As economic pressures continue to price many prospective buyers out of homeownership, Fannie Mae and Freddie Mac are turning to new credit-scoring models in an effort to widen access to mortgages.

The two agencies—which guarantee ​most U.S. mortgages—will now accept loans evaluated using ⁠the VantageScore 4.0 model, which incorporates data such as rent and utility payments in addition to traditional credit information. The goal is to improve access to mortgages, enhance affordability, and foster a more competitive housing market.

However, the same economic challenges that have hindered homebuying also make accurately assessing creditworthiness imperative to protecting both consumers and lenders. Moving away from a tried-and-true model raises questions about potential risks in the years ahead.

“FICO scores set the gold standard for credit scoring, and their U.S. model has been used in all consumer collateral classes,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “It has been tested in recessions and recovery environments for more than 40 years.”

“Lenders rely on the FICO score to manage risk from stem to stern,” he said. “These scores are used at the acquisition point, as a credit management tool, a retention tool, and even through capital markets for asset securitizations. It is a steady fact, more than 90% of credit card lenders rely on the FICO Score.”

Expanding Homeownership Access

While the importance of credit scores has not been widely disputed, some lenders have adjusted how they interpret them. For example, Fannie Mae and Freddie Mac have lowered their minimum 620 middle credit score requirement for certain home purchases and refinance loans.

The intent is to expand access to homeownership for borrowers with limited credit histories and to support “near-miss” applicants—those with sufficient income or cash reserves whose credit scores fall just below the 620 threshold.

The Best of Both Worlds

While there is broad agreement that challenges persist in the housing market, easing lending standards also carries risk if not carefully managed. As a result, a blended approach—combining traditional credit scoring with more current data on payments and debt behavior—is increasingly seen as essential.

“FICO Score 10T is an illustration of how FICO keeps its iconic scoring model relevant, as the mortgage industry requires tools that open access to borrowers who may be on the fringe,” Riley said. “The model includes trended data, such as rental payments and utilities, which will help issuers broaden access while keeping the credit score as a highly predictive risk management tool.”

The post Fannie Mae, Freddie Mac Embrace Alternative Credit Scoring appeared first on PaymentsJournal.

As loyalty programs become as valuable as the flights themselves, Bank of America and Alaska Air are doubling down on one of the industry’s longest and most lucrative partnerships.

The two companies have extended their co-branded credit card agreement in a multi-year deal, reinforcing a 30-year alliance that highlights a broader shift in aviation—the growing importance of financial partnerships as a core driver of airline profitability.

That shift was evident in 2025, when Alaska’s income from its card portfolio rose 10% during a banner year marked by the rebranding of its Atmos Rewards loyalty program and the launch of the premium Atmos Rewards Summit Card. At the same time, the airline moved to completing its integration with Hawaiian Airlines, a process that began in 2024 and is expected to wrap up this week.

That integration has also strengthened Bank of America’s hand. Hawaiian ended its relationship with Barclays after being folded into Alaska Airlines, aligning with Bank of America’s preference for fewer, deeper co-brand relationships rather than a sprawling partner network.

“Bank of America centers its card strategy along its highly respected BofA Rewards platform that ties together deposits and credit usage,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “It does maintain a few co-branded relationships, but not to the scale of Citi or Chase.”

While the bank maintains a relatively modest presence in airline co-brands—also partnering with Air France and Spirit Airlines—it has built a dominant position in the cruise industry, with ties to Celebrity Cruises, Norwegian Cruise Line, and Royal Caribbean. The contrast underscores a deliberate strategy: concentrate on fewer partnerships but extract more value from each.

That philosophy is central to Bank of America’s broader credit card push. Earlier this year, the bank unveiled a revamp aimed at lifting its customer base from 69 million to 75 million over four years, with AI playing a key role in identifying new prospects and deepening engagement with existing clients.

Extending a High-Value Rewards Engine

The renewed partnership also signals continued investment in Atmos Rewards, which as quickly become a critical earnings engine for Alaska Airlines. The program generated $227 million in profits in just the first quarter of this year, with cash earnings rising 10% year-over-year—further evidence of how loyalty programs are evolving into standalone businesses.

Industry recognition has followed. WalletHub named Atmos Rewards the Best Frequent Flyer Program for the third consecutive year, reinforcing its status as a flagship offering.

This year, the program is adding flexibility that mirrors broader industry trends—travelers can now choose how they earn points, based on miles flown, ticket price, or number of flights taken. This gives Alaska Airlines a way to appeal simultaneously to frequent flyers, premium customers, and occasional travelers.

“Hawaiian Airline Credit Cardholders will merge into the Alaska Air loyalty program, where they will be able to take advantage of the Alaska Air Atmos program,” Riley said. “The new earning structure will offer three times each dollar spent, along with free baggage checks, a common industry threshold.”

More Cards—and More Competition

Bank of America is also preparing to expand the card lineup, with new Alaska-branded products and refreshes to existing ones expected, though details remain limited.

That strategy builds on last year’s launch of the Atmos Rewards Summit Visa Infinite card, with carries a $395 annual fee and is aimed squarely at premium competitors like the Delta SkyMiles Platinum ($350) and United Quest Card ($350). Alongside it sit the mid-tier Atmos Rewards Ascent Visa Signature card ($95 annual fee) and the Atmos Rewards Visa Business card.

The Summit card has already made an impact, earning Best New Personal Credit Card of 2025 from The Points Guy. Its features—including triple points on all foreign currency purchases and on rent payments (with a 3% fee)—reflect an effort to push rewards beyond traditional travel and dining categories.

A Partnership Tested by Headwinds

For Alaska Airlines, the deeper partnership comes at a pivotal moment. Like many carriers, it’s grappling with rising fuel costs and macroeconomic pressure. The airline recently reported an adjusted loss of $193 million for Q1 2026, warned that Q2 fuel expenses could increase by roughly $600 million, and withdrew its full-year profit forecast.

Against that backdrop, the growing importance of its loyalty and credit card business is hard to ignore. The combined airline still delivered a $146 million operating profit in 2025, but the trajectory suggests that future resilience may depend on financial products as on flight operations.

The post Thirty Years and Counting: Bank of America Renews Alaska Air Deal appeared first on PaymentsJournal.

As more regions prioritize payments sovereignty, France’s Cartes Bancaires (CB) network is working to reclaim some of the market share it has lost to Visa and Mastercard.

The nonprofit network was created in the 1980s as a joint venture among France’s leading banks. However, CB has seen its domestic market share decline from over 90% to roughly three-quarters of card payments. This shift is partly due to the reliability and global reach of Visa and Mastercard’s networks, and partly due to the rise of digital-first financial players.

CB head Philippe Laulanie recently told the Financial Times that the network’s position has stabilized and interest in CB is growing again. Not only does the payments network hope to regain traction in France, but it also hopes to play a leading role in the broader push for greater payments independence in Europe.

“Cartes Bancaires is the French bank network much like an Interlink or Maestro here in the U.S.,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Most of their cards are co-branded, meaning they can run over Visa and Mastercard rails or on the CB bank rails—again, just like in the US.  However, the market share for CB has been shrinking as new fintechs like Revolut and others have driven towards exclusive deals and single-network architecture.”

Challengers and Competitors

UK-based Revolut has experienced meteoric growth, becoming a global fintech phenomenon. The company has set ambitious goals, including reaching 100 million customers by 2027 and expanding into 30 new markets by 2030. Revolut recently announced plans to establish a Western Europe headquarters in Paris and signaled that it will apply for a banking license.

Alongside fintech challenger like Revolut, CB also faces competition from emerging payment rails like digital assets—including euro-backed stablecoins and potentially the digital euro—the bank-backed Wero digital wallet, and prospective Europe-wide real-time payment systems.

An Off-the Shelf Alternative

Many of these newer rails have gained favor because the EU is increasingly searching for ways to reduce reliance on foreign payment systems. U.S.-based infrastructure, led by Visa and Mastercard, currently processes over 60% of card transactions in Europe.

Given recent geopolitical tensions and ongoing uncertainty, EU leaders have called for changes to the region’s payments infrastructure. This could potentially create an opportunity for CB.

“The political climate is now flashing a yellow light about over-dependency on US-based Visa and Mastercard, with the EU central bank pushing to bring a new network online by 2030,” Apgar said. “CB is already built and operating and could be extended in other EU countries as an off-the-shelf alternative to Visa and Mastercard.”

The post France’s CB Payments Redoubles Efforts to Vie with Visa and Mastercard appeared first on PaymentsJournal.

Despite faltering credit scores, Gen Z is charging ahead—literally—opening credit card accounts at higher rates than any other generation. In the past year, more than one in four of American adults ages 18 and 29 got at least one new card, underscoring the tough choices and high-stakes gamble facing both young consumers and the issuers courting them.

The rush isn’t about perks or rewards. According to FICO, nearly 40% of Gen Zers are taking on new cards as a financial cushion.

“When faced with job loss or income reduction over the past 12 months, 48% of Gen Z and 43% of millennials relied on credit cards to make ends meet, compared to 25% of Gen X and just 7% of baby boomers,” FICO Vice President Jenelle Dito said in a statement.

Threats to Their Credit Scores

Meanwhile, their credit scores are slipping. As of late 2025, Gen Z has the lowest average credit score among all age cohorts at 678, down three-percentage points from the previous year. That’s well below the national average of 714, placing them in what FICO describes as the “competent” to “fair” range.

A key factor is the resumption of student loan payments, which has driven scores lower. FICO reports that nearly one-third of student loan borrowers have had a new delinquency recorded  on their credit files.

Worth the Risk

Because the law prevents credit card companies from knowing how the age of their borrowers, issuers can only do so much to target, or avoid, Gen Z. Despite their higher risk, younger consumers remain a potentially lucrative market with the potential to become lifelong customers.

Card issuers can’t sustain a business by relying on 70-year-olds. They need to build portfolios around younger consumers, which means accepting some of the inherent risks of lending to this cohort.

“The whole goal is to get into the customer so you have cradle-to-grave relationships with them,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “Once they get beyond all the nuances of the early phase of life, like family and kids, they’re going to start accumulating assets, whether it’s a 401(k) or a house. You can’t just knee jerk and shut them all down because their credit scores are running high.”

The post Facing a Precarious Economy, Gen Z Turns to Credit appeared first on PaymentsJournal.

We follow the Russian credit card market, particularly after G-7 sanctions were imposed in 2022. Russia’s reactions were notable and effective. Once Mastercard and Visa moved away from the market, Russia dusted off its Mir credit card and shifted to its alternative process.

Russia’s domestic payment system worked, but mostly within the country. It had little acceptance outside of the country, and Americans are strongly advised not to visit.  In fact, the U.S. Department of State has this warning posted at their travel site: “Do not travel to Russia for any reason. U.S. citizens are at risk due to terrorism, unrest, wrongful detention, and other threats.”  For me, I’d rather sit in sunny Tampa, FL, with my American Express, Discover, Mastercard, and Visa in my hand.

From the sound of it, Russians feel the same way, and in their international travel, stick to countries like Indonesia, Thailand, Turkey, and the UAE. To each its own, I guess.

But despite Mir’s mechanical resilience, delinquencies and interest rates are off the charts. Interest rates are north of 50%, the Russian Central Bank has a fledgling credit score, and only 3.3 million new cards were issued in 2025, against a base of 100 million.

Delinquencies: Da, Off the Charts

According to this Russian news agency, “From October 2024 to April 2025, the total volume of credit card delinquencies in Russia increased by almost 70% and reached 110 billion rubles.” With inflation at the brink of double-digits, consumer life in the Kremlin is not so rosy.

What’s Next

Russia does deserve credit for Mir as a stand-in for credit infrastructure. It lacks the global capabilities of the Mastercard and Visa networks. It also lacks the collaborative support of a global network that helps with credit management and fraud controls. But, almost half a decade later, it is still working. Their home-grown credit scoring isn’t FICO Score-based, but it is better than nothing. For now, the market’s biggest challenge is to control inflation, manage down rates, and improve credit quality.

The post Credit Cards in Russia: Comrade, Watch Your Rubles appeared first on PaymentsJournal.

After processing more than 106 million disputes last year, Visa is rolling out new AI tools to tackle a growing—and often understood—problem.

Many of these disputes arise from unrecognized, but often legitimate, charges on consumers’ increasingly complex statements. This surge represents roughly a 35% increase over the past six years.

To address this pain point, Visa is launching six AI-driven tools. Three are designed to help issuers better analyze and centralize dispute data, while the other three focus on merchants, aiming to improve a longstanding challenge: data sharing between merchants and card issuers. 

“The legacy chargeback and dispute process was designed around consumers working with their card issuers and merchants working with their acquirers,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “At the same time, legacy data formats like ISO 8583 were designed to be compact for fast communications. They only allow 23 characters to be transmitted for the merchant descriptor, with no supporting info on what was purchased.”

“As consumers use cards more and more, monthly statements are typically multiple pages and consumers are challenged to remember where they shopped and what they bought,” he said. “With cryptically brief merchant descriptors and no purchase details, consumers frequently click on the ‘dispute this charge’ button next to an unremembered in their bank’s mobile app, hoping the card issuer can provide the details.”

Timed-Out Inquiries

In the current model, issuers often lack direct access to key transaction data. Compounding the issue, retrieving the information requires a complex chain of communication among the acquirer, merchant, issuer, and ultimately the consumer.

“This whole process runs on a short time window in order to provide good service to the cardholder,” Apgar said. “If the response process isn’t completed in time, the default is a chargeback to the merchant and the consumer gets reimbursed for the purchase.”

“The result is that chargebacks are increasing, simply because the legacy process is being overloaded,” he said. “Many of these chargebacks get classified as friendly fraud, where the consumer intentionally tries to evade a valid sale. And in fact, some of them are, but many are simply the result of timed-out inquiries.”

Piloting an Answer

Because many steps in the dispute process are still manual, the current system struggles to scale alongside the increasing volume of credit card transactions and disputes.

“The answer is to build a process where card issuers can communicate directly with merchants to obtain more detailed info about who the merchant is and what the consumer bought there,” Apgar said. “There are number of different models being piloted now, including a shared database where merchants upload info for access by issuers and an API hub that enables issuers to query merchants and for merchants to provide automated replies.”

“Issuers can also use this data to proactively expand their cardholder statements and head off inquiries from consumers by providing detailed purchase info upfront,” he said.

The post Visa Streamlines Credit Card Disputes with New Tools appeared first on PaymentsJournal.

Amazon approaches U.S. card issuance with a Chase-branded consumer card (this one is in constant use in my household), a PLCC card (issued by Synchrony), and small-business credit cards. The strategy is to link your Prime account to the card and generate reward points.

A Shift in Partners

U.S. Bank announced it had won the small-business card issuance program, which American Express has issued for the past five years. U.S. Bank is a top card issuer and has a strong presence in retail credit cards, with a cluster of co-brands and feature-rich card programs that range from a baseline secured card to the U.S. Bank Altitude Reserve Visa Infinite card, which faces off with the Chase Sapphire. U.S. Bank also has a global merchant acceptance network and Elan, which issues more than 1,000 white-label credit cards for small banks and credit unions.

American Express is launching a new line of small-business credit cards under the Graphite moniker.  We think Graphite is a top credit card plan for small businesses, so the loss of Amazon will probably be limited for Amex. For U.S. Bank, which has been on the cusp of becoming a top small-business card, it lands them squarely in the top tier.

A Global Patchwork of Partners

As you expect with a global firm, Amazon localizes its issuance strategy. They do not have a card issuance partner in Australia, Canada, or France, but they are strong in several markets. Santander issues the co-brand in Austria and Germany. In the UK, Barclays is the partner, and in the United Arab Emirates, it is Emirates Islamic Bank.

In summary, Amazon is moving from Amex to U.S. Bank. It won’t hurt American Express, which is also rolling out the Graphite small-business card suite. For U.S. Bank, it firmly establishes them as a top-tier small-business card issuer. And for Amazon, they bring a bank card issuer running on the Mastercard rails, running in parallel with the consumer card, which Chase issuers run through Visa.

The post U.S. Bank Scores with Amazon Small Biz Card appeared first on PaymentsJournal.

Credit card holders may be more sensitive to changes in interest rates than commonly assumed. Data reveals that, on average, a 1 percentage point increase in a borrower’s annual percentage rate leads to an almost 9% drop in credit card spending the following month.

Researchers at the Boston Federal Reserve describe this adjustment as an “economically meaningful response.” In practical terms, a 1 percentage point increase in APR translates to roughly $74 less in monthly card spending.

Effects in Different Situations

However, this effect is not uniform. The impact of interest rate changes depends on whether the cardholder carries a balance, as well as their credit score. Among accounts that carry balances, a 1 percentage point increase in APR reduces spending by about 15% in the following month—nearly double the overall average effect. By contrast, spending by cardholders who pay off their balances in full each month shows little sensitivity to interest rate changes.

Still, individual responses can vary and may shift from month to month.

“We wonder about how strategic revolvers really are,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The Fed suggests a connection between interest rate increases and spending declines, but that oversimplifies what actually happens. If consumers were more strategic, we probably would not have revolving debt in excess of $1 trillion at 20.97%. In many cases, the car breaks down, the child needs medical attention, or the household budget is out of whack. Those are core drivers of revolving debt.”

Credit Scores and Other Factors

The researchers also found similar variation by credit score. Borrowers with lower credit scores reduce their spending by about 18% when APR rises by 1 percentage point, while spending among higher-credit-score borrowers changes very little.

Instead, higher-credit-score consumers tend to adjust by paying down debt, reducing their outstanding balances by about 7%. In contrast, lower-credit-score consumers primarily respond to higher rates by cutting back on spending.

Additional factors may also influence how consumers respond to interest rate changes, and remain an area for further study.

“It would have been interesting to understand the relationship between spending and interest rates, broken out by credit line utilization,” Riley said. “Are some segments blocked from spending because they have maxed out lines?”

The post How Changing APRs Affect Credit Card Users appeared first on PaymentsJournal.

As sports betting operators move away from credit cards, BetMGM is eliminating them entirely following a fraud-related settlement with Pennsylvania.

The Pennsylvania Gaming Control Board also fined BetMGM $100,000, alleging it “failed to have sufficient procedures to prevent the fraudulent behavior,” particularly in identity verification.

State regulators identified multiple cases in which fraudulent users opened accounts, moved money, and withdrew funds using stolen or fabricated identities—a pattern that persisted for several years. One individual opened 119 BetMGM and Borgata accounts and gambled nearly $900,000. In a separate scheme from 2021 to 2024, a fraud ring created 1,567 accounts, depositing more than $13,000 using stolen payment methods and withdrawing more than $28,000.

Following Other Platforms

BetMGM is the latest gambling platform to drop credit cards. FanDuel stopped accepting them earlier this year after Senator Elizabeth Warren noted that nearly a quarter of bettors used credit cards, often incurring fees as high as half of the original wager.

DraftKings cited those fees when it ended credit card payments last year. However, it was also fined $450,000 by the Massachusetts Gaming Commission for violating the state’s credit card ban on gambling. The company said it misunderstood the law, believing it applied only to users physically located in the state.

States Have Taken the Initiative

Online sports betting is now legal in 32 states, but Massachusetts and seven others already ban the credit card funding. Last week, Maine lawmakers approved a bill to do the same.

The Maine legislation also sets technical requirements to enforce the ban. Gambling operators would have to update all payment systems—including digital wallets, mobile apps, websites, and in-person kiosks—to automatically block credit card transactions.

The post BetMGM Is the Latest Gambling Platform to Move Away from Credit Cards appeared first on PaymentsJournal.

Amex and I go back to 1998, when I was growing up in the world of bank cards, learning the wonders of carrying revolving debt. But I aspired to have an American Express card, specifically, their “green card.” The business model was different than the Mastercard and Visa in my wallet.  It shifted my thinking from carrying a balance on my card to spending only what I could afford to paying in full monthly.

You can revolve now at Amex, but the discipline has been burned into my budget for years, and for that, I always think of saying “thank you.”

Staying Power

So much has gone on at American Express in the past few years. Steve Squeri became CEO in 2018 after Ken Chenault retired. If the payments industry ever had a “Hall of Fame,” Chenault would be high on the list. Among other things, he coined the word “spendcentric” to illustrate that American Express’ strategy was to build credit relationships based on transactional fees, which were less risky than bank strategies that built revenue on risk-based interest.

In his shareholder letter, dated yesterday, Squeri lists six topics in his annual review:

• $72 billion in revenue
• 12.4 million proprietary cards acquired
• >70% of newly acquired accounts paying fees
• 30 consecutive quarters of double-digit net card fee revenue growth
• 170 million merchant acceptance locations
• 65% of consumer account acquisitions from millennials and Gen Z

And credit quality has always been a mainstay. We touched on this in Javelin’s annual review of Dodd-Frank stress testing. Among 16 top financial service companies, American Express’ potential loss rates under severely stressed financial conditions were projected at only 9.7%, compared to the all-bank average of 16.9%.

A New Business Card in the Mix

In a separate announcement, American Express launched a new line of business credit cards under the moniker of Graphite Business Cash Unlimited. Graphite will stand with Amex’s line of business card products, which include Business Green, Gold, and Platinum, Amazon Business, Blue Business, Delta Business, Marriott Business, and Hilton Business.

We think Graphite will be a winner, too. Watch for Javelin’s upcoming report on the Small Business credit card market, planned for July 2026. Javelin Card Bench is currently live in the Canadian market, and we find the issuer facing off aggressively with top Canadian small business card issuers like BMO, CIBC, TD, and Scotiabank. Card Bench has a beta-version for small business cards in the U.S., and will soon integrate Graphite into the tracking of 74 small business cards issued by 20 issuers, ranging from American Express, Bank of America, Capital One, Citi, Wells Fargo, and US Bank, plus smaller issuers like 5/3, Huntington, Regions, and Truist.

The post Good Business at American Express appeared first on PaymentsJournal.

A record 111 million U.S. consumers were carrying a balance on their credit cards at the end of last year—two million more than at the end of 2024. Together, these cardholders now owe more than $1 trillion to banks.

Based on average outstanding balances, a typical cardholder making only the minimum payment would pay about $251 per month, or more than $3,000 per year. Meanwhile, interest would continue accruing on roughly 98% of the remaining balance.

Seeking a Solution

These figures come from researchers at the Century Foundation, a progressive think tank, and the nonprofit Protect Borrowers. While the groups cite these numbers to argue for lower credit card interest rates, the broader picture is more complex.

The Century Foundation supports a proposed 10% annual interest rate cap backed by President Trump and some Democrats, including Massachusetts Senator Elizabeth Warren. However, industry experts warn that capping rates at such a low level could significantly reduce access to credit cards for many households.

For one thing, rates have already begun to edge down, albeit slightly. Borrowers paid an average annual percentage rate of 22.3% in Q4 2025, according to the Federal Reserve, down from 22.8% in 2024.

Consequences of Capping Rates

The Century Foundation estimates that a 10% cap would have saved consumers $134.5 billion since Trump took office. Critics counter that such a cap would likely have restricted access to credit for many borrowers, rather than simply lowering their costs.

Separate data from Javelin Strategy & Research suggests that the cost of lending was about 13% in 2025. At a 10% cap, lenders would likely scale back lending to all but the most creditworthy borrowers—potentially those with FICO scores near 800 or higher. In practice, that could limit access to credit to roughly 200 million Americans, or about 80 million households.

“This research overlooks the fact that credit cards are helping many people affected by persistent inflation, rising rates, and an uncertain economy,” said Brian Riley, Director of Credit at Javelin. “Without access to credit cards, consumers will not have access to short-term borrowing tools that keep them afloat when the budget runs tight, the car starts to sputter, or an unexpected emergency arises.”

“Don’t blame credit card issuers, who bear the risk for the floundering economy,” he said. “Look upstream at inflation, unemployment, and household budgets in disarray. That’s the real issue.”

The post As Credit Card Balances Hit Record Highs, Is a Rate Cap the Answer? appeared first on PaymentsJournal.

The original Bilt card, sponsored by Wells Fargo, was a good effort, but the revenue dynamics didn’t work. It is not the first failed co-brand to step outside the realm of successful airline and travel partnerships. The opportunity looked promising—about a third of American households rent—but the known obstacle remained: landlords willing to part with a portion of their profits.

Was it that Bilt required their loyalty infrastructure to be the focus rather than the bank card model? What about mis-forecasting interest revenue because cardholders figured out how to game the system? Or was it just a bad marriage? Time will tell, but there are many gory details in this WSJ article.

Replacing Wells with a Small Fintech Bank?

Bilt 2.0 is off to a weak start. It looks like Wells Fargo was correct—this variation of the successful credit card co-brand model might scale, but it loses money. Now, instead of a card issuer, in business when Mastercard was Master Charge, and Visa was Bank Americard, a tiny fintech looks to replace the model that a top issuer couldn’t get to work.

Instead of a top Wall Street bank leading the charge, Bilt’s new partner is a fintech bank, named Column, NA. Column is no Wells Fargo (or BoA, Chase, or Citi, for that matter). Originally named the Northern California National Bank, it turned into a fintech bank in 2021. The bank is FDIC-insured for deposits and its national bank charter allows it to offer loan products such as credit cards. Their current assets (loans, in bank-speak), are under $1 billion, and their liabilities (deposits) are slightly more than half that. In their latest report to the FFIEC, Column NSA reported $25,000 in credit card interest earned in December 2025. Compared to Wells Fargo, that is a rounding error.

