During its earnings call last week,MasterCard executives quietly mentioned what may be a key driverfor financial service providers for some years to come…the growingdisparity in earnings potential for U.S. consumers. This is whatthey said:
“We have two types of consumers in the United States,” Hund-Mejeansaid during a conference call to discuss the company’ssecond-quarter results. Those people who have a job and expect tokeep it “feel that they can go out and do the spending that theyneed to do,” she said. “Then, on the other hand, you have theconsumer who is not quite as well off, who is not able to do itlike that.”
If I’m a product strategist, this is a comment I need to pay closeattention to because it might be a leading indicator of what’s tocome. Namely, that there will be:
• Fewer A+ consumers for lenders to acquire, thereby increasingcompetition for this sector
• Continued growth in the subprime market, requiring more finelyhoned products to achieve sustainable profit margins
• Increasing complexity when identifying and segmenting thesegroups
The drag of unemployment and underemployment is one of the keycatalysts in pushing consumer ability and appetite to spend, buteven for those individuals who have come out the other end, thememory of lean times will remain. It has now been almost four yearssince the 2007 economic crash and most agree that our recovery isanemic at best.
This downward pressure on consumers has created a ripple effectacross every stakeholder in the payments market from issuers tomerchants to processors. We’re just now beginning to see what thelong term impact of these dynamics is having on theindustry.