are the highest for dog owners, followed by cat owners. The capital costs do not include the purchase price of an animal and are mostly health care related items such as vaccinations, spaying/neutering costs and initial medications.
- The two most likely drivers in growing U.S. pet-oriented expenditures are a combination of increasing pet ownership, which has reached 68 percent, up from 56 percent 30 years ago; and new products which have transitioned from luxury or niche to becoming mainstream or “must have” items.
(Dog) food for thought, anyway. Niche specialization makes sense, and there are opportunities that are not as obvious as everyday card usage.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