Off to a Rugged Start

Forbes reports broad dissatisfaction with the new card. Payments are not hitting properly—instead of allowing cardholders to harvest points from their shelter payments, the payments are getting lost in cyberspace. The customer service function is a mess and relies on very confused AI chatbots. Pristine credit-scored accounts are racking up late notices, and Bilt has been ineffective in providing backup support. Cardless, the program sponsor, is reported to be unresponsive.

I Know Credit Cards, and Bilt 2.0 Looks Like a Miss

After more than four decades in credit cards, I can confidently call the shot on what is a winner and what is a loser. Javelin even has a reconnaissance tool for top issuers, known as Card Bench, that reports changes to rates, rewards, or terms within minutes of the event.  But this won’t displace many cards in the market, I promise.  

As Wells exited, they offered to convert Bilt Cards to their Autograph card product, a reward-rich, good-credit-limit card suitable for general-purpose use.  I don’t have an Autograph card, but I can tell you I’ve never had an issue with Wells Fargo, and if I call customer service right now, there will be a live agent on the phone, with no more than a momentary wait. And all my payment transactions to pay and charge will go through, as you’d expect with any Mastercard or Visa payment.

Learning moment: forget about non-standard co-brands, especially those that have competing loyalty systems. And, a good partnership relies on a solid relationship, where all parties win.

The post Bilt 2.0: All Dressed Up and Nowhere to Go appeared first on PaymentsJournal.

Robinhood is jumping into an already crowded premium credit card market with the invite-only Robinhood Platinum Card. With a $695 annual fee and a range of perks, the card will compete with established offerings such as Chase’s Sapphire Reserve and the American Express Platinum Card, which carry fees of $795 and $695, respectively.

Expected to launch in Q2, the card will offer 5% cash back on dining and flights booked through its travel portal, along with 10% cash back on hotels and rental cars booked through the platform.

Cardholders must have a Robinhood Financial brokerage account to redeem the rewards they earn. Cash back is deposited directly into that account, where it can be used through the company’s travel portal or with select online merchants.

Tough Crowd

The card is aimed at affluent, high-spending households, though that segment is already heavily targeted by established premium cards.

“Robinhood’s new card is interesting, but they certainly will need to brace themselves for some well-established credit cards in this space,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “Javelin’s Card Bench indicates that the Robinhood card, issued by Coastal Bank, will have to compete against American Express’ Schwab Investment and Platinum Card, Bank of America’s Merrill Lynch Premium Rewards Card, Wells Fargo’s Advisor’s Card, UBS Bankcard, and U.S. Bank’s Raymond James Reserve Rewards+.

“Entry into this space requires that the card not only meet the standards of a premium credit card, but it also must be supported by a trading account,” he said. “That goes far beyond the standards of a block and tackle general purpose credit card.”

Building on the Gold Card

The launch is part of Robinhood’s broader push into consumer-finance services following the introduction of its Gold card in 2024. The company says that card now has more than 7 million holders and about $10 billion in annualized spending. Robinhood has also introduced wealth management and private banking features over the past year as it seeks to deepen engagement within its app.

“Robinhood’s Gold Card has experienced moderate success in the market,” said Riley. “With the new fee, Robinhood will need to ensure it can attract and retain high net worth customers with more than just baseline rewards. Cardholders in this space require a broad range of financial services, whether they rely on firms like American Express or U.S. Bank.”

The post Robinhood’s Platinum Card Enters a Packed Premium Market appeared first on PaymentsJournal.

Capital One is beginning to unveil its playbook for the Discover integration, with some of its core credit cards now being issued on the acquired network.

Updated benefits guides, first reported by The Street, show that new customers will receive Capital One-branded cards such as Savor, Quicksilver, and VentureOne on the Discover rails. Existing cardholders likely won’t see changes until their current cards expire, when they are expected to be migrated over.

Slow-Rolling the Integration

For now, the premium and business portfolios appear unaffected, including the flagship Venture X.

“Capital One is hedging its integration by keeping Venture X on the Visa network for now,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “When coupled with the brands selected to be on the four party networks, this recognizes the dominance of Mastercard and Visa networks in payment acceptance. While it does not suggest a long-term plan to remain on those networks, it suggests a thoughtful plan to execute towards the Discover network cautiously.

“Capital One’s business cards, including Spark and Venture X Business, remain on the Mastercard network,” he said. “Discover does not support a large business-card audience, and Capital One recently announced its intention to acquire Brex, a fintech with a substantial commercial card portfolio.”

The issuer is also keeping cobranded partnerships off the Discover network for the time being. That includes cards tied to T-Mobile, Kohl’s, Bass Pro Shops/Cabela’s, among others.

Shuffling the Cards

The merger of Capital One and Discover, completed in May 2025, has been rolling out in phases. The first step came through the debit portfolio, which has roughly 25 million cards in circulation.

Historically, Discover’s card business was centered on a single flagship product, the iT card. By contrast, Capital One is folding multiple rewards franchises into the network—including products with annual fees, a departure from Discover’s traditional structure—along with their no-fee counterparts. Fully consolidating the combined lineup is expected to take years.

“In the long term, it is unlikely that Capital One will operate in two network ecosystems,” said Riley. “We expect it to take five years for the full shift to take place. Converting based on expiration dates is a solid, cautious strategy.”

The post Capital One Starts Migrating Core Cards to Discover Network appeared first on PaymentsJournal.

Co-branded credit cards are a mainstay in today’s payments landscape, but how many do consumers actually hold? Recent data shows a wide range of engagement: just over half of cardholders stick with a single co-branded card, while a notable share carry multiple, with some managing portfolios of six or more. This distribution highlights differing approaches to brand loyalty, rewards optimization, and credit usage. Examining how many co-branded cards consumers own offers a useful lens into how deeply these partnerships resonate and how actively consumers are leveraging them in their everyday spending.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Databook 2026

Co-Branded Credit Card Ownership Distribution

• 52% of those with one card
• 19% of those with 2 cards
• 18% of those with 3-5 cards
• 12% of those with 6 or more cards

Source: Javelin Strategy & Research, North American PaymentsInsights 2025

About Report

The credit card industry has continued its upward trajectory despite earlier concerns that growth might plateau. In 2025, purchase volume climbed to $1.28 trillion, reinforcing cards as the preferred payment method for many consumers. At the same time, certain signals warrant attention, including declining personal savings rates that may point to heavier reliance on credit, as well as potential regulatory changes that could affect the sector’s future.

This annual report from Javelin Strategy & Research provides a comprehensive look at the current landscape. It explores how consumers across the United States are using credit cards, with detailed insights into demographic trends and key performance indicators to help gauge the market’s direction.

The post How Many Co-Branded Credit Cards Do Consumers Really Carry? appeared first on PaymentsJournal.

All indications are that 2026 credit card growth is upward, healthy, and under control, but watch out for rapid growth in unsecured installment loans. The good news is that these loans transfer high-risk credit card receivables to installment lenders. The bad news is that the growth is a subtle indicator of stress in household budgets.

Credit Bureaus Report High Growth

Credit reporting agency Equifax reported a 24.1% increase in unsecured consumer installment loans in December 2025, compared to the prior year, with 15 million loans totaling $ 62.6 billion. Seven million of those loans were classified as subprime. 

Credit card loan volumes are growing steadily, tipping the scales at $1.3 trillion in December 2025. Revolving volumes often show a bump in December because of holiday shopping. The longstanding trend is that card volumes increase with holiday spending, then when tax refunds hit in March and April, some debt gets extinguished.

But when card volumes head a steady course, and installment loans surge, an alarm bell should ring.

Ring, Ring, Ring

Consumers often use consolidation loans to pay down debt. Clever borrowers, or those with less debt, will use zero-interest credit card balance transfers. Here, they pay a 3% to 5% fee and enjoy an interest-free loan for a year. (See this report for a deep-dive on how Balance Transfers affect the card revenue model.)

Here’s the problem, though. Once the unsecured loan is approved, consumers can either keep a chunk for their household budgets and end up owing more than they started with. Or they can pay down their credit cards, keep their lines open, and juggle the new installment loan payment as they run up the card.

Neither a Borrower nor a Lender Be

Hey, I am cheap, and I save. I learned a long time ago that the dollars you bank, whether in a passbook account or a 401K, will serve you well in later years. Interest compounds, and a little pain now makes for a brighter future.

But most people don’t, and if you look at the Federal Reserve’s current numbers, we save only 3.6% of what we earn. That is much better than the historic low point of 1.4% clocked in July 2005, but much worse than the ’70s and ’80s, when the metric typically stood at 8% to 10%.

A Message to Credit Policy Managers

Credit card numbers are moving in the right direction, but be wary. When unsecured loans are booming, and when credit volumes are plodding along, keep a watchful eye on balance paydowns. When savings rates are lower, a subtle trend is brewing. Some people are juggling their credit obligations. Don’t be shy about collapsing some credit lines, as we suggest in this classic Javelin report.

The post Fast Installment Loans Growth: Card Managers Beware appeared first on PaymentsJournal.

Once the domain of luxury cardholders, metal cards have evolved into a global phenomenon. Ironically, one of the driving forces behind this momentum has been the rise of digital payments—prompting more consumers to seek out a tangible payment device that conveys prestige. A mix of cultural and behavioral factors is also fueling the worldwide demand for metal cards.

In a recent PaymentsJournal webinar, IDEMIA Secure Transactions’ Kate Eagle, Head of Growth and Innovation, Payment Services, and Hennie Duplessis, SVP of Payments Services, MEA, along with Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the drivers of metal card adoption across different markets and the lessons global issuers can draw from regional trends.

Singing the Right Song

The global metal card market has been growing at leaps and bounds. Although regional dynamics vary, several overarching trends are shaping the industry.

Competition has intensified as more players enter the space. The rise of fintechs, telcos, cryptocurrency wallets, and embedded finance providers has prompted many financial services companies to rethink their strategies.

Amid this surge in digital payment options, there has been ongoing debate about whether digital payments will eventually replace physical cards altogether. Yet rather than signaling the end of physical cards, this evolution has reshaped consumer preferences.

“The need to stand out and differentiate is becoming increasingly important because the competition is changing, and the competition is growing,” Eagle said. “The context is very different now. If you look at the digital influence in the world, metal cards have got the unique ability to go viral. If you go to Instagram and type in metal payment cards, it’s everything from unboxing experiences to talking about the perks that you get with certain cards.”

“Whether it’s the travel perks, the loyalty rewards, or the concierge services, these are all projecting an aspirational lifestyle,” she said. “It’s not just reflecting a high-net-worth or an ultra-high-net-worth lifestyle, but it’s singing the right song to the people that have got this aspirational lifestyle that want to be able to show off.”

While the appeal of metal cards is nearly universal, certain aspects resonate more strongly in specific markets. For instance, in many Middle Eastern countries, metal cards have long been associated with prestige and trust—qualities that hold particular importance for consumers in the region.

“Markets like the UAE, the Kingdom of Saudi Arabia, Qatar, Kuwait, all are incredibly competitive when it comes to payments,” Duplessis said. “These are complex, layered societies where financial needs and expectations differ quite a lot—not just by wealth—but also by things like cultural background, status, professions, religion, and lifestyle.”

“Over the last five to 10 years, banks in the region have become very sophisticated when it comes to how they segment their customers,” he said. “They’ve moved away from these wealth tiers to include things like behavior and digital adoption and different kinds of insights. It’s quite an interesting dynamic and we see a lot of potential going forward.”

Carrying Weight Across Markets

Outside of the Middle East, less traditional markets like Pakistan, Southeast Asia, and several African countries have also become key players in the metal card zeitgeist.

“Let’s look at Pakistan,” Duplessis said. “It’s a country with a high level of financial exclusion, but the payment landscape is being transformed by digital banks and telcos. For the traditional banks to stay relevant within this fast-moving digital landscape, the conventional banks are using metal cards to get back some traction on getting customers.”

“Even in this market where you see that it’s very much a digital-first market, the physical plunk factor still matters,” he said. “The sound and feel of a metal card when it hits the surface, it does carry weight—literally and as a perception.”

In Southeast Asia, the tactile and premium feel of metal cards has been a major draw. Following the pandemic and its prolonged lockdowns, consumers in the region developed a strong appetite for tangible, sensory experiences, which has translated into growing demand for physical expressions of status and quality.

In Africa, the drivers have been quite different. Although the region is a diverse continent of over 50 countries, several overarching trends have shaped the rise of metal cards. It is home to one of the world’s youngest populations, with an average age well below many other regions. Urbanization continues to accelerate as more rural citizens move to cities, while rapid advances in digital infrastructure have further connected and empowered these young consumers.

Together, these factors have created a generation that is increasingly aspirational—seeking products and experiences that reflect both success and sophistication.

“These are all prime markets for standout metal cards that are coming bundled with rewards, tailored services, things that people can aspire to and show off,” Eagle said. “These are things they can share and use within their social media and for influencing, and for taking home to their families to show that they’ve achieved something in their lives.”

“It’s a significant shift away from metal cards just being for high-net-worth. It’s this targeted focus on segments that has been the key,” she said.

The One Piece of Real Estate

In contrast, card payments are the norm in the U.S., where credit and debit cards account for roughly $8 trillion in spending per year. Additionally, revolving credit card debt totals around $1.3 trillion, compounded by an average interest rate of 22%, creating a massive U.S. credit market.

This is the market where metal cards were born, and, in many cases, have become an expectation.

“For many of these high-net-worth people and those that are ultra-high, this is just table stakes,” Riley said. “This is what I expect out of a card, and I require it when I do business stuff. When you start looking at the development of luxury cards or high-ticket cards that exceed $300 and $400 in annual fees, that’s a basic core requirement. You don’t even think twice.”

Although metal cards are a core component of premium card offerings in the U.S., innovation in this space continues. There are now platforms that offer metal cards with various weights, compositions, and designs.

This personalization can have a dramatic impact in markets like the U.S., where physical card payments are prevalent. As consumers use their cards frequently, they develop a deeper connection with them.

“Payments are getting more digital every day, there’s no getting away from that fact, but the metal card holds a special place,” Duplessis said “There’s something powerful about this physical feel—the weight in your hands—and it signals trust, prestige, and belonging. It’s emotional; it’s not just functional.”

“Even if not entirely logical, many people still feel their money is somehow safer when there’s something tangible attached to it,” he said. “In a world where everything lives in the cloud, it’s that one piece of real estate that you have attached to the financial world.”

Because there are a range of reasons why global consumers are attracted to metal cards, financial institutions must consider these nuances when implementing their metal card strategies.

“What we’ve learnt over the years is that banks need to have flexibility in terms of what they can do with a metal card,” Eagle said. “What we’ve learnt is that we need to be able to offer a customizable metal card platform and not just a one-size-fits-all, where every metal card is the same composition with the same features.”

“Having this menu of things that you’re able to do with a metal card talks very well to the banks who want to be able to segment at a more granular level,” she said. “I’m in the UK, and we produce diamond-encrusted metal cards for royalty, and we have entry-level metal cards for the youth and aspirational segments. The point is that metal cards can serve many segments, not just the most privileged.”

The Origins of Money

One key lesson that financial institutions can take from global metal card adoption trends is the importance of customizability. Issuers should develop a portfolio that offers a variety of metal card designs, allowing them to differentiate between customer segments—from aspirational users to high-net-worth.

Financial services companies should take a tailored approach with the aspirational segment, which largely consists of younger consumers. These customers are more likely to join a waiting list and pay a premium for a distinctive metal card they can show off—especially if the card offers capabilities beyond traditional payments, such as digital or crypto functionality.

Rewards are another critical factor in the success of metal card programs. Banks should consider segmenting their loyalty offerings as well. For example, perks like fast-track concert tickets and concierge services may appeal to younger users, while older customers may prioritize air miles or cash-back rewards.

Banks that strike the right balance in their metal card programs can instill a sense of status, stability, and timelessness in their brands.

“It makes me think back to the origins of money, and what is a banknote?” Eagle said. “The original conception of a banknote was that it was a promise to pay. For me, that’s what (a metal card) is. It’s representing a promise—it’s a tangible link to your life savings or to your salary or to your ability to obtain credit and pay. it’s a promise to be able to live your life.”

“Everything the physical card represents is a lot more solid when it is, in fact, solid,” she said. “It’s a tangible direct link to the brand of the bank and the trust that we have in them, the promise that they are looking after our money safely, that they are going to pay, that they are going to back up all the things that we need to do in our daily lives. This is so important in this increasingly competitive financial services environment.”

The post Why More Global Consumers Are Aspiring to Unbox Metal Cards appeared first on PaymentsJournal.

WEBINAR

The Business Case for Payment Hub Modernization

March 10, 2026

1:00 pm EST

[contact-form-7]

Are legacy payment systems holding your business back?

In today’s digital economy, outdated payment systems can be costly to maintain, pose security risks, operate inefficiently with slow batch processing, and limit your ability to innovate.  

In this webinar, Scotty Perkins, Head of Product Management at ACI Worldwide, Tyler Pichach, Global Head of AI Strategy at Microsoft, and James Wester, Co-Head of Payments at Javelin Strategy & Research, will show how a modern payment hub can deliver measurable business value and a competitive edge.   

Stop viewing payments as a cost center. Discover how a modernized payment hub can become a driver of revenue, efficiency, and innovation. 

In this webinar, you will gain insights into:

• The top benefits for payment hub modernization
• Real-time payment readiness, preparing for FedNow and RTP expansion  
• Supporting instant payment rails and ISO 20022 messaging  
• Building scalability with cloud-native solutions  
• Enabling new revenue streams and business models  
• Accelerating digital transformation initiatives

Our Presenters

Scotty Perkins

Head of Product Management

Tyler Pichach

Global Head of AI Strategy

James Wester

Co-Head of Payments

The post The Business Case for Payment Hub Modernization appeared first on PaymentsJournal.

Economic conditions often play a major role in how consumers manage credit. Changes in interest rates, inflation, and household finances can influence when people decide to apply for a new credit card. Whether consumers are looking for better rewards, lower borrowing costs, or more financial flexibility, broader economic trends help shape those decisions.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Databook 2026

Important Economic Factors in the Decision to Apply for a New Credit Card

• 73% – No annual fee
• 67% – An attractive points/rewards program
• 64% – The card had strong fraud protection features
• 63% – Good credit line
• 58% – Low APR (interest rate)

About Report

Credit card usage in the United States continues to expand, even as some observers have questioned whether the market was nearing saturation. In 2025, total purchase volume climbed to $1.28 trillion, reinforcing credit cards’ position as the most widely used payment method among consumers. At the same time, several indicators suggest areas to watch, including persistently low personal savings rates that may signal heavier dependence on credit, as well as potential regulatory proposals that could affect the industry if passed.

This annual report from Javelin Strategy & Research provides a comprehensive look at the U.S. credit card landscape. It analyzes how consumers are using credit cards today and examines trends across key demographic groups and market indicators to offer a clear picture of the industry’s current state.

The post Top 5 Economic Factors That Drive New Credit Card Applications appeared first on PaymentsJournal.

Visa has been the sole card provider for the Olympic Games for roughly 40 years, but its dominant positioning has become a point of concern at this year’s Winter Olympics.

The main issue is that all official souvenir stores at the Milano Cortina games only accept Visa or cash. With cash usage declining across Europe, many visitors without Visa cards have faced long ATM queues to access funds.

While such logistical challenges are not unusual at major events, they highlight Europe’s resilience on foreign payment providers—a dependence that has disquieted many EU leaders. This has fueled increasing calls for a stronger, independent payments infrastructure to reinforce the EU’s standing as a global financial services hub.

“The Olympics has been Visa-only since that marketing deal started way back when, but now they’re shoved into the spotlight because of global affairs, so they are scrambling to install ATMs and let people use cash,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Banks in the EU issue Visa- and Mastercard-branded credit and debit cards just like they do in the U.S; Visa and Mastercard are global brands but are headquartered in the U.S.”

“With everything that’s been happening with NATO, Ukraine, Greenland, etc., now the EU is wondering if their payments system could be at risk if the U.S. does something that makes Visa and Mastercard unavailable to the EU, or at a minimum less desirable for EU banks and consumers,” he said.

A Digital Alternative

Although there is no indication that changes to card networks are imminent, financial services are increasingly a focus for EU lawmakers. The rapid rise of U.S.-dollar-backed stablecoins has also raised concerns about the euro’s role in global transactions.

The emergence of stablecoins has intensified discussions around a central bank digital currency (CBDC). However, progress toward a digital euro has been arduous, with ongoing debates about security and the necessity of the digital asset.

Despite these challenges, the European Central Bank plans to launch a digital euro by 2029, contingent on establishing an appropriate regulatory framework. If successful, the CBDC could debut just ahead of the 2030 Winter Olympics in France.

Protecting from the Splatter

The EU’s concerns extend beyond Olympic souvenir payments. Lawmakers recently met to discuss a comprehensive payments plan that would include a euro-backed stablecoin, tokenized deposits, and a focus on ensuring that all lending and aid efforts are denominated in euros.

These discussions followed a landmark trade deal with India that carried significant financial services implications. Collectively, these initiatives signal that payments stability is a top priority for EU leaders.

“There’s also nervousness in the EU about U.S. debt at $31 trillion and growing fast, based on tax cuts and spending in the U.S. right now,” Apgar said. “Many U.S. bondholders are EU countries who are unwinding their U.S. investment positions. Combined with tariffs, Iran, Venezuela, and Gaza, some EU economists are becoming bearish on the U.S., and if our economy hits the deck, the EU is trying to protect themselves from the splatter.”

The post Olympics Payments Hurdles Are a Microcosm of EU Challenges appeared first on PaymentsJournal.

Using debt to fund gambling activities is a highly risky proposition, even more so when transaction fees are involved. That’s why online betting giant FanDuel will no longer allow customers to fund accounts with credit cards.

The ban will apply to the company’s U.S. sportsbook, casino, and racing segments and follows mounting industry pressure and regulatory scrutiny. Senator Elizabeth Warren recently urged the company to halt credit card payments, noting that nearly a quarter of American bettors used credit cards to fund their accounts and that many incurred fees as high as half of the original wager.

Rival online betting platform DraftKings cited these fees as the main reason it stopped accepting credit card payments last year. Funding a gambling account with a credit card is often treated as a cash advance rather than a purchase, allowing interest charges and fees to accumulate quickly.

“This is actually a win-win for both FanDuel and consumers,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “For FanDuel, they get some modest per-transaction cost savings, which add up over time. And they can utilize the stored-value accounts to encourage responsible play, but also to incent and reward new deposits at rates less than the transaction and interchange fees.”

“For the players, they can continue to play and use readily available funds, meaning they will not be incurring credit card debt to fund their gambling activities,” he said.

Incentivizing Betting Behaviors

FanDuel’s stored-value accounts exemplify a model that has reshaped a prepaid industry once centered largely on gift cards. In effect, these accounts function like digital gift cards purchased for self-use. Such products have surged as more organizations recognize the pivotal role stored-value accounts can play in loyalty and rewards programs.

Amid the broader expansion of the prepaid market, digital gaming and gambling have emerged as standout segments. This growth is partly driven by platform incentivizes, including deposit matches and rewards tied to specific betting behaviors.

Gambling on Prepaid

Beyond loyalty optimization, there is a more practical factor behind the digital gaming and gambling market’s recent growth: legalization. Now that online betting is legal in 32 U.S. states, the pace of expansion may begin to moderate as the market matures.

Still, the elimination of credit card payments by the two leading U.S. online gambling platforms is likely to keep digital gaming and gambling among the top prepaid segments. While some gambling platforms still permit credit card deposits, that option may diminish. Eight of the 32 states have already banned credit card funding for betting platforms, and additional states could follow.

The post After FanDuel Cuts Credit Cards, Stored-Value Accounts Take Center Stage appeared first on PaymentsJournal.

Buy now, pay later loans have become a critical tool for consumers managing everyday expenses. However, persistent concerns remain about the transparency of installment loans and the potential for misuse.

To address these issues, the United Kingdom is instituting regulations that will place BNPL providers under the oversight of the Financial Conduct Authority (FCA). The new framework has four key components. First, customers must have full visibility into the terms of their BNPL agreements, including due dates, interest rates, and late fees.

Second, lenders will be required to conduct affordability checks to ensure borrowers aren’t overextending themselves and can reasonably meet repayment obligations. Third, if a customer experiences financial hardship, lenders must provide support and debt-assistance guidance. Finally, consumers will have the right to escalate complaints to the UK’s Financial Ombudsman Service.

The Preponderance of Debt

The goal of these measures is to foster an ecosystem in which BNPL providers can operate sustainably while customers are protected. One frequently voiced concern is that the rapid growth of installment lending is contributing to a preponderance of “phantom debt.”

Because many unregulated BNPL providers were not required to report lending data to credit bureaus, there has been limited visibility into whether cash-strapped consumers are accumulating unsustainable debt.

In response, some BNPL companies began voluntarily reporting to credit bureaus. Others, however, declined, arguing that the more fluid nature of BNPL loans would not be accurately captured on credit reports.

Not a Breed Apart

BNPL companies have also resisted comparisons to traditional credit products, positioning their services as alternatives to credit cards. Yet emerging data suggests  BNPL users are not a breed apart.

Data from LendingTree found that 41% of respondents reporting making a late BNPL payment last year, up from 34% the previous year. The survey also showed that more consumers are using BNPL for routine, everyday purchases.

These trends point to ongoing financial pressure among consumers. Due to these struggles, many credit card issuers have tightened underwriting standards and lowered credit limits. As more consumers turn to BNPL to bridge the gap, concerns about phantom debt—and calls for stricter regulation—are likely to mount.

The post UK to Regulate BNPL in Transparency Push appeared first on PaymentsJournal.

Despite recent contention over interest rates and transaction fees, credit cards remain firmly entrenched in the U.S. payments landscape. To capitalize on this ubiquity, Bank of America is undertaking a credit card revamp aimed at driving profits to new heights.

A central force behind this overhaul is artificial intelligence. The bank plans to leverage AI to identify and attract new customers, while also encouraging existing clients to deepen their relationship with Bank of America.

Another key aspect of the redesign is offering tailored incentives to customers with higher account balances, a strategy long favored by credit card issuers.

“Bank of America’s strategy to further their rewards program with incentives on customer deposits enhances their strategy to leverage the credit card as a comprehensive tool for customer management,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “It expands a program they deployed for the past couple of years, and the timing is right.”

“Instead of simply associating rewards with card purchases, it considers deposit relationships and adds point accelerators,” he said. “This allows the issuer to add incremental value to consumer deposits and reward customers for their banking relationship. It is not new to Bank of America, and the functionality has been proven in the field.”

Squeezing More Value

Recent years of high inflation and interest rates have pushed consumers toward credit cards, driving balances upward and prompting issuers to tighten lending standards, lower credit limits, and prioritize stable customers.

“The timing is perfect from two perspectives,” Riley said. “First, it targets premium and luxury cardholders that pay large annual fees, such as Amex Platinum, Chase Sapphire, and Citi Strata. Secondly, with pressure on credit card rates looming, it is a way to squeeze more value out of the relationship for both the issuer and the cardholder.”

More Than Risk Mitigation

While interest rate pressures are not inevitable, many banks are preparing for a potential 10% cap on credit card rates. However, Bank of America’s strategy extends beyond risk mitigation The company has set an ambitious target: growing its customer base from 69 million to 75 million in four years.

One approach is using AI to gather deeper insights about prospective customers and deliver personalized offers at pivotal life moments, such as marriage or purchasing a home.

Ultimately, Bank of America aims to provide individualized underwriting for each customer. Once achieved, the bank has another ambitious goal: raising consumer unit profits to $20 billion—something that has only been accomplished twice in U.S. banking history.

The post Bank of America Overhauls Credit Card Program to Boost Customer Base appeared first on PaymentsJournal.

As one of the three major credit bureaus in the United States, Equifax has broad visibility into consumer credit behavior. In recent years, one notable trend has been the rise of first-party fraud, in which consumers knowingly exploit organizational policies for financial gain.

First-party fraud, sometimes referred to as consumer-engaged fraud or friendly fraud, can take many forms. One commonly cited example involves shoppers who purchase items online with the intent to return them and pocket the refund.

Equifax is leveraging its access to credit data to address two other prevalent forms of first-party fraud: loan stacking and credit washing. Loan stacking occurs when consumers rapidly apply for multiple loans with no intention of repayment, while credit washing involves attempts to remove negative information from a credit report.

To detect these patterns, Equifax is deploying its Credit Abuse Risk predictive model. The model’s primary objective is to identify suspicious application behavior in real-time, enabling lenders to be notified immediately and respond accordingly.

Justifiable Fraud

Stronger defenses are increasingly necessary, as first-party fraud has become the most common form of fraud. One reason for its growth is that many customers don’t view it as genuine fraud. Data from FICO found that nearly a third of respondents believe lying on credit applications is either justifiable under certain circumstances or simply common practice.

This mindset has been shaped by several factors, including digital anonymity and mounting economic pressure. In recent years, high inflation and elevated interest rates have ramped up financial stress, while credit card debt has prompted lenders to tighten underwriting standards.

As a result, some consumers feel validated in gaming their credit profiles or inflating details on loan applications.

When the Criminal Is a Customer

The proliferation of first-party fraud has created a new paradigm for the financial services industry, as threats increasingly originate from within the customer base rather than from external attackers. When the criminal is a customer, many organizations lack the tools and processes needed to identify and mitigate the threat.

Further muddying the waters is the emerging era of agentic commerce. As AI agents increasingly make purchases on behalf of consumers, organizations will face a host of new questions around responsibility in returns, accountability, and liability in cases of fraud—whether first-party or otherwise.

The post Equifax Launches Credit Abuse Risk Model to Detect First-Party Fraud appeared first on PaymentsJournal.

Late yesterday Capital One announced that it had acquired the commercial payments and expense management fintech Brex for $5.15 billion, half in cash and half in stock. Analysts have been noting that the price is a sharp discount from Brex’s peak valuation of roughly $12 billion, suggesting this may be reflect the broader reset in fintech valuations since 2021, but also Brex’s recent slower growth.

For some historical perspective, Capital One has made tremendous strides since launching its commercial card business in the 2000s, chiefly by leveraging its risk management and data wrangling abilities to replicate large market program economics for a portfolio understood to be mostly mid-market customers.

Launched in 2018, Brex’s commercial card portfolio seems to have scaled as fast or faster than Capital One’s, relying in large part on the same tactic of taking enterprise program offers downmarket, but with a lure of enterprise-grade expense management and controls, as well as a digital first approach. This acquisition, along with the acquisition of the Discover network, presents tremendous opportunities for Capital One in the commercial payments space.

The World’s Your Oyster, If You’ll Have It

With the Brex acquisition, Capital One seems to have all the ingredients for a scaled working-capital machine: a longstanding institutional focus on industry leading underwriting, a network where they can shape both authorization and settlement economics, and now a platform with state-of-the-art spend controls and workflows, built to draw in customers focused on leading edge tech. The three parts, properly integrated, offer the potential for a uniquely differentiated platform for commercial cards and broader commercial payments.

One hopes that Capital One sees the potential synergies in these two acquisitions, because they will need to be clear-eyed about the integration lift required to capture it. Taking on Brex while still onboarding Discover raises the risk of slower decisions, duplicated work, and blurred ownership. The ingredients are there, but realizing the full working-capital machine will take substantial execution.

Discover has historically been oriented toward retail, suggesting less expertise in commercial working-capital product development, specifically the expertise required shape a strategy to leverage its retail focused network and sales arm into something fit-to-purpose for conversations with B2B payees.

Now for the Assembly

Brex’s success is largely a product of its fintech talent and operating pace. Acquisitions often see key individuals cash out, and while the principals at Brex have committed to stay, the risk is always that talented team members accustomed to fintech environments may be less inclined to want to work for a bank. A potential mitigating factor is that Capital One is not a conventional bank: it has a long track record of behaving like a disruptor, with a product and data-led operating model and a talent base that often seems equal parts fintech and banking.

So Brex brings state-of-the-art platforms and a substantial installed base, Discover brings the opportunity to manage network pricing across buyers and sellers, and Capital One brings leading underwriting expertise and scale. A powerful combination of factors to be sure, but as with most acquisitions like these, success will be determined less by the pieces than by how quickly and cleanly they are assembled.

The post Capital One’s Brex Bargain: Now Comes the Hard Part appeared first on PaymentsJournal.

Credit scores play a quiet but powerful role in financial life, influencing everything from loan approvals to interest rates and insurance costs. While most people know whether their credit is “good” or “bad,” fewer understand how credit scores are spread across the population. Looking at these score ranges helps put individual credit profiles into context and shows how common, or rare, certain credit situations really are.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Evolutions in Secured Cards: Not Ready for Traditional Lenders

Number of People in Various Credit Scoring Segments, in Millions (2025)

• 7.0 – No credit score
• 37.9 – Poor (300-579)
• 39.8 – Fair (580-669)
• 54.5 – Good (670-739)
• 73.4 – Very Good (740-799)
• 61.4 – Exceptional (800-850)

Source: American Banker, FICO

About Report

A new type of fintech payment card is reshaping the traditional secured credit card model. Rather than asking consumers with limited or damaged credit histories to deposit funds as collateral, these products link a credit card directly to a checking-style account. When the card is used, the transaction amount is automatically pulled from the connected deposit account, effectively settling the balance right away. These credit-building cards operate on the Visa and Mastercard networks and are not offered through American Express or Discover, which issue cards directly to consumers.

From a regulatory standpoint, this structure raises open questions. Because payments are automatically covered through the linked deposit account, the cardholder is not actively managing repayment in the same way as with a standard credit card. Financial institutions have also flagged concerns around merchant impact, since transactions are processed over credit card networks with higher interchange fees rather than through debit rails that are subject to stricter pricing limits.

The post Where Do Consumers Fall Across Credit Score Ranges? appeared first on PaymentsJournal.

The secured credit card has long been the industry’s solution for consumers without credit histories. A new generation of credit builder cards is testing whether that solution still holds. Offered by several fintechs, the cards require users to fund an associated demand deposit account—often held at a separate bank—to cover card payments.

A new report, Evolutions in Secured Cards: Not Ready for Traditional Lenders, from Brian Riley, Director of Credit at Javelin Strategy & Research, examines the rise of these credit builder cards and considers what their growth could mean for established issuers and their position in the secured card market.

The Secured Credit Card

The advantages of a traditional secured card program are easy to see. By requiring a deposit account with funds that match the card’s credit limit, issuers can serve young consumers, immigrants, and others without established credit histories. As the relationship matures, the financial institution can reduce the deposit-to-credit-line ratio, with the goal of eventually eliminating the deposit altogether. When done right, this approach can turn a low-credit borrower into a customer for life.

But for much of their existence, secured cards were viewed as somewhat unscrupulous, a province of lower-tier banks. The CARD Act of 2009 put an end to many of the secured-card offers these banks had been promoting.

“You could open the account with a 900 number,” said Riley. “You could get a $500 credit line, with $490 in junk fees on it. There were lots of games on it, but the CARD Act cleaned a lot of that up. That’s when major banks got back into it.”

Competition from the Fintechs

Non-bank fintechs are also interested in building these relationships. However, only entities with bank licenses can take the deposits necessary to support a credit card. As a result, fintechs have developed an alternative model that requires partnerships with established banks: the customer deposits money into a checking account with the bank while receiving a credit card account from the fintech.

Rather than working with major banks, fintechs often partner with regional or specialized institutions like the Bank of Missouri. A few banks either rent their licenses or create white-label programs for fintechs, which typically lack the capital to assume the risk of issuing credit cards themselves.

“Remember if you have just 100 cards out there with a $5,000 credit line, you need close to half a million dollars to support that,” said Riley. “Most fintechs don’t have that warehouse credit access. The banks that have traditional programs can take deposits, hold the funds, and issue on top of all that.”

Assessing the Market

There are no precise figures to measure how widespread the credit builder market has become, but several significant players are active. Chime is now the leader in the category, offering cards through partnerships with Bancorp Bank and Stride Bank. When Chime filed to go public last year, it estimated the market at tens of millions.

“It’s really everybody with a weak FICO score that can’t just go get a regular credit card, which is about 40% of the United States,” said Riley. “Even with that, if you’re just in the prime level, like a 700 score, you can help your credit score by doing a Discover secured card.”

Escaping Regulatory Attention

The newer model offers some appealing advantages. One key benefit of the credit builder card is that it requires less money to leave the household budget when setting up the account. Instead of deposit funds into a traditional secured account, as with the secured model, the money is placed in a demand deposit account, keeping it accessible to the borrower. This flexibility allows credit builder issuers to reach a broader market.

For issuers of secured cards, another advantage is the visibility it provides into cardholders’ payment behavior and their ability to manage household budgets, including how they handle minimum and larger monthly payments.

But a notable concern is that credit builder cards have received little regulatory attention, partly due to the limited oversight capacity of the CFPB. Major banks have not yet entered this space, and fintechs offering these cards are not covered under the CFPB rules. Regulatory scrutiny is likely to increase over time, but the timing and potential impact remain uncertain.

“The cards are going to last for a while until regulators get involved and come back to the way they were, maybe at the next presidential cycle,” Riley said. “This won’t be the first thing on their plate, but sooner or later it will be on there. And banks need to be cautious about it because of the gamification around it. Is it a debit card? A credit card? Why didn’t you use a debit card in the first place?”

Play It Safe

There are no formal guidelines on how these products should work, be priced, or reported. Banks would likely be better off taking a cautious approach by supporting the traditional secured product, which has already navigated the regulatory gamut in 2009.

“Our recommendation is that we don’t think banks should be doing it,” Riley said. “Even fintechs should be wary of doing it. There’s a really good strategic reason to have a secured card strategy, but it’s the one that’s in place now, not the new model.”

Nevertheless, the credit card business can be a copycat industry, with players quick to adopt the latest trends to see if they gain traction.

“What happens a lot in this industry is that somebody gets a new idea, or a repackaged new idea like buy now, pay later, and every bank thinks they have to shift what they’re doing,” Riley said. “But you really don’t want to do it. It’s not really credit that you’re putting out there. You’ve got the money already in the debit account. Just don’t go there because, you know, be a bank.”

The post Should Banks Compete in the Credit Builder Card Market? appeared first on PaymentsJournal.

What would happen if President Trump’s proposed 10% cap on credit card interest rates were enacted nationwide? The New York Fed recently examined the effects of interest rate caps imposed by several states—albeit at much higher levels—and found that credit wasn’t so much reduced as it was reallocated.

That said, the comparison isn’t entirely apples to apples. The analysis focused on caps as high as 36% in states like Illinois and South Dakota.

Even so, the findings align with what many industry analysts suspect would occur under a much lower cap. Lending to subprime borrowers fell sharply, with the number of credit accounts dropping by 20% compared with states that imposed no caps. In effect, the caps shifted credit away from lower-income borrowers toward consumers who were already more financially secure.

No Easing on the Budget

Subprime borrowers also saw their debt balances decline by 16.9% under a rate cap, but delinquency rates did not improve. In other words, the caps reduced access to credit without reducing the risks associated with it.

“Lowering credit card rates will not particularly ease household budgets,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “A subprime account, with a score south of 720, has a wide range of obligations beyond just the credit card. Also in that budget are other loan products, such as auto financing, BNPL, and personal loans. These responsibilities often compete with expenses for daily living, rent or mortgage payments, and unexpected costs such as medical bills, auto repairs, and unstable employment.”

“A high-risk borrower is likely to default whether credit card APRs are 10% or 22%,” he said. “Factors such as strained employment and persistent inflation are wild cards that pressure household budgets, and those in riskier credit classifications are most vulnerable to unanticipated events.”

Pricing the Loan for Risk

Borrowers weren’t the only ones to see limited benefits. By constraining card issuers’ ability to price risk appropriately, interest rate caps can have adverse consequences for the overall lending pool.

“Credit scores, particularly those like FICO Scores, predict risk and help lenders navigate lending opportunities and risks,” said Riley. “Pricing the loan for risk is one of the most important components of lending, because it allows the lender to make granular assessments of the account’s ability and intent to pay. Risk-based pricing also ensures that the high risk of a weak credit account is not passed to a borrower classified as low risk.”

The post Interest Rate Caps Shift Credit Access, the Fed Finds appeared first on PaymentsJournal.

Consumers increasingly value flexibility, a dynamic that has helped buy now, pay later products become a fixture in retail payments. A new feature from Klarna and Walmart-backed fintech OnePay adds a new wrinkle to the model.

The companies are teaming up to let OnePay customers convert debit card purchases into installment loans after a transaction has been completed. For example, a consumer who buys a new TV and later faces an unexpected medical expense could use the OnePay app to turn that transaction into a four-payment BNPL loan.

“Post-pay installment plans are nothing revolutionary, they’ve been a part of the card landscape for a while now,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “But we do know that cardholders seek flexibility in how they are able to pay, and this OnePay and Klarna partnership really captures the fervor around BNPL by offering it to customers after payment.”

“We’ve seen a lot of the big BNPL vendors getting into the territory of digital banking—offering debit cards and new ways to pay—and this partnership is an extension of that experience,” he said.

Exemplifying the Trend

Klarna illustrates the broader evolution underway in the sector. The company, which built its reputation as a BNPL provider, has since launched a debit card, applied for a U.S. bank charter, and expanded into peer-to-peer payments in Europe.

More broadly, Klarna has dipped its toes in a range of emerging payments, from agentic commerce integrations to plans for a proprietary stablecoin. This expansionary approach is not relegated to BNPL firms. Many leading fintechs have moved well beyond their anchor offerings. PayPal, for instance, has recently roll out products spanning cross-border payments, agentic shopping, and tax filing.

Playing to Strengths

Although open banking has yet to receive formal regulatory blessing in the U.S., the growing breadth of fintech portfolios suggests the model continues to thrive. Third-party financial services providers form key components of open banking infrastructure, and their growth is beginning to have downstream effects on traditional banks.

Consumers have become accustomed to fintech services that are purpose-built for digital use and generally easier to access than legacy alternatives. As more fintechs offer banking services, the traditional bank relationship anchored in the demand deposit account has come under pressure.

As fintechs continue to band together and broaden their offerings, financial institutions will need to play to their core strengths if they hope to maintain customer relationships.

The post Klarna and OnePay Test Post-Purchase BNPL Conversion Model appeared first on PaymentsJournal.

Massachusetts, one of the few states where it is still illegal for businesses to surcharge customers for credit card payments, is considering new legislation that would reverse that policy. The proposal is the latest development in a broader pushback against rising credit card fees.

The Massachusetts bill, which passed out of committee last week, would allow to charge customers a fee for using a credit card, provided the surcharge doesn’t exceed the business’s actual cost to process the payment. Merchants that impose a surcharge would be required to clearly disclose the fee before payment, and the surcharge amount would have to be printed on the receipt.

The legislation also states that credit card companies cannot stop businesses from offering discounts to customers who pay by cash or check.

Who Ultimately Benefits?

Currently, Massachusetts is one of only three states—along with Maine and Connecticut—that explicitly ban credit card surcharging. While the bill is being framed as a win for both consumers and merchants, there is also much jockeying behind the scenes by payment networks, which have a financial stake in the outcome.

“It’s a contentious topic because the networks don’t like it,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “Surcharging causes people to switch into different payment methods in order to not have to pay the extra fee. If they pay in cash, Mastercard and Visa lose out on that transaction.”

Consumers don’t like it either, especially younger ones. According to research from Javelin, roughly a quarter of consumers ages 18 to 44 say they would take their business elsewhere if required to pay a credit card surcharge.

Credit card surcharging can also push consumers toward debit cards. While the average credit card surcharge hovers around 2% to 3%, debit card surcharging remains illegal in all 50 states.

Trump Weighs In

The issue gained greater salience when President Trump, fresh off declaring a 10% cap on credit card rates, endorsed the long-stalled Credit Card Competition Act (CCCA). The law would allow merchants to choose from multiple payment networks.

Its stated goal is to break the current dominance of Visa and Mastercard, who control 80% of all payments, fostering competition that could ultimately lower costs for consumers. Laws like the Massachusetts proposal could put consumers in a position to see exactly how much their credit card usage costs and to choose their preferred payment networks accordingly.

The post Massachusetts Bill May Pass Credit Card Surcharges to Consumers appeared first on PaymentsJournal.

When the president announced the following statement on credit card price controls, credit policy managers must take note and prepare for market disruption.

Javelin commented on this topic in September 2024, when candidate Trump raised the 10% rate cap during his presidential campaign. (See: Market-Drive, Risk-Based Credit Card Price Controls Would Disrupt Borrowing and Lending). In that report, we suggested that credit card lending (and borrowing) would essentially stall because the rate would create losses for all issuers. Were it to happen, our simulation showed that credit card lenders would lose billions, ending with a potential 6.4% negative return on assets in a steady state. 

By 2028, lenders could mitigate future losses by contracting lending and imposing stricter FICO Score cutoffs. To minimize risk, credit card lenders would need to lend only to those with FICO Scores of 740 or better, representing 118 million adults. Practically speaking, they would need to cease lending to those in the United States with FICO Scores <740, or about 114 million adults.

Bracing for Impact: Consumers, Investors, Issuers, and Merchants

Credit card lenders have a responsibility to ensure lending is safe and sound and to protect their investors and balance sheets. Lending into credit score ranges that will result in losses is bad business, and financial markets will not accept operational losses, even if executive orders cause them. 

A broader concern for lenders and investors is how other financial markets, including auto loans, consumer loans, and shelter products, could be affected by an interest rate mandate. Merchants should be on notice that much of the $4 trillion that passes through credit cards is vulnerable to reductions in credit availability, which will affect verticals ranging from durable spending to everyday card use and consumable products. Credit card issuers will need to rethink their business models entirely, as profitability will no longer swing from black to red.

Four Strategies to Mitigate Risk from 10% Interest Pricing Controls

Although the discussion centered on a Truth Social post, it would be reckless not to consider the impacts and countermeasures. Here are four facets to consider; each requires some form of regulatory endorsement but is germane to the 10% issue, which will also require more than a comment on social media:

Overhaul the Minimum Due Strategy. The construction of a minimum due is an American invention that allows a small portion of the balance to be paid while interest is serviced. The metric is roughly 1/36 of the outstanding balance. Many companies use the same format, but others do not. India, for example, is closer to 1/20. This higher amount benefits the consumer by paying off a larger portion of the principal balance each month. Canadians in Ontario recently underwent a mandated increase in minimum due amounts, which appears to be successful. Although it does not affect other provinces, the province requires that all credit card transactions amortize on a 5% of balance standard. A similar action in the U.S., perhaps doubling the minimum due to a 10% increase, would mitigate much of the risk in interest rate spreads. However, expect a spike in delinquencies as households face less available credit and higher payment rates.

Shut off lending to FICO Scores < 740. This will reduce lending, but it will eliminate future lending risk to high-risk borrowers, directly improving operational revenue. Cutting off credit limits to those outside prime credit is severe, but the lender has a responsibility to its shareholders, particularly given the public benefit of credit extension.

Impose a transaction fee on borrowing. To offset the disruption caused by an interest price control, card issuers should consider alternative uses in Sharia-compliant lending. Islamic financing prohibits charging interest (riba). Fees may be charged, but interest may not. Perhaps the industry needs to consider a blended approach of reducing interest rates and adding a transaction fee to offset the revenue loss.

Make Credit Card Interest Tax Deductible Again. Credit card interest was tax-deductible up until the Tax Reform Act of 1986. To control inflation and encourage savings, the deduction was eliminated.  While the impact will vary by adjusted income, a return to deductibility would provide a meaningful benefit to many consumers, allowing the current average interest rate of 22.25 to remain competitive in the market.

Summary

The executive-level discussion of credit card interest rate price controls requires credit card issuers to position themselves and protect their investors. We propose four action items that will require bank lobbying and influence to achieve; in the interim, we suggest that each contingent be considered. For borrowers, it will be a tight credit market. For merchants, lost sales. For issuers, a revenue challenge, and for investors, an unacceptable situation.

The post 10% Credit Cards: A Roadmap for Issuers appeared first on PaymentsJournal.

India has become a nation known for financial innovation, with the widespread adoption of the UPI payment system and new approaches to lending and insurance that have helped democratize personal finance. But one area that has lagged behind is the credit card sector. Today, there are roughly 50 million credit card holders in India—seemingly a large number until you consider a population of nearly 1.5 billion. By contrast, the U.S., with about one-quarter of India’s population, has more than 600 million credit cards in circulation.

“A decade ago, credit cards in India were restricted to the urban, high-end segment,” said Vibhav Hathi, Co-Founder and Chief Marketing Officer at FPL. “It has become much more widespread, but it’s still an aspirational product.”

In a market where many consumers are still deciding whether they need their first credit card, it’s understandable that an aspirational metal card once seemed far-fetched. When FPL first explored the idea, plenty of people warned it wouldn’t fly.

But fly it did. With the help of CompoSecure, the FPL card not only succeeded but carved out an entirely new market by bucking conventional wisdom.

Finding a Differentiator

Given that India has more than a billion people without a credit card, there was clearly room for a new entrant.

“India is a terrific country for payment cards,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The Reserve Bank of India has helped democratize credit cards and enable borrowing in the nation. It is an exciting market, where 15% to 20% annual growth has been common.”

The important question was how FPL’s card could differentiate itself. With 45 cards already on the market, FPL would be entering as the 46th. Competing directly with the country’s largest card issuers made little sense for FPL, which was known for its user-friendly digital credit products developed in partnership with some of India’s major banks.

So how could FPL’s brand stand out? The answer was a physical metal card—attention-getting yet classy, and definitely not your father’s credit card. Hathi and CompoSecure recognized that the card could appeal to a market defined not by a specific demographic, but by a lifestyle.

“Our demographic segment for adopting metal was somebody who was ready to try something new,” said Hathi. “Imagine a 28-year-old software engineer who uses a QR code for a half-dollar transaction. When he or she goes to a fine dining restaurant or goes out with a group of friends, they want to flash something. It gives them a status symbol.

“That’s the demographic,” he said. “Somebody who wants to be the early adopter, somebody who wants to try out something new, somebody who’s known for adopting newer technologies.”

Three Distinct Personalities

CompoSecure further refined this target market into three distinct personas: elites, innovators, and the aspirational.

Elites represent consumers with a certain level of wealth and social status. They tend to be interested in the arts and social causes and respond to messaging around exclusivity, prestige, and scarcity. These customers want a premium feel to their physical card.

Innovators are typically mobile natives—millennials or Gen Z—who respond to messaging centered on innovation and trendiness.

Then there’s the aspirational group, known as HENRYs: high earners, not rich yet. For them, the metal card—long associated with the elite—signals the future status they aspire to.

For all three segments, the metal card elevates the credit card from a rational, transactional product to an emotionally resonant one.

“The card’s weight adds appeal, and the plunk of the metal card on a countertop has a special ring,” said Riley. “When you add in the importance of card branding, particularly as e-commerce overtakes retail sales volume, the payment card itself helps endear the customer to the issuer, and that is also a plus for the metal card.”

Rolling the Card Out

With the decision to launch a metal card made, the next step was to design and roll out the product. FPL needed to ensure that the card was more than a gimmick—it had to be a world-class offering capable of standing alongside the leading products in the category.

To reinforce the distinctiveness of the metal card, FPL created a more tangible, sensory experience. With every transaction, customers received a notification that played a metallic “clink,” echoing the sound of the card itself and adding a multisensory dimension to the brand.

Beyond prestige, metal cards are more durable than plastic, and FPL leaned into that attribute. Sustainability is top-of-mind for many consumers in India. One motorcycle manufacturer, for example, reclaimed metal from a prominent retiring warship and used it to build a limited-edition bike, which quickly became a collector’s item. Hathi wanted FPL’s metal card to evoke a similar sense of meaningful material and enduring value.

“What is the story behind my metal card?” Hathi asked. “Is it bringing purpose to somebody somewhere? Is it recyclable? Is it improving someone’s life?”

Falling in Love

When the card launched, reactions were immediate. Customers fell in love with it, forming an emotional connection that’s rare for a credit card. Some users posted unboxing videos on social media, while others even used the card to slice their birthday cake. They wanted the card woven into every aspect of their lives, creating a level of loyalty that quickly made it their  primary payment choice.

“A consumer would say, ‘Oh, is this an Indian card?’” said Hathi. “They felt proud when they went beyond India, when they were making a transaction at a restaurant and their card felt as good as any other global card. We had a customer who used it at a hundred restaurants, and we asked him why. He said, ‘I became the cool guy. I had something which others did not have.’”

The success of FPL’s metal card was amplified by its partnership with a trusted, experienced collaborator like CompoSecure, which has supported more than 150 different payment card programs. The card’s distinctive look and feel proved to be far more than a branding play—it became a serious business driver, delivering significant ROI along with strong consumer preference and loyalty.

“Metal cards are not a passing fancy,” said Riley. “They are standard-issue products for luxury cards, and they have a broad appeal to younger age groups. Every one of the premium cards in the U.S. market today, things like Sapphire and Platinum and so forth, gravitate towards a metal card, for good reasons, You will be seeing more of them in the years to come.”

The post Defying Expectations: How a Metal Credit Card Found Its Market appeared first on PaymentsJournal.

After much discussion and speculation, JPMorgan Chase has agreed to assume Apple’s $20 billion credit portfolio from Goldman Sachs.

The deal offers benefits for all parties involved. For Goldman Sachs, it represents the end of a rocky foray into consumer lending and a return to its core business. For JPMorgan Chase, the bank will acquire a sizable credit portfolio at a discount while strengthening ties with one of the world’s leading technology companies. For Apple, the arrangement places its credit business in the hands of an established consumer lender.

“The problem here is Apple wanted everybody who had a phone to have a card,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “Goldman Sachs accommodated it for a while, and then it started to blow up and you have these billion-dollar credit write-offs, and Goldman Sachs had to get out of it. Being an investment bank and then trying to move into retail—it was a very different culture.”

Weathering the Transition

To prepare for potential risks, JPMorgan will record a $2.2 billion provision for credit losses when it reports its Q4 2025 earnings. However, as the largest lender in the United States—and soon to be even larger—Chase is well positioned to weather this transition, which is expected to take roughly two years.

“It’s a win for Chase in some ways,” Riley said. “It doesn’t bring in a zillion new customers—Chase is already in one out of two households in the U.S—but it does bring in some good technology. It is a springboard to reach millennials and younger adults, but Chase is often already there. But it increases volume by 10%, and being able to do that, in itself, is important.”

In addition to the increased volume, Chase will acquire the Apple Card portfolio at a discount of over $1 billion. This reflects the portfolio’s higher concentration of subprime and less-than-optimal borrowers.

“Chase is a very conservative lender, and that’s want you want out of the biggest bank in the United States,” Riley said. “They’re not going to carry over the Goldman Sachs standards. You can expect that there are going to be bank-grade lending standards in place, and that’s important.”

That said, Chase has demonstrated flexibility in the past. For example, with its Chase Rise card, the bank has softened underwriting criteria when borrowers open a checking account. The rationale is that consumer who deposit their salaries into a checking account are more likely to be stable, long-term relationships.

A Wobbly Portfolio

While Chase could bring a similar model to Apple’s portfolio, it would still face risks that require a response.

“They can mitigate a lot of the risks by shutting down accounts,” Riley said. “When you start looking at the portfolio and you get down and dirty into it, there’s going to be some pockets they want to grow and there’s going to be some pockets they want to diminish. They can do that systemically and not have the emotion of tying into the old business.”

Cleaning up Apple’s portfolio will require significant legwork on Chase’s part, but this has already been factored into the deal.

“The big thing to point out is usually these deals come with a premium,” Riley said. “This comes with a discount, and that tells you how wobbly the portfolio is. It will take years for that to work its way out of the system, but it’s something that Chase is used to. It’s a very large bank with lots of computer horsepower behind it.”

The post JPMorgan Chase Brings a Fresh Approach to Apple’s Credit Card Model appeared first on PaymentsJournal.

The CFPB remains in flux, but it met its requirement to report on the credit card industry. Although the report is typically produced mid-year for the prior year, the requirement was met when it was published on December 30, 2025.

The report is full of relevant industry metrics that indicate the business is operating effectively. You can find the 191-page missive here. We identified 12 key items that provide a clear view of what is happening in U.S. Payments.

Where People Use Their Credit Cards and the Balances They Carry

• The top 5 spend categories were retailers ($743 billion), professional and financial services ($646 billion), food and groceries ($319 billion), restaurants ($317 billion), and transportation/travel services ($238 billion).
• Superprime credit card users carried the lowest amount of monthly cycle-ending balances, at $2,551 as of July 2024. This was up from $2,045 in July 2014. Weaker-scored segments increased more substantially, with Deep Subprime surging from $3,480 to $5,484, and Subprime rising from $3,562 to $5,960 during the period between 2014 and 2024.
• The average APR for a Superprime cardholder went from 15.1% in Q1 2015 to 23.1% in Q4 2024.  Cards were much pricier for lower-scoring segments, with Deep Subprime rising from 22.1% to 29.1% over the same period.

Payment Habits Were Healthier

• In 2015, 36.3% of cardholders paid their total balance; in 2024, the metric hit a lofty 42.5%.
• For minimum due payers, only 5.5% of super prime paid the minimum due only, versus Subprime, with a whopping 30.9%.
• Persistent debt, those dollars that languished for more than a year, affected 41.1% of Subprime and Deep Subprime, and only 2.4% of Superprime.

Fewer Bank and Credit Union Issuers

• 1,146 banks carried credit card balances in 2015. The number plummeted to 724 in 2024.  Credit union issuers fell from 3,614 down to 2,972.
• Distribution of card balances by issuer size was constant, with 83.6% of the top ten issuers controlling the market, and 11.4% of those ranked between 21 and 40. All other issuers only affected 5.0% of balances.
• Big issuers had stronger portfolios. Those over $100 billion accounted for 94.9% of Superprime credit scores, compared with 5.1% for issuers under $100 billion. For Subprime and Deep Subprime, smaller banks held a 67.4% share, while larger issuers accounted for only 32.6%.

Javelin Research Cited by CFPB

• The CFPB cited two pieces of Javelin research in this critical report.
• Javelin’s 2023 Identity Fraud study was used to size the time-consuming impact of new account fraud resolution. The agency also cited Reducing Operational Risk Through Careful Credit Line Decreases, as part of a risk-averse credit card risk strategy. 

What This Means to Credit Card Issuers

2026 should be a year of “full speed ahead,” assuming the economy continues to be strong.  Anticipated tax refunds should help many clear debt, and transaction volumes should increase as consumer confidence in the economy grows. For small issuers, be careful. Offers must be more competitive to attract the best cardholders, and consumers are poised for a healthy payments year.

The post CFPB: U.S. Credit Cards are Prosperous and Strong appeared first on PaymentsJournal.

When the latest iteration of the settlement involving Visa, Mastercard, and various merchants was proposed in November, there was speculation that the deal could reshape the credit card rewards model. However, a group of retailers led by Walmart argued that the settlement doesn’t go far enough to create a meaningful impact for merchants.

Under the proposed deal, Visa and Mastercard would lower the credit card interchange fees that merchants have increasingly criticized, reducing fees from roughly 2%-2.5% by about 0.1% for several years.

Perhaps the more impactful part of the settlement is that merchants would gain the ability to decline certain credit cards—particularly high-fee rewards cards—that they were previously required to accept. Still, Walmart and other retailers emphasized that this latest settlement doesn’t sufficiently address the ongoing challenges merchants face.

“What’s being offered to merchants is not really a practical solution, allowing them to not accept higher-cost rewards cards,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “That defeats the purpose of having a shared acceptance mark like Visa or Mastercard—that was the whole power of the brands when they started. For a store to say, ‘We accept some Visa cards, here’s a list of Visa cards we do and do not accept,’ is ridiculous.”

“Retailers don’t want to be put in a position of instituting fragmented payment policies that disadvantage consumers and add friction to the shopping experience,” he said. “Merchants, for the most part, acknowledge that card payments are fast and convenient, but the rising cost of interchange and network fees has damaged the value proposition for merchants.”

Perks with Payment

One of the factors driving calls for change is that rewards cards have shifted from being the exception to the rule. Once the domain of luxury credit cards—such as those issued by American Express—more card issuers have added benefits to attract cardholders.

As consumers have come to expect perks with their payments, rewards programs have become an integral part of the credit card landscape. However, even as consumers enjoy cash back and discounts, credit card companies pass a portion of these costs to merchants. This has intensified merchants’ calls for a reduction in interchange fees.

Overlooking the Benefits

Amid the focus on costs, the substantial benefits of credit cards should not be overlooked. These payment cards have become the dominant form of payment in the U.S., offering consumers flexibility, protection, and efficiency.

The widespread use of credit cards has led to measurable increases in shopping activity and spend per visit at merchants. E-commerce, mobile payments, and contactless transactions have all benefited from their adoption.

What’s more, transaction times at the point-of-sale have been substantially reduced, while the risks and expenses associated with handling large amounts of cash have been minimized. 

“Sadly, the great benefits that branded card acceptance has brought top large-chain retailers are being completely ignored in these conversations,” Apgar told PaymentsJournal. “Cards have been part of our daily shopping lives for long enough that merchants have stopped tracking the benefits and focus solely on the expense of the fees to accept cards.”

The Final Analysis

For their part, Visa and Mastercard have been working toward a solution with merchants for years, even as they continue to deny any wrongdoing. Prior to the November proposal, the two companies reached a $30 billion settlement with merchants last year, which was initially considered a win for retailers.

However, in the final analysis, this settlement only amounted to a 0.07% reduction in interchange fees over five [or several years]. The deal was later struck down by a New York federal judge for failing to provide adequate relief to merchants.

The Walmart-led group has petitioned a federal judge in Brooklyn to reject the latest settlement on similar grounds. Additionally, there are concerns that accepting this settlement could affect other ongoing actions against the card companies.

Impacting the Business Model

The uncertainty surrounding these actions has put many credit card issuers in limbo. If the latest settlement is approved, it could significantly disrupt their rewards-driven strategies, potentially forcing them to scale back on cashback and points programs.

“There (would be) a shift of control at the acceptance point, from the card issuer to the merchant,” Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research told PaymentsJournal. “The big deal to watch is whether cardholders will lose confidence in their card. Consumers may need to have multiple cards in their wallets or purses to ensure the merchant will accept the product.”

“For some large issuers that have strong merchant relationships, this might be a positive,” he said. “But expect chaos for small issuers who might just issue one type of a credit card.”

The post Why Walmart Is Taking the Lead Against the Visa and Mastercard Settlement appeared first on PaymentsJournal.

Google Pay is launching a credit card in India, linked to the highly popular Unified Payments Interface (UPI) network. This co-branded card, Flex by Google Pay, could serve as a pilot for further global expansion.  

The digital card is issued through the Google Pay app and can be used both online and in physical stores. It offers a rewards program, tools to monitor spending and bills, and flexible repayment options, including full balance repayment or installment plans.

According to Google, the full rollout will take several months.

“In India, while digital payments have become ubiquitous, transactional credit remains underpenetrated,” said Sharath Bulusu, Senior Director of Product Management at Google Pay in a blog post. “We see an opportunity to simplify and reimagine this experience for the next generation of card users.”

Seeking a New Revenue Source

Google Pay is already widely used in India, having processed about 7.2 billion UPI transactions in October alone, second only to the PhonePe payments app. However, person-to-person payments on the UPI network generate relatively little revenue. Introducing a credit card would provide Google Pay with a substantial new income stream in the Indian market.

Although India has a population of more than 1.4 billion people, fewer than 50 million currently hold a credit card, indicating strong potential for growth in this area.

“It will not take long for the product to scale to one million cardholders in India,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The Reserve Bank of India (RBI) has taken the lead to democratize credit in that country, with strong efforts to build modern consumer protections, increase competition, and grow digital and consumer payments Mastercard, RuPay, and Visa networks.”

A Dream Market

The Flex card is a partnership with Axis Bank. Google Pay plans to expand Flex to additional banking partners in the future. With more than five billion users engaging with its search functions, Google represents a potentially lucrative market for financial services.

“Google users are a credit card marketer’s dream,” said Riley. “You can bet that if they find success in the Indian subcontinent, they will discover co-brand partners to issue with top banks in their other top markets, which include the United States, Japan, Brazil, and Germany.”

The post Google Pay Launches Its First Credit Card in India appeared first on PaymentsJournal.

There is nothing wrong with a good failure, provided you protect your investors and learn a lesson. Here’s one for the books: co-brands sounded like a winner in shelter products, but one of the best credit card lenders couldn’t build a successful model with renters, and another fintech that tried to address the homeowners market abruptly closed.

If you want a co-brand model that works, think airlines, hotels, and maybe a few solid retailers.  Margins in rentals and homebuying are too slim, the market is too fragmented, and while it appears promising, think twice.

Flop One: Wells Fargo/Bilt—The Renter Model

Wells Fargo put millions into this one, aligning with Bilt, a unique firm that services rental units, from the largest apartment groups to mom-and-pops renting out a room over the garage. Wells has been very aggressive in reentering the U.S. market, with a well-orchestrated suite of rewards-rich cards, ranging from the Active Cash Visa to the Autograph Journey and Reflect cards.

But the Bilt card was a bad marriage. Net revenue was upside down, where cardholders didn’t revolve as expected. Reward mongers hoarded points but restricted their purchases to rent payments. It wasn’t lovely, and you can read about it here.  

Cardless, a much smaller lender, is assuming card issuance in February 2026, with a markedly different model. We still think success will be elusive.

Flop Two: Mesa /Celtic Bank—The Homeowner Model

In an abrupt site message, the firm announced: “Effective as of December 12, 2025, all Mesa Homeowners Card accounts are closed. All credit cards have been deactivated, and you are no longer able to make any new purchases or earn Mesa Points.” 

Unlike Wells’ strategic, graceful exit, with alternative offerings and no knee-jerks. TechCrunch noted that the equity funding was a mere $7.2 million, so this was a relatively cheap learning experience, according to MSN News.

Why the Flop

Whether you are paying $6,000 a month for a Sutton Place apartment or a fixer-upper Craftsman home in Tampa, Florida, shelter products consume a substantial portion of the household budget. According to Fannie Mae, the debt-to-income ratio should be no more than 36% of net income. 

One possibility is that people like to keep their largest expense item clear from their day-to-day expenses. In other words, harvesting rewards on rent payments or mortgage payments will consume a substantial portion of the open-to-buy, so why cloud it with other spending, especially when you do not plan to revolve? 

Another possibility is that people use different cards for different types of purchases. Perhaps they use an American Express Blue Preferred card for groceries and a Chase Freedom card for everything else.

What’s Next

Top credit card lenders, such as American Express, Capital One, Chase, and Citibank, have avoided the shelter market for their cobrands. Don’t expect them to attempt to enter this market after Wells’ test. Middle-market regional lenders will likely avoid this segment, as it would involve fragmented lenders dealing with fragmented landlords.

For now, keep whipping out your Amex Delta, Chase United Airlines card, or even your Citi Home Depot card. And, if you want to know everything about co-branded credit card offers, take a look at Javelin Card Bench.

The post Trouble at Home: A Second Flop in Credit Card Rewards appeared first on PaymentsJournal.

Javelin’s 2026 Credit Card Trends report anticipated moderate growth in 2026, and we are pleased to see the credit reporting agency TransUnion share a similar expectation. Their numbers use a different source than the Federal Reserve numbers we use, as they rely on consumer files rather than bank filings. Either way, it is time for a breather in growth.

Pressures on household budgets and inflation are natural growth drivers. When budgets tighten, consumers tend to spend more and shift their purchases from debit to credit. Sure, rewards help drive the move, but when money is tight, consumers have few options.

Peak Growth Was In 2022

According to TransUnion’s numbers, 2020, the COVID year, saw balances actually drop 12.5%, a far cry from the usual MBO metric credit card executives often manage to, which is around 7% to 8%. The number rebounded in 2022, with an 18.5% result in credit card loan books. The number has tempered since then, with 12.6% growth in 2023, 5.7% in 2024, and 4.4% in 2025. The expectation is that 2026 credit card loan growth will be a mere 2.3%.

Why Is Growth Tempering?

Easy enough: Lenders are getting more cautious.

60-day delinquency is starting to bubble. Auto loan 60-day delinquency surged from a low of 0.92% in 2021 to 1.54% in 2025. Late mortgages rose from an uncharacteristic low of 0.82% in 2025 to nearly double, at 1.54%. Credit cards, at the decisive 90-day delinquent metric, more than doubled, going from a 2020 low of 1.30% to 2.56% in 2025.

What This Means

Lenders will be more cautious. Products for top-end borrowers, which Amex addresses with its Platinum card and Chase with its Sapphire, are a strong segment, but the mass market will tighten.

For borrowers, expect tighter lending, more application declinations, and stronger collection policies. Stricter lending policies are appropriate to help consumers regain control of their budgets as unemployment rises and the Fed continues to lower interest rates.

We think the Secured Card will help borrowers at the cusp of good credit score levels, particularly <700 FICO Scores. They will even help borrowers with mid-range scores between 700 and 720 who want to improve their performance. 

You can read about it here in a recent Javelin report: Evolutions in Secured Cards: Not Ready for Traditional Lenders | Javelin.

The post 2026 Will See Lackluster Growth in Credit: Thank Heavens appeared first on PaymentsJournal.

Recent research from CompoSecure and Capuchin Behavioural Science shows that issuing metal cards is an incredibly efficient way for banks and fintechs to acquire high-value customers, to encourage them to spend using the card (making it top of wallet) and to retain them. Today, the metal card is more popular and more in demand than ever among consumers worldwide. People are captivated by the aesthetics of these cards, the way they feel, their weight, and the distinctive sound they make.

Leveraging Metal Cards to Reinforce the Brand Among Broader Customer Segments

While metal cards were not originally aimed at wider customer groups, their issuance created a positive brand perception across broader customer segments. In today’s banking landscape, where new players continue to emerge, leading to the disintermediation and unbundling of financial services, the way a bank is perceived is arguably more important than ever. There are many ways to enhance this perception, and this research shows that one highly effective measure is including metal cards in the bank’s or fintech’s offerings.

Segmenting the Customer Base to Optimize the Uptake of Metal Cards

The research highlights specific customer segments that are particularly likely to embrace metal cards:

• Elites have considerable financial wealth, a higher social status, and refined interests such as social causes. They tend to prefer traditional banks. ‍
• Innovators are both Gen Z and Millennial customers who are drawn to lifestyle, technology, new trends, and innovation. They typically lean towards fintech providers. ‍
• Up and Coming are young, well-educated individuals (primarily Gen Z) who have already achieved significant professional success and are status-conscious. Sometimes referred to as HENRYs – High Earners, Not Rich Yet.

Immersing the Senses—the Sensory Power of Metal Cards

Compared to standard plastic cards, metal cards stand out by engaging 3 of our senses:

• They look different– sight
• They feel different – touch
• They sound different– hearing

Interestingly, the Elite, Innovator and Up and Coming segments place significantly more value on these sensory attributes than the general population.

Positioning the Metal Card to Maximize Its Impact

Compared to the general population, the aforementioned segments tend to value metal cards as “accessories.” They see the cards as symbols that communicate their values, lifestyle, identity, and status. Using a metal card becomes a form of self-expression. Interestingly, these segments prioritize experiences and emotional connections over mere functionality. It’s also important to note that these groups prefer the exclusivity of metal cards within their select group, reinforcing the successful strategy many issuers have used: offering metal cards (only) to carefully selected segments and/or pricing them with a (significant) premium compared to standard plastic cards.

Using the Right Cues When Communicating About Metal Cards

To truly captivate the Elite, Innovator and Up and Coming segments, issuers of metal cards should carefully consider the cues used in their communication. It’s important to create the impression that these cards are scarce, rare, premium, and unique. This will reinforce the FOMO (fear of missing out) effect and strengthen the sense of exclusivity. It’s also crucial to emphasize that metal cards are rare for a reason: they are (hand)crafted through long and complex processes that require expert skills, advanced technology, and specialized equipment, using rare materials.

Summary

This research highlights how today, metal cards are more popular and more in demand than ever they have been. Consumers around the world are captivated by the aesthetics of these cards, the way they feel, their weight, and the distinctive sound they make. Banks and fintechs can leverage metal cards not only to improve acquisition, spending, and retention among selected segments, but also to enhance the overall brand perception among all customer segments.

The post Leveraging Metal Cards to Attract High-Value Customers appeared first on PaymentsJournal.

In an industry dominated by plastic, metal cards stand out. Their distinctive look, feel, and even sound have drawn in an emerging customer base that sees them as powerful symbols of status and stability. While often associated with affluent consumers, metal cards represent more than just a luxury novelty.

In a recent PaymentsJournal webinar, Amanda Gourbault, Chief Revenue Officer at CompoSecure, Vibhav Hathi, Co-Founder and Business Officer at FPL, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, examined the trends shaping metal cards, their diverse use cases across global markets, and the pivotal role they are poised to play in the future payments landscape.

A Dose of Dopamine

To better understand metal card trends, CompoSecure surveyed over 21,000 consumers across 17 markets. One key finding was that metal cards often make a profound psychological impact on consumers.

“People using a metal card feel valued when they use it,” Gourbault said. “They feel noticed, they feel respected, and those are fundamental human needs. Every time you pay with a metal card, you get another little dose of dopamine which makes you want to keep doing it again. That is one of the reasons why we found that—across all geographies, all segments—87% of respondents would prefer to have a metal card over a plastic card.”

Another reason consumers are drawn to metal cards is that they engage the senses, creating a more memorable and emotionally charged experience. The sleekness, heft, and even sound of a metal card can’t be replicated by plastic cards or mobile payments.

As the world becomes increasingly virtual, a metal card represents security, solidity and durability—qualities consumers have come to value.

This preference for metal cards makes customers more likely to engage with and stay loyal to metal card issuers. In a rapidly shifting industry where e-commerce and digital banking dominate, this can be a powerful advantage.

“As you get away from the retail bank, the credit card becomes your institution’s calling card,” Riley said. “That’s the foundation for a relationship. Establishing that relationship with the metal card adds that cachet and brings it through the whole relationship. Once you get that hook in, people get used to using it and they don’t want to give it up.”

Oftentimes, once consumers start using a metal card, their loyalty deepens and they evolve into brand advocates.

“We have had customers who have taken their metal card and sliced a birthday cake with it,” Hathi said. “They are bringing the card into every aspect of their life. We have so many of our consumers who will unbox the metal card and put it on social media and drive organic traffic to us.”

Tailoring Messaging to Distinct Consumer Segments

Even though there is a strong attraction to metal cards across the board, CompoSecure identified three segments where 90% of respondents said they would choose a metal card over a plastic card: elites, innovators, and up and coming.

A commonality among these segments is that they all prioritize the payment experience over functionality. While there are additional similarities, organizations should tailor their marketing messages to each group.

“When we talk about the elites, it’s not just the ultra-high net worth, although it’s certainly people with a certain wealth and social status,” Gourbault said. “But it also tends to be those who are interested in the arts, interested in social causes, it’s that group. And they respond to messaging around exclusivity, around prestige, and around scarcity.”

Innovators tend to be Gen Z or millennial consumers. Although these younger adults are digital natives, they are increasingly drawn to unique experiences—such as paying with a metal card. To reach innovators, organizations should craft messaging around themes such as trendsetting or even accessorizing.

The third segment consists of up-and-coming consumers, often referred to as HENRYs: High Earners, Not Rich Yet. Their priorities are desirability and aspiration, so companies should adjust their marketing efforts accordingly.

“Each of these three segments has differentiations, but the way they perceive and how they accept the metal card form factor as a differentiator for themselves is unique to them,” Hathi said. “All three feel that the metal elevates the credit card from an aspirational product to something well beyond that—from a rational transaction product to an emotional connection product.”

A Metal Card Pioneer

Just as metal cards can have different meanings for various segments of the population, premium cards can also be perceived differently across markets.

In the U.S., where there are roughly 660 million cards, metal cards are a compelling niche product. In a market like India, where much of the population lacks access to credit, the prestige of a metal card is far more pronounced.

“When we started working with banks to do something different in the credit card market, India was the country where—post the entire UPI and digital revolution—digital payments were the core,” Hathi said. “Consumption became the focus for a young Indian and therefore consumer credit. You add the lure of digital, and it was whatever you do as an innovator should only be virtual. Now, here comes an organization called FPL, and we’ll do a physical metal card.”

Although the company’s flagship product is a metal card, FPL is still a digital-first financial services company. Its goal was simply to bring a tangible experience to a mobile-first card. After an initial foray into a metal card with a high annual fee—a la Chase or American Express—FPL shifted course and offered a free metal card.

This strategy paid dividends and underscored a key aspect of the digital experience: even though consumers need the convenience and efficiency of digital payments, they still crave real world experiences. FPL leveraged this demand to stand out from a large pack.

“There are 45 cards in the industry. If I’m the 46th card enabler, how do I differentiate myself?” Hathi said. “I can go and compete with the large banks through my bank partners and say here’s a 25% discount, but that doesn’t make sense. Getting a metal card was an innovation, and even our detractors tell us, ‘Do not touch the metal card proposition.’ Metal is now a brand association for us across the entire segment.”

The Warship Card

Along with the payments experience, many metal card users increasingly look for purpose and sustainability in these products.

“What is the story behind it?” Hathi said. “There was a motorbike and cycle manufacturer, and there was a very prominent and large warship which was being retired after its time was done in the navy. What they did is they took the metal out of that ship, and they created their bike using that metal, and that became a collectible. What is the story behind my metal card versus your metal card?”

In addition to a card’s backstory, the type of metal can also entice some consumers. For example, Robinhood recently released metal cards made from 10-karat gold as an exclusive for certain members.

Alternatively, many consumers seek cards that are linked to charitable causes or sustainability initiatives, or that are created from recycled materials.

“It plays to a card that we made for American Express with Delta, where we made a card out of a retired 747,” Gourbault said. “In terms of recycling, we stripped off the fuselage and made it into something that we could create into a collectible.”

A Material That Resonates

Whatever its origins, metal has long resonated with consumers. For centuries, it has been used to forge tools, craft works of art, and both adorn and protect the human body.

Beyond its practical and aesthetic uses, metals have also served as one of the most widely recognized forms of currency across cultures worldwide. For these reasons, metal cards naturally convey value and prestige to consumers—making them a compelling differentiator for card issuers.

“It’s very important in conveying the brand and I’m sure it produces brand loyalty, but it’s not just about the perks, it’s about how the card makes you feel,” Gourbault said. “The experience of these customers where they’re unboxing and they’re cutting their birthday cake, it’s all about how you make them feel. When you do that well, it produces a great return on investment.”

The post Metal Card Magnitude: How a Premium Touch Can Enthrall High-Value Customers appeared first on PaymentsJournal.

The much-discussed uncertainty around student loans is having a spillover effect on other debts, such as auto loans. But the most vulnerable area is going to be credit cards, where delinquencies for 20-somethings have been on the rise. And this scenario is likely going to get worse before it gets better.

As risky as younger people are for credit card issuers, they are also a potentially lucrative target to become lifelong customers, a group card issuers cannot ignore. In a new report, Young Borrowers: Riskier Than Ever… and the Future of Credit, Brian Riley, Director of Credit at Javelin Strategy & Research, looks at the challenges faced by issuers focused on this segment and the innovative ways some issuers are building relationships with them.

Losing Access to Credit

Student loans are just one of the pressures negatively affecting younger credit card users. Another effect is a result of the Card Act of 2009, which ended the practice of giving college students access to credit cards. The law established an ability-to-repay test on credit card lending, requiring the student to show that they would qualify for a loan, such as by meeting a certain income threshold.

“That reduced college marketing by something like 90%,” Riley said. “Even though students were mostly using them to buy pizza and beer, it gave them a foundation that you have to pay your bills on time and built up their credit history. “

Around the same time that law took effect, the student loan bubble popped up. As students stopped getting credit on their way up the ladder, they were also incurring a great deal of liability because of their student loans. These students had no established credit but did, in many cases, have substantial student loan debt.

When members of this generation entered the job market, they were also faced with the question of what to do with all that student debt. It has been suspended and reinstated and canceled to the point that many borrowers are unaware of where they stand. On top of that came inflation.

Behind the Eight Ball

The latest metrics indicate that nearly 1 in 10 cardholders in the youngest segment have reached 90-plus days of delinquency on their credit card balances. Entering 90-day delinquency is a significant trigger in credit, indicating a need to take action on the account before it gets charged off as bad debt at 180 days of delinquency.

“That is a real costly thing that credit card issuers have to deal with,” Riley said. “It comes right off their income statement. That’s where the risk is.”

But card issuers also can’t maintain a business by relying on 70-year-olds. They need to build their portfolios on younger people, which means they have to accept some of the inherent risk.

Once these younger borrowers reach their 30s, they generally start accumulating assets, whether that’s a 401(k) or a house. An issuer cannot afford to shut down outreach to this cohort because delinquencies are running high. Even if these borrowers need to be coddled at the outset, this is where card issuers begin to build cradle-to-grave relationships.

“You have to train them better, let them understand how long paying off these cards can take,” Riley said. “If you just pay the minimum due, you’ll be 50 before it gets paid off.”

The Promise of Starter Cards

One method by which issuers can gain access to young people without good credit is through starter cards, which require a deposit the borrower can then draw on through the use of the card. Before the Card Act of 2009, such cards were largely unregulated.

“There were all kinds of stories about start-up banks in South Dakota that required a $500 fee down to get the card,” Riley said. “They’ll secure it with $200 and then take $200 in fees. When the customer got the card, there was probably $100 left to use on it.”

But these cards have become much more user-friendly in recent years. Capital One, for instance, will gradually increase the credit limit above the customer’s deposit. An account that started with a $500 limit might increase to $1,000, even without the cardholder needing to add deposit money. Discover will qualify a buyer for a true credit card and refund their deposit money once they have become established.

KeyBank actually has a celebration for people when they progress from a secured card to an unsecured one, marking it as a milestone for the issuer as well as the cardholder. “You don’t want to always have the customer on the starter card,” Riley said. “You want to give them something and then start building their relationship.”

Age Unknown

Another complicating factor is that the law prevents credit card companies from knowing how old their borrowers are. But they may be able to identify applicants who are new to credit.

“When they get declined for a regular card, one option that works well is to push them down the stream that says we won’t give you a regular card, but here’s a secured card,” Riley said. “Capital One might go to Equifax and say, ‘Give me five million names of people who might have a thin FICO score or employment of less than X years.’ You can’t go in and say, ‘Give me people that are 18 to 21,’ because the Fair Lending Act says you can’t discriminate on age.”

The Opportunity in Credit Unions

One avenue that Riley recommends for young people is credit unions. The average credit union member is 53.9 years old, despite the fact that many aspects of credit unions are especially advantageous for young borrowers.

“It’s really a good place to go for a credit card because there’s a cap in there,” Riley said. “By law, they can’t charge more than 18%. They really need to foster that whole generation, shepherd them into the portfolio, and then start cross-selling.

“Once they’re there, you can’t just deal with credit cards. You have to think of the whole lifecycle and how you’re going to handle this person from cradle to grave.”

The post The Young and the Restless: Marketing Credit Cards to 20-Somethings appeared first on PaymentsJournal.

One concerning trend heading into the holiday shopping season is the rise in credit card delinquencies among the lowest-income households, even as consumers anticipate putting more spending on their cards.

Since July, 60-day delinquency rates have climbed 11% year-over-year for lower-income households, according to data from VantageScore. Middle-income groups have seen a smaller increase of 6%, while delinquency rates among high-income households have declined.

VantageScore classifies lower-income households as those earning less than $45,000 annually and high-income households as those earning more than $150,000. The company also reported a continued gradual shift toward lower credit tiers: subprime and near-prime segments have both edged higher over the past year, while prime and super-prime segments have contracted slightly.

Across all borrowing categories, late-stage delinquencies—accounts more than 90 days past due—inched up to 0.23% in October, marking their highest level since before the pandemic.

More Holiday Credit Spending

The problem may worsen over the holidays, especially given that borrowing is already at a five-year peak. While VantageScore reported that the average credit card balance held steady at $6,400 in October, the average overall credit balance inched up to $106,700. That figure is more than $1,000 higher than last October, signaling that consumers are increasingly relying on credit to cover everyday expenses.

Separate research from TransUnion indicates that shoppers intend to lean even more heavily on credit cards this holiday season. Nearly half of respondents say credit cards will be their preferred payment method this year, up from 38% during the same period in 2024. More than half also expect to spend more over the holidays.

Risk for Younger Borrowers

VantageScore attributes the rise in delinquencies to persistent inflation and a softening labor market, both of which are having an outsized impact on financially vulnerable households. Tighter access to credit may also be playing a role. While credit card originations were flat in October, they declined among Gen Z borrowers, who remain particularly susceptible to lending constraints.

The latest statistics compiled by Javelin Strategy & Research show that nearly 10% of credit card holders in the younger segment are now 90-plus days delinquent—almost double the rate for those ages 60 to 69.

The post Holiday Season Brings Added Pressure for the Lowest-Income Borrowers appeared first on PaymentsJournal.

Balance transfers can be a powerful tool for consumers who are struggling with mounting credit card debt, but such offers come with their fair share of risks. For consumers, there is the risk that rolled-over debt can avalanche if unforeseen circumstances arise and they can’t to pay off their obligations in time.

Because roughly half of consumers do not pay off balance transfers in the allotted period, issuers face the risk of default. However, as Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, detailed in the report Credit Card Balance Transfers: A Consumer’s Opportunity and an Issuer’s Bet, significant opportunities remain for those small- to mid-market issuers considering credit card balance transfer products.

Paying the Piper

Even if there are risks for consumers, the benefits of a balance transfer, when leveraged properly, are substantial. The main benefit is it allows consumers to get off the revolving debt wheel and secure a minimal or zero interest rate loan for a fixed time period. Although customers pay a fee for this right, the long-term savings often far outweigh the costs.

For issuers, one of the main advantages to offering credit card balance transfers is they realize this fee immediately, which often ranges from 3% to 5% of the balance.

Additionally, balance transfers are a straightforward way to bulk up an issuer’s portfolio because the borrowers have been pre-screened and carrying over a balance is often a lighter lift. In turn, many crucial portfolio metrics get a boost, which is typically how financial institutions gauge their performance.

Although the consumers who leverage balance transfers are often revolvers of debt, it can be beneficial for banks to have this knowledge up front. Unlike some consumer groups for which delinquencies can be unforeseen, issuers are aware that they must watch credit card balance transfer customers more diligently because of their penchant for revolving debt.

Financial institutions will have to proceed with care with these products, especially as consumers continue to battle high inflation and interest rates. If the consumer doesn’t pay off their balance within the prescribed timeframe, usually 12 to 20 months, they will be forced to pay off the remainder of the balance at the prevailing interest rate.

“Sooner or later, they’re going to hit a bump in the road, whether it be a loss of a job or some other piece,” Riley said. “That can kick off lots of interest income, but there’s a piper to be paid. Consumers can also misuse these without a doubt, where you take it out under the pretense of doing a balance transfer, transferring a 22% rate over, and then sometimes they get misdirected.

“The consumer might not be living up to that promise, and they start stacking up more debt and that can create an issue that takes years to resolve. Interest revenue is important in cards, but it also indicates the cardholder cannot extinguish their balance, so issuers must remain cautious.”

Timing and Selection

Although the nature of credit card balance transfers bring additional considerations, these are not novel products. Banks have been conducting balance transfers for years, and major banks like Citi and Chase have their own balance transfer infrastructure. However, these tools are now available to issuers of all sizes.

“Banks that use Fiserv and FIS have these tools available, but sometimes they don’t like the risk tolerance,” Riley said. “Sometimes they’re concerned about doing it, but when you look at how you’re going to compete against the top issuers, you have to have similar tools—and they’re available and they should be used.”

To mitigate the risks, these tools help issuers implement controls to keep customers current and ensure institutions are aware of any line increases. It is critical for issuers to know if customers are veering toward default so they can take steps to ensure the institution doesn’t bear the brunt of the risk.

This risk means issuers must also be judicious in how they offer credit card balance transfers. These tools shouldn’t be offered to every customer; institutions should identify demographics where there are balances within accounts that are at other institutions and start there.

Additionally, issuers should be cognizant of seasonal concerns. For example, September may not be the best time to offer a balance transfer because summer is over, many borrowers or their families are returning to school, and there are often too many financial balls in the air.. The beginning of summer or the winter holidays are two better opportunities to send balance transfer offers.

These two aspects—selecting the right customers and choosing the right time—are critical to the success of credit card balance transfers. When offered properly, balance transfers can be a powerful tool for customer retention.

“Credit card issuers have an issue on the number of people that have tried either voluntarily or involuntarily over the year and they have to make that gap up when the next year rolls around  if they want to grow,” Riley said. “It would be covering attrition rates that could be 7% to 10% and the next year’s bogey, so being able to hold these in place is important.

“This is a good retention tool because it does keep the customer engaged. It’s giving them something of value in a controlled situation, and you’re not lending the money forever. It’s on a specific term.”

The Retention Potential

Some banks have been aggressive with the terms they offer for credit card balance transfers, but the risks involved mean a more measured approach may be prudent.

“I saw one recent offer on a zero balance transfer that puts you out to 2027 already,” Riley said. “That’s about the limit that you want to do. It’s maybe 16 months. But being able to integrate that in the strategy for retention is important.”

This retention potential, coupled with immediate fee realization and portfolio enhancement, means that properly managed credit card balance transfers offer a significant opportunity for financial institutions.

The post Navigating the Risks and Rewards of Credit Card Balance Transfers appeared first on PaymentsJournal.

As the 2025 holiday season approaches, a convergence of payments technology—from embedded financial services to agentic AI—will influence consumer shopping behavior. Adobe for Business projects point-of-sale financing transactions will value $1 billion on Cyber Monday alone. Additionally, shoppers will use mobile payments for 56.1% of holiday sales, marking the first time mobile purchases exceed half of overall spending.^[i] Are your merchants set up for success?

Let’s look at a use case. A merchant offers flexible financing options to a customer shopping for a smart TV at checkout. The customer chooses a 6-month installment plan, receives instant approval, and finishes the purchase directly on the merchant’s website or within their app. The shopper gains immediate access to financing, making the high-ticket holiday purchase more manageable.

For the retailer, embedding lending means higher conversion rates, reduced cart abandonment, and increased average order sales. The ISV benefits through monetizing the lending feature through a referral fee or revenue-share model while creating more value for its merchants. Everyone in this scenario benefits.

What to Look for in a Lending Solution

So, how can ISVs implement financing options in their software? They can integrate a fully headless API solution to gain maximum flexibility in customizing the user experience. This approach enables ISVs to tailor the financing flow to their brand’s specific needs, differentiate themselves in the market, and accelerate their speed to market.

Beyond providing a holistic software solution, ISVs need to consider a solution that supports how consumers want to pay, including mobile terminals, self-checkout kiosks, and unattended payment methods—all optimized for holiday traffic and offering financing options.

Software companies should seek a robust suite of RESTful APIs that supports every stage of the point-of-sale (POS) lending lifecycle, offering granular control and customization. Alongside advanced API capabilities, they should prioritize clear documentation, strong developer resources, and a sandbox environment that streamlines integration and reduces friction.

Bringing it All Together – U.S. Bank | Elavon

ISVs thrive with a payments partner that goes beyond basic acceptance. In a crowded market, offering end-to-end payments technology—from checkout to financing—helps your merchants boost revenue and build stronger customer relationships. When shaping your long-term strategy, choose a proven partner that supports your growth and embeds value throughout the payments experience.

Explore what’s possible with our award-winning APIs^[ii], a comprehensive ecosystem of integrated software solutions, and Avvance™, our point-of-sale lending platform designed to streamline the consumer journey.

Ready to expand your capabilities? Backed by the strength and stability of U.S. Bank, we bring global payments expertise so you can focus on delivering more value to your customers. To connect with us, simply fill out our short form.

[i] Adobe for Business
[ii] 2024 API Awards

The post Empowering Merchants with Embedded Lending: How ISVs Can Optimize Revenue This Holiday Season appeared first on PaymentsJournal.

As more consumers feel the impact of holiday spending on their budgets, PayPal is launching its buy now, pay later service in Canada.

Customers will be able to split purchases between $30 to $1,500 into four installments, as long as the merchant is a PayPal partner. One of the goals of the launch is to give consumers another payment option during tough economic times, as many have turned to installment loans to navigate financial quandaries.

However, PayPal is entering a market already served by Affirm, Klarna, and Afterpay, which have established BNPL offerings in Canada. Still, PayPal has managed to achieve approximately 20% quarter-over-quarter volume growth in the highly competitive U.S. market, where these same rivals operate.

A Need for Alternatives

PayPal recently expanded its U.S. offering to let customers make in-store purchases using BNPL—previously available only for e-commerce transactions. To encourage adoption during the holiday season, the company is also offering 5% cash back on all BNPL purchases through the end of the year.

Consumers have shown growing interest in alternative payment methods. PayPal highlighted this in its research, which found that roughly 60% of U.S. consumers are more concerned about holiday spending this year, while over 80% of shoppers who have used or considered BNPL plan to use it for holiday purchases.

A Popular Refuge

BNPL has become a popular lifeline for consumers, largely because these products typically involve low or no fees and often don’t require credit checks.

While concerns persist about potential misuse and the need for stronger regulatory oversight, BNPL loans seem destined to play a substantial role this holiday season. According to Adobe, BNPL purchases on Cyber Monday are projected to reach $1 billion for the first time.

This trend could benefit merchants who view BNPL as a tool to increase average order value. And for Canadian customers, it could enhance cross-border purchasing power, as they’ll now be able to use BNPL at U.S. based-merchants within PayPal’s ecosystem.

The post PayPal Brings BNPL to Canada as Holidays Approach appeared first on PaymentsJournal.

It was a good idea at the time. No issuer made a meaningful play to create a co-brand in the rental industry. With almost 50 million households renting their homes, couldn’t a top issuer come up with a program that rewards all parties to create a leading co-brand franchise? With top issuers offering cobranded cards in partnership with airlines, retailers, and other entities, there is evidence that these alignments are effective, fueling the majority of credit card offerings in the United States.

The answer, so far, is no. Javelin Card Bench, a competitive intelligence tool for top credit card issuers, observed that Wells Fargo officially pulled back the Bilt application site. Card Bench identified this shift within hours of the change.

The Bilt/Wells Fargo relationship has been floundering almost from the beginning. It made a big splash, with a promising pipeline, but cardholders outsmarted the marketers. Savvy cardholders did not revolve as expected (though who would want customers who do not settle their rent monthly), and they rarely used the card for substantial purchases beyond the credit card link.  The WSJ conducted a deep dive on the downfall of the card more than a year ago, which can be found here. A snippet of the Javelin Card Bench Flash Report appears below.

Lose One, Gain One

One of Javelin Card Bench’s reporting functions is the Flash Report. Users can receive journalized daily change updates or cluster them over a few days, as illustrated in this example.  Here we see the Wells termination and a new launch by Capital One on their T-Mobile Visa card.  In contrast to the Bilt relationship, we believe Capital One can be a winner if it provides value to its mobile base, which includes approximately 130 million people. Capital One, now with Discover as the top U.S. card issuer, is no novice to credit cards and has deep experience with running cobrands. However, that is a story for another day.

Watch for Bilt 2.0

Bilt continues to be a strong business on its own, but has a new suitor for its cobrand, named Cardless. This will be interesting to watch. Cardless is not a top issuer like Capital One, Discover, or Wells Fargo. They issue cards through First Electronic Bank, based in Salt Lake City. Cardless offers an embedded card platform and has a few interesting clients. 

And, the world can use another stab at linking renters to credit cards. Although the margins are tight, there are plenty of them. As we say in credit card payments, you can always make up the margins with volume.

The post Evicted: Wells Fargo Stops Marketing Bilt appeared first on PaymentsJournal.

After decades of contention, Visa and Mastercard are reportedly ironing out another settlement with merchants over interchange fees.

According to the Wall Street Journal, the two companies may agree to incrementally lower credit card interchange fees merchants pay—from current rates of roughly 2% to 2.5% to about 0.1% over several years.

While that reduction would be significant, another aspect of the proposed settlement could have even greater implications: it would allow merchants to decline certain credit cards—namely high-fee rewards cards—at the point of sale, when they were previously required to honor all cards.

“The core value proposition of the Visa and Mastercard brands is the ability to unite many issuers and merchants under a common brand,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The brand mark tells consumers that you can use your card here, you don’t have to worry if the merchant accepts only Chase or Citibank cards.”

“Splitting the Visa and Mastercard brands into rewards and non-rewards will create confusion among cardholders about which type of cards that a merchant accepts—the exact issue the brands were created to avoid,” he said. “Will merchants need new signage that says which kinds of cards they accept?”

The Price of Milk

This uncertainty could rapidly become disruptive because rewards cards have shifted from being the outlier to becoming the norm. Visa and Mastercard initially introduced rewards cards to compete with American Express for high-income customers.

Because Amex charged merchants more to fund its rewards program—roughly 3.5%—Visa and Mastercard issuers followed suit, introducing their own rewards cards with higher interchange fees. At first, the limited number of rewards programs meant the share of transactions subject to higher fees was small, so the impact on merchants was nominal.

“What nobody saw coming was a war among issuers racing to get in on the action, building up to where 90% of cards now are rewards cards,” Apgar said. “Even though the interchange rates haven’t gone up per se, the effective cost to the merchant has increased steadily as more of the cards they accept qualify for the higher rewards interchange.”

However, the higher transaction fees are also one of the reasons American Express has not been as widely accepted as Visa and Mastercard. Now, those same companies are facing similar pushback from merchants.

“Nobody expected the rewards market to get so big, but how do you get the toothpaste back in the tube?” Apgar said. “I think Visa and Mastercard are betting that merchants won’t opt out of rewards card acceptance, and they’ll get merchants to accept a compromise they can’t use. That’s a risky strategy in my opinion, as there are merchants ready to do that. Costco has one foot in that direction—where they accept Visa, but the only Mastercard they accept is the Costco Mastercard.”

“I go back to Econ 101: the price of milk must be low enough so that consumers will buy it, yet high enough that farmers will produce it,” he said. “That’s when the market is in equilibrium. The interchange seesaw has tipped too far, and merchants generally agree that the cost of card acceptance is too high. Farmers aren’t selling milk—they are turning it into cheese.”

A Shift of Control

The question for Visa and Mastercard and their issuers is how to restore equilibrium—where merchants view interchange fees as fair and consumers can still enjoy the rewards they value.  

While there may not be an immediate answer, any settlement between the credit card companies and merchants would still require court approval—a stage where previous proposals have stalled. Still, credit card issuers should prepare for a sea change.

“In the new world, consumers will need to know if a merchant will accept their specific card,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “The situation can get very complicated if the card is an enhanced product such as Mastercard World Elite or Visa Infinite. There is a shift of control at the acceptance point, from the card issuer to the merchant.”

“The big deal to watch is whether cardholders will lose confidence in their card,” he said. “Consumers may need to have multiple cards in their wallets or purses to ensure the merchant will accept the product. For some large issuers that have strong merchant relationships, this might be a positive. But expect chaos for small issuers who might just issue one type of a credit card.”

The post Visa and Mastercard’s Merchant Settlement Could Imperil Rewards Cards appeared first on PaymentsJournal.

Fannie Mae is lowering its minimum 620 middle credit score requirement for purchases and refinance loans—a move that could broaden access to homeownership for borrowers with thinner credit files or lower scores.

Following Freddie Mac’s lead, Fannie Mae is removing the threshold from its Desktop Underwriter (DU) eligibility determination system. While DU may no longer require a credit score, it will continue to evaluate loans using a comprehensive set of credit risk criteria to determine whether they qualify for sale to Fannie Mae.

The impact on homebuyers could be significant, even though Fannie Mae and Freddie Mac do not originate mortgages directly. These entities purchase loans from other mortgage lenders, but lenders often check borrower eligibility in DU and Freddie Mac’s platform before issuing loans.

The policy shift could especially benefit “near-miss” borrowers: those with consistent income or cash reserves but credit scores that previously fell just below the 620 cutoff.

Still, Fannie Mae will continue to weight multiple risks, including property attributes, occupancy status, whether the loan is a purchase or refinance, borrower debt levels, and available cash reserves.

An Older Homebuyer

This change in eligibility criteria comes amid mounting challenges for younger consumers trying to buy homes. According to the National Association of Realtors, the median age of a first-time U.S. homebuyer has climbed to a record 40 years old—a sharp jump from 33 just five years ago.

At the same time, first-time buyers now account for less than a quarter of all home purchases, the lowest share in nearly 45 years.

Gauging the Risk

Although removing credit scores from the mortgage eligibility equation could open the door for more buyers, credit scores are still a critical measure of borrowers’ ability to repay loans—and a key indicator of broader economic health.

Recent data from credit bureau TransUnion found a widening divide in consumer credit profiles, with borrowers classified as either super prime or subprime, leaving fewer in the mid tier. This polarization has been driven by long-term economic turmoil and rising household debt.

In addition to credit card debt, which has been hovering near all-time highs, more consumers are taking on unsecured personal loans, and auto loans have veered into delinquency. Since Fannie Mae and other mortgage lenders must still consider this debt when determining loan eligibility, it’s unclear whether removing the credit score requirement will meaningfully expand access to homeownership.

The post Fannie Mae to Drop Minimum Credit Score for Homebuyers appeared first on PaymentsJournal.

The travel and expense reimbursement process is a common pain point for many organizations—an issue American Express and Emburse aim to solve with virtual cards.

Within Emburse’s expense management platform, Amex is introducing virtual card issuance capabilities, coupled with real-time transaction data that give organizations visibility into card activity.

For example, a customer could issue an Amex virtual card for a business trip. Once issued, expense entries would automatically be created, and the organization would receive card live updates on card spending as they occur.

Self-Evident Applications

Many industries are only now realizing the benefits of using virtual cards for enterprise payments. Each virtual card is issued with a unique card number, expiration date, and security code—details that not only protect sensitive data, but can be leveraged for reporting.

The advantages of virtual cards in travel and expense management are clear, especially compared with the traditional process where employees pay out of pocket and later submit receipts for reimbursement.

Beyond that, virtual cards also offer distinct benefits over company-issued physical cards. They are far less likely to be lost or stolen, and organizations can set precise spending controls. These may include transaction limits or restrictions that confine a virtual card’s use to specific vendors or sectors.

Furthering the Use Case

While travel expenses are a common use case for commercial virtual cards, their potential extends much further. In fact, virtual cards are often much more efficient for any employee-initiated purchase. This allows employees to make indirect yet essential purchases, including maintenance items or event supplies, without having to go through the purchase order process.

While the benefits of virtual cards are significant, many companies remain unsure about how to deploy them effectively.

“It’s only good to be used to make payment to that one supplier, conceivably on that day,” Hugh Thomas, Lead Commercial and Enterprise Payments Analyst at Javelin Strategy & Research told PaymentsJournal. “It’s got all the benefits of a card wrapped on top of it, the recourse to charge back if you don’t get what you said you were ordering, and so forth.”

“Now you have a solution that has a bunch of benefits to it, but also a bunch of costs to it where you need to be conscious of where the thing is best applied—and that is not something that’s immediately intuitive,” he said.

The post Amex and Emburse Launch Virtual Card Program for Expenses appeared first on PaymentsJournal.

Student loan repayments have followed an erratic path since March 2020. Payments were suspended at the start of the pandemic, resumed in October 2023, and many borrowers received forgiveness under the Income Based Repayment plan before that program was suspended again in July 2025.

The regulatory whiplash has created predictable consequences. As of April 5, 8 million federal student loan borrowers were 90 days or more past due on their payments, according to TransUnion. Nearly a third of all borrowers are now delinquent, and credit scores among student borrowers have dropped by an average of 60 points.

The damage extends beyond individual credit reports. Lenders and servicers face mounting operational costs from increased customer service volume, technical updates to payment systems, and compliance overhead. Call centers struggle with volume while navigating unclear guidance that puts their reputation at risk regardless of whether they’re perceived as too lenient or too aggressive.

“Lenders need to be very cautious about the space because a lot of these payments that have been suppressed since COVID are coming back to being collected,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “All the judgments they’ve made in lending have used an ability to repay rule, but now these are back on their files and actively being collected. It very well could displace a lot of the good decisions that were made before by the realities of student debt.”

The Communication Gap

Traditional outreach methods fail with Gen Z and Millennial borrowers. Direct mail goes unopened. Phone calls go unanswered. These borrowers live on their phones, but not in their voicemail.

What does work? Mobile notifications, SMS, and email. According to the 2025 ACI Speedpay^® Pulse Report, more than 70% of Gen Z and Millennial consumers prefer receiving billing reminders via mobile notification or text. More than half say they’re more likely to pay on time when prompted digitally.

The preference goes beyond communication channels. These borrowers expect self-service tools that allow them to make urgent payments, update account information, and adjust repayment plans without waiting on hold or explaining their situation to a representative.

“They don’t feel the need to interact with somebody,” said Dylan Lerner, Senior Analyst of Digital Banking at Javelin Strategy & Research. “They like being able to make a payment on their own time, in their own way. And digital wallets are one way to do that.”

Why Digital Wallets Matter

More than a third of consumers now use mobile wallets to store nonpayment items such as digital tickets, boarding passes, and loyalty cards, according to ACI Worldwide research. Most consumers say they would stop using a provider that doesn’t support digital wallet options.

The trend is particularly pronounced among younger consumers at the center of the student loan crisis. They grew up storing items in digital wallets and using them for payments across multiple services. The behavior is already established.

ACI Walletron^® has integrated with Google Wallet, Apple Wallet, and Samsung Wallet, managing more than 10 billion bills across these platforms. The digital passes provide one tap access to payment portals and use push notifications to deliver timely reminders about due dates.

The functionality extends beyond simple payment reminders. Lerner notes that digital wallet integration allows for more flexible payment options, including micropayment adjustments that borrowers can schedule according to their own cash flow cycles. Traditional loan servicer payment portals often limit borrowers to predetermined payment amounts and schedules.

Building in Flexibility: Helping Borrowers Take Control

Payment deferral features address a practical reality: borrowers sometimes need breathing room. The ability to request short-term deferrals through self-service tools reduces the friction of financial hardship and also maximizes the potential for collection.

“That’s where Delay My Payment becomes a valuable tool,” said Darcy Locke, SVP, Head of Sales for ACI Speedpay. “This self-service feature allows borrowers to request a short-term deferral within servicer defined parameters without needing to call an agent, wait on hold, or explain their financial hardship.” If you want to learn more, click to read her entire blog post.

For servicers, deferral requests provide valuable information. When a borrower proactively requests a payment delay, it signals financial stress before an account becomes delinquent. That early warning creates an opportunity for engagement rather than collection. This is a significant distinction and gives the loan provider a chance to actually deepen their relationship with the borrower.

“A student loan account holder may otherwise not have access to their servicer,” said Lerner. “When the biller receives information about a payment delay or hardship, it opens a window into what the borrower is experiencing. That creates an opportunity to engage more meaningfully, offer relevant support, and become a trusted resource in their financial journey.”

The engagement opportunity matters because it helps borrowers protect their credit and build financial confidence. When a borrower can navigate a temporary hardship through intuitive self-service tools, they’re more likely to stay on track with payments, avoid delinquency, and preserve their credit score. For younger borrowers, these moments can lay the foundation for long-term financial health.

The Path Forward

The student loan repayment crisis will not be resolved quickly. Regulatory uncertainty will persist, borrower confusion will continue, and servicers will face ongoing operational pressures. Digital tools that meet borrowers where they already are, on the platforms they already use, with the flexibility they need, represent the most practical path forward. This is proving to be a gamechanger.

The 2025 ACI Speedpay^® Pulse Report provides additional insights on consumer billing and payment trends across industries.

About the Sources:

Brian Riley, Director of Credit, Javelin Strategy & Research

Dylan Lerner, Senior Analyst of Digital Banking, Javelin Strategy & Research

Darcy Locke, Head of ACI Consumer Finance

References:

1. TransUnion student loan delinquency data (April 2025)
2. ACI Speedpay Pulse Report 2025

© Copyright ACI Worldwide, Inc. 2025

ACI, ACI Worldwide, ACI Payments, Inc., ACI Pay, Speedpay and all ACI product/solution names are trademarks or registered trademarks of ACI Worldwide, Inc., or one of its subsidiaries, in the United States, other countries or both. Other parties’ trademarks referenced are the property of their respective owners.

The post How Digital Wallets Could be the Answer to the Student Loan Repayment Crisis  appeared first on PaymentsJournal.

There are now more super prime and subprime borrowers, leaving fewer consumers in the middle of the credit market.

According to TransUnion, the share of super prime borrowers—low-risk consumers with exceptional credit scores—increased from 37.1% in Q3 2019 to 40.9% in Q3 2025, representing roughly 16 million additional customers.

At the other end, the subprime segment also saw an uptick after contracting during the pandemic, when many consumers paid down debt. Together, the super prime and subprime groups drove higher origination volumes and overall growth in the credit card market.

“TransUnion always has great card-level data based on information furnished by lenders,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “Here we see consumer polarization between good scores and weak scores, and everything in between. Super prime cards are booming, and you can expect to see more with Amex, Chase, and Citi’s amped up offers.”

An Avalanche of Offerings

The premium card market has heated up as economic conditions continue to batter the average consumer. To reach more affluent—and potentially more stable—customers, American Express and Chase have both recently enhanced their premium card benefits and raised annual fees.

Citi followed suit with the launch of its premium-tier Strata Elite card, and an avalanche of offerings aimed at the super prime market has followed. Even Klarna launched subscription tiers for its debit/BNPL card, designed to offer luxury perks without the debt associated with traditional credit cards.

More Stress Is Ahead

Meanwhile, the spiraling credit card balances have pushed many consumers, especially in the subprime segment, toward BNPL cards. However, the TransUnion report found that despite the significant amount of existing debt and credit growth in the subprime segment, delinquencies have continued to decline.

This may reflect improving consumer credit health, but issuers have also played a role, most notably by tightening credit lines. The average new account credit limit has dropped, and TransUnion found that subprime credit limits were down 5% year-over-year. Still, even with the drop in delinquencies, credit card issuers aren’t out of the woods yet.

“With the government shutdown and SNAP, expect to see more activity in line utilization,” Riley said. “Delinquency is rising slightly, but not alarmingly. Watch out for some younger segments that are under stress, particularly if they are subprime.”

“Credit card managers should be using bureau analytics to keep their eyes on two specific data points outside of plastics as inflation persists,” he said. “The increasing number of unsecured personal loans is up from 25.4 million in 2022 to 31.8 million—which is a stress indicator for the household budget—and auto loans are increasing to a point that they can have a real household impact. With tariffs in flux, more stress is ahead. But do not forget middle America—the points between superprime and subprime—as that is where the volume is. Keep a cautious eye on increases in revolving debt.”

The post More Consumers Shift to the Extremes of the Credit Risk Spectrum appeared first on PaymentsJournal.

Experian is rolling out a new version of its credit scoring model in the UK that, for the first time, takes rental payments into account. Renters who consistently make payments will now see this reflected in their credit assessment, potentially improving their prospects for future mortgages.

The updated model also considers other behaviors increasingly valued by lenders, such as reducing overdraft use, avoiding credit card cash advances, and making regular payments on phone contracts, in addition to rent.

The changes include an expanded score range, from the previous 0-999 scale to a new maximum of 1,250. Experian has also revised the score bands and removed labels such as “poor” and “very poor.”

The changes are not expected to have much of an impact on the average credit score. Experian estimates that about 44% of borrowers may move down a score band, while 42% could move up.

The new scoring model will initially only apply to borrowers in the UK and Ireland. Although Experian has not commented on plans to introduce it in the U.S., it could be considered if the model proves effective overseas.

Tweaking the Model

Credit rating agencies have recently experimented with changes to their scoring models to better reflect modern consumer economics. FICO introduced two new credit score models that incorporate buy now, pay later (BNPL) data into their calculations.

As Experian expects with its rental model, incorporating BNPL information had minimal impact on overall scores. After examining BNPL loans taken out through Affirm, FICO found that these loans affected credit scores by around 10 points for more than 85% of the customers surveyed.

Medical Debt Goes Out and In

Earlier this year, the Consumer Financial Protection Bureau (CFPB) banned medical bills from being considered on credit reports. Its research found that medical debts have little correlation with a borrower’s ability to repay other types of debt. The research also highlighted that consumers frequently receive inaccurate bills or are asked to pay charges that should have been covered by insurance or financial assistance programs.

The decision would have removed roughly $49 billion in medical debt from the credit reports of about 15 million Americans. However, the Trump administration reversed that decision and has sought to prevent individual states from excluding medical debt in credit scores.  

The post Experian Adds Rental Payments to Its UK Credit Scores appeared first on PaymentsJournal.

When money is tight, student loan holders are forced to make choices that rarely feel fair. Rent, groceries, credit cards, medical bills, and loan payments all compete for the same limited dollars, and something usually gives. For millions of borrowers, the question isn’t whether to pay their student loans, but where those loans fall on the list of financial priorities—and what gets sacrificed when they do.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Young Borrowers: Riskier Than Ever…and the Future of Credit Cards

Payment Priority Ranking by Holders of Student Loans

• 73% – Mortgage
• 70% – Auto loan
• 57% – Student loan
• 54% – Credit Card
• 49% – Personal loan
• 40% – BNPL

Source: Javelin Strategy & Research

About Report

Younger adults, especially those between 18 and 29, will shape the next phase of the credit card market, not older generations. That opportunity comes with real challenges. Compared with their parents and grandparents, these consumers are more likely to fall seriously behind on payments or end up in charge-off, making them a riskier segment for issuers. As a result, lenders face a balancing act: managing near-term risk while finding ways to support these customers as they move through adulthood and build financial stability.

This report from Javelin Strategy & Research examines how credit risk varies across age groups, tracks how card performance evolves over time, and explores how issuers can adapt their product design, messaging, and offers to better engage younger cardholders while protecting their portfolios.

The post What are the Payment Priorities of Student Loan Holders? appeared first on PaymentsJournal.

As credit card companies expand their premium offerings, Klarna is introducing membership tiers that provide perks for a price.

The company’s two tiers—Premium and Max—are launching first in Europe, with a U.S. rollout planned in the coming weeks. Subscribers will be able to redeem cash back rewards directly with Klarna’s travel and airline partners and enjoy benefits like airport lounge access, a ClassPass fitness and wellness membership, subscriptions to magazines and newspapers, and even a metal card.

Unlike traditional credit cards that charge an annual fee, Klarna’s model is a monthly subscription. The top-tier Max plan costs €44.99 ($52.39) a month, yet Klarna claims it delivers more than €5,000 ($5822.17) in annual value through its perks.

“Loyalty programs are a great customer acquisition strategy,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “The idea is to bring customers into the Klarna ecosystem and reward them for using their Klarna balance, which can be loaded by way of a debit card or bank transfer.”

“This positions Klarna as more than just a buy now, pay later vendor, but more in line with Venmo, where balances are stored and drawn from like a bank account,” he said. “However, the monthly fees to belong to the program cannot be too expensive for the region’s consumers and will need to align with consumer interests—and Klarna will need to do its research before launching this program in the U.S.”

Perks Without the Debt

Other companies, such as American Express and Chase, have revamped their premium tiers to offer more benefits while raising their annual fees. Citi followed suit with the launch of its Strata Elite card, and Capital One has entered this market with its Venture X card.

All of these products target more affluent customers, who have become increasingly attractive to issuers as economic conditions have worsened and many consumers have racked up credit card debt.

The Go-To App

Klarna’s model is unique because it gives users premium perks that aren’t tied to credit. Instead, membership rewards are linked to the Klarna Card, which functions as both a debit and BNPL card.

This marks another step in Klarna’s evolution toward becoming a full-scale financial services company. Like many of its fintech competitors, the company aims to be the go-to super app for consumers.

“It’s a similar play to what Venmo is doing here in the U.S—bringing customers into their ecosystem, presenting a physical card option to spend funds, driving money into their app, and offering card rewards,” Danner said. “And the metal card makes it feel more premium.”

The post Klarna Launches Premium Memberships, No Credit Card Needed appeared first on PaymentsJournal.

Over a five-year period, the number of credit card transactions in India has doubled, while the total value of those payments has nearly tripled—even as debit card transactions have declined in both volume and value.

A study by the Reserve Bank of India (RBI) found that credit card transaction volumes increased from roughly 2.1 million in 2019 to around 4.5 million in 2024. Over the same period, debit card transactions fell from approximately 5 million to 1.7 million.

The RBI attributed this divergence to differences in usage. Credit cards are more often used for e-commerce purchases, credit access, and larger purchases, whereas debit cards are primarily used for cash withdrawals and everyday spending.

The Rise of UPI

Although debit cards may be more of a staple payment method, one key factor behind their decline in India is the rise of the Unified Payment Interface (UPI) real-time payments system.

The National Payments Corporation of India (NPCI), which operates UPI, now handles almost half of the world’s digital transactions. Transaction volume on UPI has surpassed that of Visa and Alipay, and the platform continues to expand its global footprint, as evidenced by UPI’s recent expansion into Qatar.

A Payments Mainstay

With real-time payments systems, users can pay-by-bank through their phone without the need for a card. However, this doesn’t spell the end of the debit card.

In fact, several factors have strengthened debit card usage across many regions. First, tough economic conditions have driven credit card debt to record highs, pushing many budget-conscious shoppers back toward debit.

Second, many debit issuers have taken a page from the credit card playbook by offering rewards or cash back. These incentives are mostly funded by merchants who prefer customers use debit over credit to avoid higher interchange fees.

Finally, the surge of fintechs has led to more debit cards in circulation than ever before. PayPal, Venmo, and Cash App have long offered debit products, and buy now, pay later giant Klarna launched a debit card earlier this year.

Add to that the fact that real-time payments in many regions—including the U.S.—have yet to replicate UPI’s success, and it’s clear that debit cards are likely to be a payments mainstay for years to come.

The post As Credit Card Usage in India Has Increased, Debit Card Use Declines appeared first on PaymentsJournal.

As major issuers vie for the dominance in the premium credit card market, American Express appears to have pulled ahead, posting a standout third quarter fueled largely by its more affluent customers.

The company reported a 16% increase in Q3 profits, despite heightened competition among luxury card offerings. The average spend per Amex cardholder rose to $6,387, up 5% from a year earlier, and more members are now carrying balances on their cards.

Amex also saw a lift from higher fees. In September, it raised the annual fee on its Platinum Card from $695 to $895, while enhancing its perks and rewards program through new partnerships with Resy and Lululemon.

Following its strong Q3 results, American Express raised its full-year 2025 guidance, now projecting revenue growth between 9% and 10%.

“American Express is positioned well to leverage its recently improved credit card,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “It has taken the pain out of an annual fee with an array of features that quickly offset the cost.”

Competition in the Luxury Space

Amex’s success comes even as competitors raise both the features and fees on cards targeting the affluent market. Citi entered the premium space last month with the launch of its Strata Elite card, which carries an annual fee of $595.

JPMorgan Chase also revamped its Chase Sapphire Reserve Card in June, increasing its annual fee from $550 to $795. To offset the higher cost, the company introduced a Points Boost feature, giving users the opportunity to double their points.

A Certain Cache

So far, consumers don’t seemed deterred by the rising prices. In fact, many have embraced the opportunity to showcase their upgraded perks. As part of its own refresh, Amex introduced a limited-edition mirrored version of its Platinum card. The company had expected about half a million requests by the end of the year—but it reached that milestone in just three weeks.

“Just when metal cards created a new class of customer features, Amex brings in the mirrored card that people love,” said Riley. “This illustrates how American Express addresses details well beyond the structure of the payment card. The firm has a long history of creating a certain cache with its cards, dating back to the old green card days. And it looks like high-net-worth customers are stepping up. You can see it in their volumes.”

The post Amex Comes Out Strong in the Chase for the Luxury Card Space appeared first on PaymentsJournal.

Months after launching its first U.S. credit card, Rakuten is now considering an initial public offering for its credit card business.

Best known for its online shopping platform, Rakuten operates one of the largest credit card programs in Japan, with more than 30 million cards issued. It entered the U.S. market with the Rakuten American Express Card, which runs on the Amex network but is not issued by American Express. Instead, the official issuer is First Electronic Bank, and Rakuten made the surprising choice of partnering with fintech startup Imprint to power the card program.

“This is a really exciting move into the U.S. market, where they’ve already established a foothold,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “This is not a fintech doing an IPO because they need money to grow. I see the IPO as more of an opportunity to broaden their presence than to fund their war chest.”

Aggressive Growth Strategy

The potential expansion also appears to be targeting the business-to-business (B2B) market, as part of an aggressive strategy adopted by Koichi Nakamura, who became CEO of Rakuten Card earlier this year.

In a blog post, Nakamura noted that Rakuten aims to reach 30% domestic market share in Japan—up from nearly 25% at the end of 2024—and achieve ¥100 billion in annual operating profit, nearly double the company’s performance last year. However, he emphasized that achieving such ambitious growth would require tackling the B2B space.

Nakamura highlighted that the B2B market is generating more than ¥1,100 trillion yen annually, of which less than ¥10 trillion is currently conducted via credit card.

“The consumer card spends maybe $12,000 at the max a year,” said Riley. “The typical average B2B small business card is more like $40,000. And there are lots of ways to kick off relationships, if you look at how the B2B card is used with office supplies, technology, and expenses like that.”

A History of Spinoffs

Rakuten has a history of spinning off subsidiaries across various stock markets. Its unit, Rakuten Bank, went public on the Tokyo Stock Exchange two years ago. Earlier this year, the company took steps toward listing Rakuten Securities on the same market again but canceled those plans after Mizuho Group acquired a stake in the company’s brokerage and card businesses.

And just as previous spin-offs allowed Rakuten to unlock value and attract strategic partners, a potential U.S. IPO could serve as the next step in extending its reach and influence beyond its home market.  

The post Rakuten Explores U.S. IPO for Its Growing Credit Card Business appeared first on PaymentsJournal.

After nearly a decade, Visa and Mastercard have agreed to pay merchants $199.5 million to settle a class-action lawsuit over chargebacks.

Merchants filed suit after the companies changed the rules around chargebacks, which occur when payments are reversed following customer disputes.

Retailers alleged that Visa and Mastercard violated antitrust laws by coordinating to alter the rules, making merchants responsible for chargeback costs unless they updated their point-of-sale systems to include chip readers.

Merchants said this change increased their expenses, as they faced higher chargeback costs while transaction fees remained unchanged.  Although the credit card companies have admitted to no wrongdoing in the case, Visa agreed to pay $119.7 million and Mastercard will pay $79.8 million to settle the lawsuit.

Creating Contention

As cards have become the predominant payment method in many parts of the world, Visa and Mastercard have assumed a central role in the financial services landscape. However, many merchants have pushed back against practices they consider unfair.

For example, London’s Competition Appeal Tribunal recently ruled that the interchange fees charged by these companies violate Europe’s competition law, following lawsuits filed by hundreds of merchants.

Additionally, a law in Illinois banned credit and debit interchange fees on taxes and tips. While many merchants welcomed this legislation, it sparked concerns among financial institutions, which argued that such fees are critical to the ongoing operation of the credit card industry.

Approving the Settlement

While these actions are significant, one of the largest lawsuits involved the decades-long battle between U.S. merchants and Visa and Mastercard over interchange fees.

A $30 billion settlement in this longstanding suit was reached last year. Although many declared the settlement as a victory for merchants, Chief U.S. District Judge Margo Brodie ultimately rejected it, arguing that it didn’t go far enough to compensate retailers.

Similarly, many are calling the most recent settlement a win for merchants. However, the agreement still requires approval, and since the lawsuit was filed in a Brooklyn Federal Court, Judge Brodie will have the final say on this settlement as well.

The post Visa and Mastercard Resolve Longstanding Dispute with Merchants appeared first on PaymentsJournal.

In an unsteady economy, credit card issuers are attracting the most profitable customers by offering lucrative introductory benefits. These come at a significant cost to issuers, but in a world where high-end credit cards come with annual fees in the hundreds of dollars, users have come to expect immediate rewards in return.

In a new report, Credit Card Acquisitions: An Intro to Introductory Offers, Brian Riley, Director of Credit at Javelin Strategy & Research, explains why these offers are so critical to card issuers. One factor that helps make them work: a key accounting technique that amortizes the incentive cost over the anticipated card’s lifetime.

Constructing the Offer

From 2016 to 2025, the number of credit cards in use in the United States rose by nearly 50% while the adult population grew by just 10%. Clearly, issuers are doing something right in enticing customers to sign up for cards. But those decisions carry a cost. Introductory rewards represent a significant investment in the accounts, typically ranging from $200 to $500. For high-ticket cards such as American Express Platinum, Chase Sapphire, or Citi Prestige, the cost will be closer to $1,000.

“When you’re constructing the offer, there are ways to enhance it,” Riley said. “You see the premium cards really standing out now with a lot of benefits, such as the customer having to spend $3000 in 90 days to get $1,200. The reason for that is to get the card activated early in the situation.”

For issuers, the challenge is to devise an introductory offer attractive enough to generate customers but conservative enough not to strain the card revenue model. These introductory offers are typically conditional, requiring the customer to meet a purchasing threshold to earn the reward.

That’s a necessary step, because it’s the way to quickly put a new account into positive territory. A new account generally costs between $175 and $250 to book, so if the customer is making only modest purchases, the account will not land on the positive side of the revenue curve for up to three years.

Creative Accounting

Programs like these require a sizable outlay of funds at the onset. One of the methods issuers have found for managing these costs takes advantage of an FAS accounting rule that lets them amortize the expense over seven years, or 84 months. Rather than taking an upfront hit of something like $1,000, they are able to take it out at $12 a month.

JPMorgan Chase CEO Jamie Dimon clearly understands this dynamic. “One of the fictions here is that the marketing cost gets booked over 12 months,” Dimon said earlier this year on CNBC’s “Squawk Box.” “The benefit of the card gets booked over seven years. The card was so successful that it cost us $200 million, but we expect a good return on it. I wish it were a $400 million loss.”

This technique helps card issuers cover the costs of their introductory offers while expanding their pool of cardholders, but not every bank takes advantage of it. Some banks instead employ asset-based securitization, whereby they use their current funds to fund their credit cards, then take those into capital markets and sell the portfolios.

Getting the Customer’s Attention

Consumers who earn a 100,000-point reward when the card is activated but start revolving on the card are going to quickly diminish their rewards, especially if they are paying the average interest rate of 23%. People get the card for the points, but they need to keep an eye on the long haul and the full numbers involved. Riley reinforced the idea that consumers need to always use the card with their own interests in mind.

“The top brands are pretty aggressive in using introductory offers, for a couple of reasons,” Riley said. “There’s often an issue where people get a credit card, but never trigger it or take a long time to do it, while the issuer wants it to be just a natural thing for people to use.

“But there are opportunities to grow by making their offer more attractive. They have to educate consumers when they do it because consumers go in and ask, ‘How many points will I get for this relationship?’ They really need to understand the full scope of what’s in that offer. And it’s not just rewards. It’s the incentive to get more payments up front for using the card.”

Javelin’s research shows that 40% to 60% of people will carry a balance from month to month. Although issuers make a lot of money on such users, this doesn’t mean they should necessarily fill their portfolio with people who don’t pay their balance every month. Although the interest can be lucrative, issuers need to remain sensitive to this in the context of the initial reward.

To Fee or Not to Fee

When assessing credit cards, Javelin breaks them into two worlds: cards without fees and cards with fees. Issuers need to convince people that the fee will be a worthwhile investment for them. Consumers need to choose cards with the same calculus in mind.

“On my Amex card, for instance, I can get the same card with 3% back on groceries if I don’t pay a fee,” Riley said. “If I do pay a fee, I get 6%. When you start doing the math, it will equate to a benefit there.

“Same thing goes with premium reward cards: The 100,000 points you get from Chase for signing up are built into its whole fee structure. The account has to become a profit center. I need to be able to make money on that particular card I’m lending to that particular person to make the whole proposition work.”

The post How Card Issuers Make Introductory Offers Work appeared first on PaymentsJournal.

Emerging rails like real-time payments, stablecoins, and central bank digital currencies have quickly created a fragmented payments ecosystem. This environment presents both an opportunity and a challenge for digital wallet companies: they could become the nexus for all payment types if they can build mechanisms to connect disparate sources into a single solution. 

Although digital wallets have gained solid momentum in peer-to-peer and e-commerce spaces, they are not yet an all-encompassing solution. To achieve broader adoption, digital wallets must incorporate near-field communication (NFC) technology to enable account-to-account (A2A) payments in physical stores. 

As IDEMIA highlights in its whitepaper, From One Click to One Tap to Pay: How Next-Generation Digital Wallets are Unlocking In-Store Account-to-Account Payments with NFC, once digital wallets adopt this technology, they can become the next big evolution in the payments landscape. 

Finding the Middle Ground 

As traditional payment types like cash and checks have steadily declined, an increasing array of alternatives have emerged in their place.  

Cards remain the most predominant payment type, but real-time payments, mobile money systems and CBDCs have all achieved varying degrees of consumer adoption and merchant acceptance. As alternative payment methods gain traction, digital wallet providers are under pressure to innovate and differentiate themselves and adopt new solutions. 

“Digital wallets leverage payment methods such as real-time account-to-account payments, which rely on their own dedicated rails,” said Eric Lassouaoui, Head of Digital Payment Product and Solution Architecture at IDEMIA.  

“Now, they have reached a stage where they are positioning themselves at par with rails such as cards.” he said. 

This convergence of factors has left many digital wallet providers scrambling to find a middle ground between the payment rails they have implemented to attract consumers and the most efficient, cost-effective ways to drive transactions. 

Fragmentation and Interoperability 

Although many digital wallet providers are struggling to navigate the evolving payments landscape, the technology they need is already within reach. Digital wallets have emerged as the primary front-end solution to connect and converge these payments rails.  

The effectiveness of digital wallet technology is clear from the sheer number of wallets that have launched—and the diverse use cases they now serve.  

This landscape includes big tech wallets from Apple and Google, as well as all-in-one super apps like WeChat Pay and Grab. There are also retail-specific digital wallets, such as those from PayPal, Amazon, and Starbucks. In the financial services sector, banks have introduced their own solutions, including Zelle and Paze, while card networks have issued wallets such as Click to Pay. 

Notably, some of the most successful digital wallets globally are those designed with domestic markets in mind—for example, Spain’s Bizum and Brazil’s Pix. 

“We can see that in Brazil, with Pix, they have already been able to demonstrate for the past few years the capability to grab a big chunk of payment transactions—and they are even now trying to create more cross-border payments.” Eric Lassouaoui said. 

The success of Pix and India’s United Payments Interface (UPI) has prompted many other regions to explore their own digital wallet solutions. However, this regional approach has also resulted in greater fragmentation across the sector. 

“We already see an emergence of many wallets in Europe, and in many countries,” Lassouaoui said. “Several entities have been also already initiating this work with Bizum in Spain and Blik in Poland. There will definitely be a challenge moving forward in regard to the interoperability of those different wallets. That’s going to be a clear, key aspect and especially in Europe.” 

In-Store and Proximity 

Amid these challenges lies a significant opportunity for digital wallet providers. Digital wallets already account for roughly half of all e-commerce transactions, yet only about 30% of point-of-sale (POS) transactions are conducted through them. 

Since their greatest growth potential is in the in-store experience, digital wallets must incorporate NFC technology to enable single-tap experiences, account-based payments at physical points of sale.  

There are already solutions gaining traction with this model, solutions like Spain’s Bizum and Brazil’s Pix are now moving beyond peer-to-peer transactions to support contactless, in-store payments through NFC. Similarly, PayPal has introduced a contactless wallet in Germany designed for in-store shopping. 

The rise of NFC-powered payments has been fueled by the widespread availability of the technology on smartphones. Additionally, Apple’s recent decision to open its NFC tech to third-party developers has sparked renewed interest in contactless payments. 

Still, widespread adoption of contactless payments remains a complex challenge. To expand beyond P2P and online transactions into everyday in-store purchases, digital wallet providers will need to fully embrace NFC technology. 

Once they do, digital wallet companies will be able to deliver the seamless payment experience their customers have come to expect. 

“Digital wallets can play a significant role in this competitive ecosystem by capitalizing on the customer relationships they already own,” said Eric Lassouaoui. ”Positioned at the front end and supported by existing adoption in P2P and e-commerce, wallets can naturally extend into proximity and in-store payments.” 

“By doing so, they have the potential to reshuffle the market dynamics and strengthen their competitiveness, especially when combined with value-added services such as loyalty programs,” he said. 

Routing the Path to NFC Payments 

Digital wallet providers seeking to bring account-based payment solutions to merchants have two options: they can either build a private in-store acceptance network or rely on existing card acceptance infrastructure at POS terminals. 

Once digital wallet companies have implemented contactless payments, they can then leverage flexible transaction routing. This brings them to another fork in the road: their transactions can either be processed directly by the alternative network, which offers greater independence, or routed through an established card network, which is faster to market and has broader acceptance.  

Regardless of the route, there are significant benefits for the companies that enable NFC payments. 

For example, contactless payments allow providers to offer cost-efficient and locally tailored account-based wallets. This model also gives organizations stronger control over their products, which in turn gives digital wallet firms the freedom to differentiate themselves without external dependencies.  

Finally, adopting NFC payments can lead to substantially higher wallet adoption and usage, since payments are frictionless and convenient for customers. “Previously, many wallets relied on QR-led flows, fine for peer-to-peer payments but slower at the point of sale.” Lassouaoui said. Tap-to-pay by account offers a faster, more convenient experience for consumers, further encouraging adoption and usage. 

“On the other side, Apple has been driving the payment experience within a mobile environment with its tap-to-pay experience, so the consumer is used to presenting their phone at the terminal,” he said. “Those that want to compete with big tech need to match that tap experience and that’s exactly what our stack enables, bridging wallet assets with the existing EMV ecosystem.” 

Bridging Cards and Accounts 

By bringing together emerging and traditional systems, digital wallet providers gain operational autonomy and increase their competitive edge—all while enhancing the customer experience.  

The key to moving into this model is contactless payments, meaning that embracing NFC is no longer optional—it has become essential. As the global payments landscape continues to shift, platforms like IDEMIA’s Tap to Pay by Account present a strategic opportunity for wallet providers to lead the next wave of in-store innovation.  

“On our side, we are one of the unique technological providers, capable to bridge this gap between alternative payment rails and the EMV ecosystem. This is coming from the background we have on the digitization of any card asset into a device and the capability to bridge the EMV world with the account world.” Lassouaoui said. 

The post How Next-Gen Digital Wallets Are Redefining A2A Payments at Checkout appeared first on PaymentsJournal.

Celebrating the holidays is important to many consumers, but it can also be a source of financial stress. To help ease that burden, PayPal is expanding the capabilities of its buy now, pay later program and introducing cash back rewards on BNPL purchases.

The company launched its pay-in-four installment loans five years ago and added monthly payment options a few years later. Until now, these BNPL offerings were limited to e-commerce transactions. Going forward, PayPal will extend the functionality to include in-store purchases made through its installment plans.

As an added incentive, PayPal is offering 5% cash back on all BNPL purchases—both online and in-store—through the end of the year.

Strained to the Brink

One of the biggest challenges facing holiday shoppers this year is the difficult macroeconomic environment, which has stretched many household budgets to the brink. PayPal highlighted research findings showing that roughly 60% of U.S. consumers are more concerned about their holiday spending this year.

As economic pressures mount, shoppers are becoming more strategic with their budgets and payment choices. Many are deciding where to shop based on where their dollar goes the farthest and are paying closer attention to loyalty programs and rewards. Consumers are also becoming more payments-savvy, opting for payment methods that offer the most bang for their buck.

Considering BNPL for the Holidays

As credit card debt hovers near all-time highs, BNPL services have become an attractive alternative. They typically offer minimal or no fees and often don’t require a credit check.

While BNPL products have been a game changer for many consumers, concerns have emerged about the rising amount of BNPL loan debt that is not reflected in consumers’ credit scores. However, leading BNPL providers like Klarna, Affirm, and Afterpay report that delinquencies are rare—with Klarna noting a delinquency rate of less than 1%.

Despite these concerns, BNPL’s flexibility means that consumers are likely to continue using these services, especially as the holidays approach. PayPal’s research also found that over 80% of shoppers who have used or considered BNPL plan to use it for holiday shopping.

The post PayPal Enhances BNPL Products Ahead of the Holidays appeared first on PaymentsJournal.

Credit cards are better than cash. You can spend more than you have and set all your repayment terms, as long as they are more than 3% per month. They can also be used virtually anywhere. Their ubiquity comes from the technologies behind them and their widespread acceptance. Since the late 1950s, companies operating behind the scenes have made the credit card industry run predictably, reliably, and securely. 

Companies like Mastercard and Visa are at the center of bank cards, but vendors and suppliers, such as IBM, with their 1401 mainframe introduced in 1959, stand out as technology that changed banking from a ledger account system to a dynamic I/O design. And don’t forget the magnetic stripe, an IBM creation. ACI Worldwide, with its Base24 platform launched in the 1970s, stands out, as does the combination of Fiserv and First Data, which democratized technology for smaller banks. And then, there is FICO.

FICO’s foundation is a classic tech success story. It starts with: “From 1956 with two smart guys and a borrowed computer…”  And in 1958, they launched their first credit score. Now, nearly every lender with over 90% of credit booked in the U.S. market uses the FICO Score.

What’s A FICO Score Anyway

The purpose of the score is to risk rank credit. Lenders use it universally at the entry point when applications get scored for underwriting and reconnaissance. Sophisticated firms utilize it throughout the credit cycle, monitoring factors such as balance buildup, and then continue to assess credit line usage, collection vulnerability, and risk management. Then, when accounts get securitized in capital markets, the score provides a clear line of sight on credit quality. The score is not a black box and conforms to all requirements of the Fair Credit Reporting Act.

There are variations of the FICO Score. Some specialize in auto, card, or mortgage lending.  Others, like FICO Score 10 and 10-T, bring in trended data to enhance reporting.

What Happened

There are three major credit reporting agencies (CRA) in the U.S.: Equifax, Experian, and TransUnion. These companies compile lender data and are highly regulated for accuracy by the Consumer Financial Protection Bureau and the Federal Trade Commission. These agencies are responsible for enforcing the Fair Credit Reporting Act. 

FICO owns the intellectual property on the FICO Score. CRAs license the score and calculate for each consumer. For about 20 years, the three bureaus have been developing their own score, known as VantageScore. The FICO Score is by far the dominant provider. In short, the CRAs sell the FICO Score, but they are also trying to build a business with their proprietary product.

According to the Financial Times, FICO is creating a novel distribution strategy that will allow lenders to deal directly, rather than through CRAs. This has the potential to improve pricing transparency and trim costs.

FICO Cuts Out Middleman

• FICO announced the launch of the FICO Mortgage Direct License Program late Wednesday. The platform is for tri-merge resellers, which combine data from the three nationwide credit bureaus and provide it to mortgage industry participants. Instead of depending on the credit bureaus, the tri-merge resellers will have the option of calculating FICO scores through the platform and distributing them directly to their customers.

Investing.Com noted: “Citigroup analysts said selling scores directly to lenders would cut out the margin that companies such as Experian and Equifax make on the FICO credit score.”

This move will likely increase competition in the scoring space, trim and clarify consumer pricing, and result in a stronger business model for lending.

The post Market Changes and FICO Scores appeared first on PaymentsJournal.

Barclays is exiting its cobranded airline credit card partnerships with both American Airlines and Hawaiian Airlines. Citibank, which has been American’s primary card issuer for nearly four decades, is taking over the entirety of that business, while Hawaiian’s portfolio is being integrated into Alaska Airlines’ unified Atmos Rewards program.

These shifts leave Barclays with only a handful of smaller airline card relationships.

“Currently, Barclays has only two airline co-brands left: JetBlue and Breeze Airlines,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “JetBlue has experienced some revenue headwinds, but Breeze recently posted a profit. Barclays’ presence in air travel will likely temper, but this change will help it focus on its recent acquisition of the Goldman Sachs GM card.”

Playing Second Fiddle to Citi

Although Citi has been American’s long-standing partner, Barclays involvement stemmed from the airline’s 2013 acquisition of US Airways, which had previously relied on Barclays to manage its card business.

Still, Barclays consistently played a secondary role to Citi. When American renewed both partnerships in 2016, Citi secured broad market rights—including online channels, direct mail, and airport lounges. Barclays, by contrast, was limited to in-flight solicitations and barred from advertising within 100 feet of an American Airlines airport lounge.

The merger of Hawaiian Airlines and Alaskan Airlines weakened Barclays’ position. With the transition now complete, the HawaiianMiles program has officially been folded into the Atmos Rewards, the new joint loyalty program for both airlines. The Atmos card program is operated by Bank of America, which has maintained a lengthy partnership with Alaskan Airlines.

Focus on GM

Barclays can now focus on its General Motors card business, which it acquired from Goldman Sachs last year. Goldman had long struggled with the business—one report estimated that Goldman’s Platform Solutions unit, which managed the GM credit card program, lost roughly $6 billion on a pretax basis between early 2020 and Q1 2024.

After the acquisition, Barclays overhauled the program, consolidating multiple branded rewards programs into a single, streamlined offering. The refreshed program also significantly expanded earning potential, allowing customers to earn up to 10 times more points on eligible GM purchases than before.

The post In the Exit Row: Barclays Leaves Two Airline Cards, Shifts Focus to GM appeared first on PaymentsJournal.

FICO Scores are the credit card standard, throughout the account lifecycle.

Top issuers use them at the acquisition point, they become the foundation for assessing credit quality on regulatory reports like Current Expected Credit Loss, automated credit line increases consider them, collection groups use them to triage resources, and when it comes time to securitize portfolios in capital markets, the FICO Score is a universal risk comparison tool.

FICO Announces the Average U.S. Credit Score Dropped

The FICO® Score Credit Insights Fall 2025 report announced a modest drop in the aggregate U.S. score:

• National Average FICO® Score at 715: The average score dipped two points from 2024 (although remained stable since FICO’s last update), driven by rising credit card utilization and a spike in missed payments, in part due to resumed student loan delinquency reporting.

A two-point drop is not the sign of a major crisis, but it does suggest that lenders need to keep their eyes peeled for hot pockets in delinquency. The return of student loan collections is a flag, which affects several age cohorts. In this segment, keep an eye on ability to repay issues.  According to this source, the average student loan payment is $536 per month, enough to trigger financial disruption in many households.

And with increased line utilization, a FICO Score element that has been around for decades, keep an eye out on ascending revolving debt. This is a natural extension of people’s budgets under pressure. Remember, there is $1.2 trillion in revolving debt, and a whopping $4 trillion in open to buy on consumer credit cards, so issuers should keep an eye on decreasing lines, just as much as they talk about increasing lines. For more information on credit line decrease programs see Reducing Operational Risk Through Careful Credit Line Decreases.

The post Average FICO Score Drops: A Canary in a Coal Mine? appeared first on PaymentsJournal.

Credit card interest rates remain a key indicator of consumer borrowing conditions, especially when viewed alongside broader benchmarks such as the prime rate. As financial institutions balance risk, funding costs, and market dynamics, the relationship between these two measures offers important insight into how credit pricing evolves. Reviewing recent data helps clarify whether movements in the prime rate translate into shifts in credit card APRs and provides useful context for understanding trends in consumer credit overall.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Balance Transfers: A Consumer’s Opportunity and an Issuer’s Bet

Average U.S. Credit Card Interest Rate and Prime Rate, by Percentage

• 2021 – The interest rate was 14.61% with a prime rate of 3.25%
• 2022 – The interest rate was 15.13% with a prime rate of 4.00%
• 2023 – The interest rate was 20.84% with a prime rate of 8.25%
• 2024 – the interest rate was 21.51% with a prime rate of 8.50%
• 2025 – the interest rate was 21.16% with a prime rate of 7.50%

Source: Chase, Federal Reserve Bank, Javelin Strategy & Research estimates, 2025

About Report

Balance transfer promotions can offer meaningful advantages for both consumers and card issuers when used as intended. Borrowers gain temporary access to interest-free financing, while issuers collect an upfront fee—typically between 3% and 5%—that provides immediate revenue.

However, many consumers do not repay the transferred balance within the standard promotional period of roughly one to two years, resulting in the remaining amount shifting to the card’s regular APR. Although balance transfers have long been a staple of credit card portfolio strategy, institutions vary widely in how they manage these programs. This Javelin Strategy & Research analysis explores current practices at major issuers and highlights the unique challenges mid-sized and smaller banks face, given their more limited participation

The post Does the Prime Rate Impact Credit Card Interest Rates? appeared first on PaymentsJournal.

As more credit card companies compete for affluent customers, American Express is updating the benefits lineup on its premier card and raising the annual fee to $895.

The new fee represents a substantial jump from the previous $695 mark, but Amex maintains that the hike is justified by the expanded perks and partnerships it has cultivated.

These enhancements now include credits at Uber, Lululemon, Oura, and Resy, in addition to the travel and dining rewards Amex is known for. Streaming benefits have also been added to the mix.

“The $895 annual fee is shocking, however Amex counters with an earning potential of $3,500,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “Amex is sticking to its strategy of offering statement credits with brands like Uber and premium retailer Lululemon.”

“The problem is that if these credits are with brands that don’t resonate with consumers, then the card begins to lose value quickly,” he said. “General offerings like travel credits may have a wider appeal than brand specific credits. However, Amex has done its research, knows its audience, and is targeting them with these brand credits.”

Competing for Customers

This Platinum card update was unveiled several months ago, around the same time that JPMorgan Chase announced changes to its Chase Sapphire Reserve card, though full details weren’t released.

Shortly after, Citi announced the launch of its Strata Elite card, positioned to compete in the luxury space. Strata Elite carries an annual fee of $595, compared to Sapphire Reserve’s $795 fee.

One reason companies have raised fees and tightened lending standards is to better target affluent customers. This group is seen as more reliable and tends to spend more—one of the factors behind Amex’s dramatic increase in worldwide merchant acceptance over the years.

A Premium on Stability

This focus on affluent customers has also been driven by macroeconomic uncertainty. As inflation and higher interest rates have fueled mounting consumer credit card debt in recent years, stability has become increasingly valuable.

Another factor pushing issuers to strengthen their customer base is the recent merger of Capital One and Discover, which created the largest lender in the U.S. This competitive pressure, combined with the absence of imminent regulation on credit card fees, suggests that more luxury credit card offerings are likely ahead.

The post Amex Refreshes Platinum Card Perks and Lifts Annual Fee appeared first on PaymentsJournal.

Retail credit card interest rates remain stubbornly high, despite the Federal Reserve’s rate cuts at the end of 2024. While standard credit card rates have held steady and mortgage rates have inched lower in recent weeks, retail card rates have shown little movement.

According to the 2025 Bankrate Retail Cards study, the average retail card APR now stands at 30.14%—”nearly 1.5 times higher than the average interest rate for all credit cards,” which is currently 20.12%. Within the retail category, store-only cards carry the steepest rates at 31.64%, while co-branded cards are somewhat lower at 28.65%.

“Retail cards have historically been aimed at prime and below customers and thus tend to have higher fees to offset the risk,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “With merchants that have a private label and a co-branded card, the higher credit score customers will be placed into the co-brand card, while lower scores will be placed into the private label.”

Reaching Their Limit

The retail credit card market has been in decline in recent years. According to Equifax, store-only originations peaked in 2015 at 44.3 million but fell to 16.8 million private-label credit cards last year.

While many retailers have slightly lowered their rates following interest rate cuts by the Fed, some have actually raised them, per Bankrate. Saks Fifth Avenue’s flagship credit card, for example, has increased from 29.24% to 35.99% over the past year, coinciding with a switch in issuer from Capital One to Comenity. Victoria’s Secret also offers cards at 35.99%, while the Gap’s cards carry a 33.99% rate.

These numbers may be approaching their limits. The Military Lending Act imposes a 36% APR cap for active service members, which has effectively become “a de facto ceiling for all” credit cards.

Other Rates Are Dropping

The average credit card interest rate has remained largely unchanged in recent months, although it’s slightly down from a record high of 20.79% set last August. Other rates have been falling recently, particularly 30-year fixed-rate mortgage rates, which peaked above 7% in January but have now eased to 6.35%.

“As interest rates are tied to the prime rate, the rates will drop as the prime rate decreases,” said Danner. “However, we expect retail credit card to still have relatively high rates in comparison to other credit card products.”

The post Store-Issued Credit Card Rates Still Soar appeared first on PaymentsJournal.

The average yearly spending on American Express cards is significantly higher than that of competing credit cards, which helps explain its thriving network of merchants.

The lender’s cards are now accepted at roughly 160 million merchants worldwide, representing a five-fold increase over the past eight years.

One of the main reasons for this growth is Amex’s international expansion. The average annual spend on Amex cards issued outside of the U.S. is approximately four times higher than competing cards, compared to nearly three times higher for cards issued within the U.S.

“Amex has had the pedal to the metal on card acceptance outside of the U.S. and has made significant progress in connecting with payment facilitators, digital wallets, marketplaces, and aggregators in large markets like China,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.

“Amex has always delivered a higher level of spending and average purchase sizes for merchants, but the higher cost of acceptance for merchants has historically been a barrier to expanding acceptance,” he said. “While specifics aren’t disclosed, I’m sure Amex has brought some innovative pricing solutions to the table that help to reinforce their value proposition for merchants.”

A Strong Strategy

Amex has long targeted an affluent customer base by requiring higher credit scores and charging annual fees for its products. For example, its premium-tier Platinum Card recently saw its annual fee raised to $695.

This focus on affluent cardholders has paid off: American Express has been able to build and maintain a strong lending portfolio at a time when many consumers are under immense pressure from inflation and rising interest rates.

The strength of this portfolio was underscored by the recent DFAST tests, a set of government-mandated assessments designed to simulate a severe economic downturn. In these tests, both American Express and its main rival in the premium credit card space, Chase, ranked among the top performners—thanks largely to the stability and reliability of their customer bases.

Leaving Home with It

To reward these customers, both Amex and Chase have built a substantial array of travel, dining, and entertainment perks. American Express, in particular, highlighted how travel has also contributed to the expansion of its international merchant network, especially in Japan, the UK, and the Caribbean.

This marks a significant shift for a company that had previously focused primarily on its stateside operations.

“The Amex card has always been strong for travel purchases, but at the same had gaps in utility when travelers reached their destination,” Apgar said. “This push toward expanding merchant acceptance is long overdue and creates significant utility for cardholders, who may no longer be concerned about leaving home without a secondary card brand in case Amex isn’t accepted.”

The post American Express Dramatically Increases Merchant Base appeared first on PaymentsJournal.

Launching a card is a complex process with the potential for long-term financial gains—if executed flawlessly. Yet, it moves quickly, with an average timeline of just six to seven months from concept to launch.

Any major player in today’s financial landscape—from legacy banks to fintech apps to fledgling retailers—has at least considered launching a card. But before diving in, there are critical questions to answer: Who is the target market? What will make this card stand out from others already on the market? Which partners are essential to ensure its success?

A white paper from Galileo outlines the key steps to designing and bringing to market a successful credit, debit, or prepaid card program.

Defining the Objectives

The first step is to clearly define the objectives for the card. These may include building brand awareness, enabling easier customer payments, or serving as a central element of a financial offering rather than simply a secondary tool.

An important consideration is determining how the card will stand out from competitors in the market. There should be a compelling use case that encourages customers to choose it over other options in their wallets, which begins with a strong value proposition.

The value proposition explains why customers would prefer this card over others. For instance, the fintech app Wise, known for international money transfers, ensured that its first debit card supported spending in multiple currencies. This aligned with customer expectations and filled a niche that many other cards do not address.

That’s another important part of the value proposition: tying the card to the firm’s brand. A successful card will reinforce those expectations. A well-planned card will address specific problems for its customers. Users of a travel website, for instance, might want to integrate spending with planning, paying for a hotel at the same time it is booked.  

These capabilities can also evolve after the card is launched. The strategy can be iterated if something turns out not to work as intended. For example, a debit program might falter because customers don’t have enough cash in their accounts to feel confident making purchases, and it may need to be supplemented with a prepaid card. No plan is written in stone; if the market sends a signal that differs from the original plan, the market should be heeded.

Special Challenges for Credit Cards

When a company chooses to launch a credit card, there are special challenges that must be anticipated. This means entering the lending business with all that entails.

“The whole essence of the business is that you have to be ready to bear the risk of the portfolio,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “If I open up 2,000 accounts with a $1,000 credit line, all of a sudden I have to have $2 million in the bank just reserved against those funds because I’ve got to qualify my lending capacity by the total exposure on day one.”

It makes sense to target a certain level of credit quality in line with the brand’s positioning. Consumers holding Walmart credit cards are likely to have lower scores than those using a card from a high-end hotel chain. This will affect revenue from the card. Higher credit scores are generally associated with more reliable payment behavior, while lower scores may result in greater profits from late fees and interest.

“Conceptually, you have control over the customers’ scores, but there’s a reality here,” said Riley. “You could say you want to target people with FICO scores of 760 or better. However, if you do that, you’re going to compete against American Express and Citi. You better bring your ‘A’ game, and it’s rare that a small issuer is going to do it. So you end up going to segments of the market that tend to be less robust.”

What Type of Customer Are You Serving?

Now it’s time to move from planning to execution. Understanding the potential customer base is an important part of putting together a launch plan. A simple metric, like the size of the potential audience, is a critical factor that will determine the team—both internal and external—needed to launch the product.

The target market may already be defined, but each customer niche has specific needs. A small business card will require a range of services—more than a simple consumer card, but less than a large enterprise card. A card focused on cross-border payments must have access to the best available exchange rates to remain competitive. An e-commerce business might seek to establish a physical presence by offering a plastic card rather than relying solely on a digital one.   

“An e-commerce vendor doesn’t have that physical brand presence that a lot of cobranded cards are going to have,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “The blessing of a physical card is that it’s present in the customer’s wallet. When they’re out shopping, they’re going to open their wallet and physically see that card in there. In the e-commerce world, consumers can get lost in the kind of the myriad of different payment forms that are available. It’s all about trying to keep that brand top of mind.”

It’s important to devise branding for the card that aligns with the overall image of the customer. A jeweler may want to maintain a more prestigious feel than a grocery chain, while a fintech card targeting the upper end of the market may aim to convey elegance in its presentation.

The card should reflect the same design principles and values found on the website or in physical stores. The full brand experience should be integrated into the card’s design.

That can extend to the physical appearance of the card as well. For example, an outdoor retailer like REI might consider a wooden card or another environmentally conscious material to better align with its customers’ sensibilities.

This is also the time to consider developing a loyalty program. In today’s market, almost no card is launched without some type of rewards program, offering benefits that go beyond encouraging repeat visits.

“For a competitive rewards program, you have to offer X percent back because using the rewards program does cause a little bit of pain on the consumer side,” said Danner. “You have to make sure that you’re using your loyalty number and that you’re using, for example, the right gas station. But the payoff for the retailer is that you have spend data on the customer. And this applies to your partner bank as well. One of the wins for them is having this large database of loyal customers that they can collect data and interchange fees on.”

Do You Have the Resources to Launch?

The final phase of launching the card is assembling the team that will bring it to market. Smaller cards often require a great deal of external support to launch. Key partners to consider include:

• Issuing bank: Issues the cards and manages the accounts. These banks often collaborate with payment networks and hold licenses to issue cards.
• Processor: Manages the processes involved in authorizing, clearing, and settling electronic payment transactions on behalf of the financial institutions. They also provide services such as cardholder customer care, error and dispute resolution, and chargeback management.
• Manufacturer: Produces  the physical card, including the plastic and embedded technology, and provides the onboarding materials that customers receive in the mail.

There’s also the crucial role of the program manager, which many card issuers choose to handle internally. Program managers establish and evaluate the goals and objectives of the card while collaborating with the partners who help operate the program. This role requires familiarity with factors such as compliance requirements and the key objectives the card is intended to achieve.

Outsourcing program management allows the issuer to focus on areas of expertise, such as user experience or branding, while partners handle specialized functions. Whether program management is handled internally or through a partner, getting this aspect right is essential for the success of a new card.

Fortunately, outsourcing card program management isn’t an all-or-nothing decision. Many vendors can offload certain functions without taking on responsibility for managing the entire program. Other positions will may still require outside support, especially for smaller or first-time card programs.

One increasingly popular option is combining these services in a Banking-as-a-Service (BaaS) platform, which can simplify and shorten the launch path. BaaS providers generally place clients on a shared Bank Identification Number (BIN), which can make it easier to get a card program off the ground. However, migrating to another platform later will require obtaining a brand new BIN for the program.

As a trusted advisor with more than two decades of experience helping banks and fintechs develop successful payment programs, Galileo can play many of these roles. For first-time issuers, having a payment card expert is essential to provide fair advice based on real-life experience with hundreds of clients and millions of their cardholders. Whether it involves compliance, marketing, or building a fresh tech stack, Galileo has been there.

Getting to Top of Wallet—and Staying There

The entire purpose of this exercise is to reach the top of the customer’s wallet, becoming the first option they turn to when making any type of payment. Debit and credit accounts often struggle to differentiate from competitors, so the only real way to remain top of wallet is by creating a feature that truly sets the product apart. The launch of the card is the opportunity to establish that differentiator.

The rest of the planning, including building the infrastructure to manage the program, is essential to maintaining top of wallet status. Both elements are necessary for the long-term success of the card and the business.

The post From Idea to Swipe: How to Launch a Winning Card Program appeared first on PaymentsJournal.

Credit card companies often promote introductory offers to attract new customers—but who finds these deals most appealing? By looking at consumer interest across different income ranges, we can start to see patterns in how people respond to these promotions.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Acquisitions: An Intro to Introductory Offers

Interest in Credit Card Intro Offers Across Income Groups

• 52% of consumers making less than $50,000 desire intro offers.
• 58% of consumers making $50,000-$74,999 desire intro offers.
• 58% of consumers making $75,000-$99,999 desire intro offers.
• 57% of consumers making $100,000-$149,999 desire intro offers.
• 60% of consumers making more than $150,000 desire intro offers.

Source: Javelin North American PaymentsInsights, 2025

About Report

Between 2016 and 2025, the number of U.S. adults rose by just 10%—but credit card openings surged nearly five times faster. During that same window, consumers racked up over $360 billion in revolving credit card debt. Despite economic uncertainty, issuers continue to aggressively pursue growth, often sweetening the deal for new customers with limited-time offers. These upfront incentives—like welcome bonuses and temporary 0% APR—can jumpstart spending and boost account engagement.

While effective, these perks come at a cost, especially for premium and rewards-based cards. To manage the financial hit, issuers rely on specific accounting practices that allow them to spread out the expense of these offers across the expected lifespan of the account. This strategic approach contrasts with the immediate outlay required for traditional marketing spend. In this Javelin report, we explore the role of credit card accounting standards in enabling introductory promotions and how they support long-term acquisition strategies.

The post Is Desire for Credit Card Offers Driven by Income? appeared first on PaymentsJournal.

Credit cards and sports are a great connection.  When you look at it as a consumer, the price of a nice set of seats is nothing like it was when Mickey Mantle (my boyhood hero, long ago) played for the New York Yankees.  Back in 1958, a bleacher ticket in the Bronx was all of 75 cents, with a box seat running at $4.00.  Today, a basic beer is $10, and a ticket can easily cost $100.

But for credit card issuers, sports are a goldmine.  The brand gets splashed all over television, as you may have seen in the recent U.S. Open, with Chase. It influences children, who are a feeder group for credit cards, and worship sports figures. Adults bask in reflective glory.  And if you watch soccer, you can see attendance is off the charts globally.  Sports are fun, competitive, and healthy.

AMEX Replaces Visa with the NFL

In conjunction with the opening of the NFL season tonight, Sports Business Journal is reporting “AmEx taking over as NFL credit card sponsor in ’26.” Some of the highlights of the deal:

• American Express will replace Visa next season as the NFL’s corporate sponsor in the credit-card/payment card category.
• Sources with knowledge of the deal said the terms are seven years for around $910 million, although one source insisted the total deal was “closer to” $950 million.
• Visa’s current NFL rights expire at the end of March, after the new season ends. That means it will have a lame-duck year as an NFL corporate sponsor.
• Visa has been an NFL corporate patron since 1995, making it the league’s second most-tenured sponsor, after Gatorade.
• When Visa signed on 30 years ago, replacing Amex, it was paying around $10 million a year.
• Under the deal expiring after this season, Visa also has rights to associated categories, including peer-to-peer banking, like Venmo and PayPal, which recently joined forces with NCAA football.
• Vis also had the rights to retail banking, which it passed through to Truist, the “Official Retail Bank” of the NFL since 2021.

Wow. From $10 million to $950 million in 30 years.  Wouldn’t you like your 401 (k) to perform like that? $100 invested in 1995 would be worth about $2,300 today.  Looks like the NFL deal outperformed that by a factor of 4.

The post NFL Affiliation: A Touchdown for Amex appeared first on PaymentsJournal.

When a traveler books a hotel through an online travel agency (OTA) like Expedia, the OTA pays the hotel some or all of the value of the booking, but the OTA may or may not have been paid the full value of the booking by the traveler. The amount the traveler is willing to pay upfront to secure the booking, and the amount the hotel will insist on receiving upfront from the OTA to hold the room, are functions of their perceived potential risks and rewards at the time of booking. By pricing based on certainty of travel, OTAs have become a tool for travelers and travel providers to hedge risk, in part through payment authorization and payment timing.  

This need for variable timing and commitment of funds has created a durable use case for virtual cards as the instrument OTAs use to push funds to travel providers. Their ability to authorize for one amount and settle for another, as well as pay suppliers on day 1, then pay card providers on day 45, allows OTAS to manage final payment amounts automatically and bridge gaps in working capital.

However, as Hugh Thomas, Commercial & Enterprise Lead Analyst at Javelin Strategy & Research, sets out in the report The Virtual Economy: Measuring Buyer Industry Receptiveness to Using Virtual Cards, these sorts of cash management and automation challenges are not unique to online travel agencies, suggesting use cases for virtual cards in B2B payments in many other industries.

In this report, and its companion, The Virtual Economy: Identifying Supplier Industries Receptive to Virtual Cards, Thomas offers perspectives on other industries where virtual cards may be poised for a breakthrough based on factors like cash management, the need for automation, and vendors that already accept cards, setting out a new way for banks and networks to uncover use cases.

Not as Intuitive as Its Predecessors

Early card applications for B2B payments were fairly straightforward. Products like travel and expense (T&E) cards had a clear purpose and use, enabling staff to travel on business without reaching into their own funds. As the notion of spending with a card issued to a company became more broadly accepted, use expanded to indirect spending on things like maintenance, repairs, and operations, areas where purchasing cards, with strict controls on purchase amounts and locations, empowered other employees to pay on behalf of the company without raising purchase orders.

“You’ve got people on your staff that you need to go visit a customer, or you need to pick up some tools and cleaning materials,” Thomas said. “You don’t want them to go out of pocket, you don’t want to spend employee time raising purchase orders, and you’d like to manage those expenses and gain whatever benefit you can gain—from some chunk of whatever the bank itself is gaining by issuing the cards—in the form of things like rebates. So these things are fairly intuitive.”

With the emergence of virtual cards, businesses are now looking at card networks for making all kinds of payments, up to and including direct purchases of goods and supplier payments, leveraging card networks’ ability to message that a transaction is authorized, then later settle it. Cards also allow buyers to pay suppliers faster, then use card cycles to hang on to funds longer before they pay the card provider. Virtual cards also come with controls; such cards have maximum transaction limits, set within the parameters of what the business estimates the purchase order will cost, and virtual card numbers can also be set to work only for a given vendor or vendor industry.

“It’s only good to be used to make payment to that one supplier, conceivably on that day,” Thomas said. “It’s got all the benefits of a card wrapped on top of it, the recourse to charge back if you don’t get what you said you were ordering, and so forth. Now you have a solution that has a bunch of benefits to it, but also a bunch of costs to it where you need to be conscious of where the thing is best applied—and that is not something that’s immediately intuitive.“

Shortening the Payment Cycle

Delving deeper into using virtual cards as purchasing cards uncovers more use cases.

For example, a business may have a vendor it doesn’t plan to work with on a long-term basis. Instead of going through the typical know-your-supplier or know-your-customer checks, the company could simply pay the vendor with a virtual card.

This way, the business doesn’t give the vendor any banking information, avoids creating purchase orders, and eliminates significant costs in the process.

“The business case for cards begins to expand, and as that happens, you come to realize it shortens the payment cycle time and thus begins to get used even more broadly,” Thomas said.

Everyone Has Exigencies

As the B2B use case expands, it becomes clear that virtual cards are not simply an X-that-does-Y product.

To identify some of the best fits for virtual cards, Thomas used the OTA industry as a blueprint. He identified the defining traits of the target market for virtual cards. One characteristic he discovered: a high number of potential vendors.

“There’s a vast number of vendors for any OTA business,” Thomas said. “The number of vendors is basically equal to the number of hotels, car rental companies, airlines, and train companies in the world. Whatever they book, that’s a potential vendor to them, so the numbers are obviously in the millions. High volume seems to be something that drives this use case.”

Another characteristic of virtual card candidates is they require flexible and potentially slow incoming payments or, conversely, high days payable outstanding.

Taking the criteria gleaned from the OTA model into account, Thomas began to focus on the industries where virtual cards could make the most impact. What he found was these were often sectors which have complex supply chains, such as home centers, food manufacturers, or general merchandise stores.

“Another is the healthcare business,” Thomas said. “Healthcare payments have to go through so many different parties, and everybody’s got their own, ‘I want to be paid sooner exigencies’ or ‘I want to pay later exigencies.’ It’s obviously a data intensive payment process in healthcare, so it’s a great tool in that respect.”

Selling Opportunistically

For all the promise of virtual cards, businesses have very few resources they can rely on to guide them through the usage of virtual cards. This was the impetus for the Javelin report—to analyze the landscape and predict where virtual cards might emerge next as a solution.

“In all my time working with banks data, what I found was that the characteristics of suppliers being paid with virtual cards was vastly different from bank to bank,” Thomas said. “There were no two banks that looked alike. Now, if you made that comparison for a T&E product or a purchasing card product, the patterns would be very much largely the same.

Thomas notes that with virtual cards, there are some financial institutions that heavily over-indexed in healthcare, some in auto, others that are heavily indexed in utilities, and still others in OTA.

“That, to me, says there’s no uniformity among the banks for a product where everybody’s product is by and large pretty much the same,” Thomas said. “That suggests this is something that water has just begun to find its level on in terms of use cases for virtual cards—and that it’s being sold opportunistically, rather than with an eye to the typical exigencies of the industry in question

“It says that there just is not a common awareness of where it’s best used and how to determine the circumstances of where it’s best used,” he said.

The post Uncovering the Buyer Industry Opportunities for Virtual Cards appeared first on PaymentsJournal.

Since the 2007-08 financial crisis, all U.S. banks that have been categorized as systemically important have been required to undergo annual stress tests. These tests were detailed under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed after the recession, and have become colloquially known as the DFAST tests.

This objective of the DFAST assessments is to identify significant vulnerabilities in the U.S. financial system before they occur. As Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, detailed in the report DFAST: Tight Credit Card Risk Controls Ensure Bank Liquidity, top banks may not be in any imminent danger, but credit issuers must consider many factors as they forge ahead into next year.

A Catastrophic Cocktail

The DFAST tests measure how each financial institution would respond to a hypothetical economic downturn. In this worst-case scenario, unemployment rises to 10%—as it did during the COVID-19 pandemic—and housing prices fall by roughly a third. Taken with other factors like plummeting equity and real estate values, the DFAST tests create a catastrophic cocktail for financial institutions.

This year’s tests found that these factors would cause more than $500 billion in total credit losses for the top financial institutions. As with last year, consumer credit card losses would be the most impactful among all lending segments, totaling $157 billion. Excluding trading losses, credit cards would account for roughly a third of all projected losses for financial institutions.

Although these numbers were significant, the projected total losses and credit card losses were down from the year before. However, banks aren’t completely out of the woods.

“I think it showed how resilient banks are right now, which is good,” Riley said. “There are a lot of operational improvements, and the charge-offs have been under control, and that’s a good thing.

“The economy is always the risk. Right now, the trend is that it’s going to be better because some of the charge-offs are down, some of the delinquencies are down, but you still have consumer credit at an all-time high—it’s like $1.3 trillion. In the last 10 years, it’s gone up by over $300 billion, so that’s a lot of bananas. You have to be worried about where this is going to level off.”

A Proof Point

This substantial stress on consumers had direct effects on this year’s DFAST tests. Most notably, Ally Financial is no longer included in the index because the company sold its credit card portfolio last year. Ally Financial’s credit risk simulation was the weakest among all credit card issuers, running at a projected 40% loss rate. 

Ally built a loan portfolio that catered to borrowers with lower-range credit scores. As a result, Ally was at high risk of default and delinquencies as economic factors pressured consumers in these income brackets.

This was evidenced by last year’s DFAST tests, in which Ally Financial was the poorest performer. The assessment found that Ally would face severe losses under the stressed conditions of DFAST, far more than the 16% to 20% range other lenders experienced.

On the other end of the spectrum, American Express and Chase performed the best in last year’s DFAST tests, and they achieved similar success this year. This is largely because they have cultivated a different customer base from Ally’s.

“The big deal is that American Express and Chase, the two top leaders, are still at the best performance level,” Riley said. “It’s an example showing how American Express uses a lot of discretion when they underwrite. It’s typically FICO scores above 720, and that’s a proof point. Chase is diversified in a lot of ways—they were anchored to the consumer households, and they take advantage of that in their marketing. Those are two good signs of what’s going on.”

Balancing Credit Investments

According to Riley, financial institutions should take a page out of the top lenders’ playbooks and prioritize quality over quantity. One aspect of this model is tightening lending criteria to match borrowers’ FICO scores, but attracting and maintaining a quality customer base is more complex.

Financial institutions should also entice potential cardholders with attractive offers and work to build strong relationships with their customers. Banks also must scrutinize all new accounts and take a closer look at their underwriting processes. Another consideration for lenders is keeping their portfolios balanced to ensure they aren’t over-exposed to one client segment in the event of a downturn.

One of the most important lessons from the DFAST tests is that credit cards play a significant role in the operations of financial institutions and consumer households. Although all of the top-tier institutions passed this year’s assessments, significant risks are in play for smaller issuers.

Credit cards offer high returns for issuers, but they can quickly become a high risk if there is an economic mishap. This means that smaller issuers shouldn’t become overly dependent on their credit card portfolio.

The Party Isn’t Over

Concerns remain about the state of the economy, as inflation and interest rates are still high, and the impacts of tariffs loom. However, if this year’s DFAST tests are any indication, most financial institutions are prepared to weather the storm.

“I think we have to thank our lucky stars that many of the metrics did not deteriorate—that’s important,” Riley said. “There are mixed feelings on why it hasn’t. There’s a lot of talk on interest rates going down right now; they’re relatively high. In Canada, they’re significantly lower. Which one’s better? A lot of it depends on who you ask.

“The takeaway is that things are better, but everybody is walking on eggshells because debt is higher and prices are higher. Even though there are mixed levels of optimism, things do look better in a lot of ways. I wouldn’t say the party’s over because you have indicators like the rising amount of debt.”

The post DFAST Tests Indicate U.S. Financial Institutions Are Braced for an Economic Downturn appeared first on PaymentsJournal.

Credit delinquencies are starting to creep up even among borrowers with the highest credit scores. Research shows that most of the increase is concentrated in the auto loan and mortgage segments, while credit card delinquencies remain stable for now.

According to the latest edition of CreditGauge, published by VantageScore, late-stage delinquencies have risen across all credit tiers. The sharpest rise was in the Superprime segment (credit scores 781-850), where delinquencies jumped 109% year-over-year. The next tier, Prime (661 to 780), recorded a 47% increase.

Much of the rise stems from mortgages and auto loans, where delinquency rates climbed by 0.11 and 0.05 percentage points, respectively. Both auto loan and mortgage balances also grew on a month-over-month basis.

Big Shakeups in Car Loans

The auto finance business has been under pressure. Auto loan originations are falling, according to VantageScore, even as the amounts financed per purchase continue to grow. Experian reports that the average monthly payment for a new car in Q1  2025 was $745. The average credit score for those buyers was 756, putting them squarely in the Prime segment.

Buyers have been trying to lower those payments by opting for longer auto loans. Six-year loans are now the most common term, accounting for 36.1% of loans in Q2, according to Edmunds.com. Seven-year loans represented 21.6% of all financing for new vehicles.

Credit Cards Remain Unscathed

The credit card market hasn’t shown signs of weakness yet. The Federal Reserve reports that overall delinquency held steady at 3.05% between Q1 and Q2 2025. That’s slightly lower than in Q4 2024, when the rate stood at 3.08%.

Weaknesses in other types of loans borrowed by creditworthy individuals may not necessarily spill over into the credit card market.

“With the recent drop in chargeoffs for all credit card issuers falling from 4.42% in Q1 2025 to 4.17% in Q2 2025, we view the VantageScore comment as anecdotal for credit cards, and expect to see strong delinquency trends for the next 60 days,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The segment VantageScore refers to—those with better credit scores—should not be ignored, though. This segment is often a canary-in-a-coal mine. But for now, credit card performance continues to be strong.”

The post Auto Loan Delinquencies Creep Higher Among the Most Creditworthy appeared first on PaymentsJournal.

Loan losses represent one of the most critical indicators of financial system health, and stress-testing scenarios provide a clear lens into how institutions might perform under adverse conditions. By examining data from regulatory and internal stress tests, analysts can gauge the resilience of banks and lenders to economic shocks, such as rising unemployment, interest rate fluctuations, or market downturns.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: DFAST: Tight Credit Card Risk Controls Ensure Bank Liquidity

Top 5 Loan Losses in Stress-Testing Conditions

• Credit cards: $157 billion
• Commercial and Industrial: $124 billion
• Other loans: $78 billion
• Commercial real estate: $52 billion
• Trading: $44 billion

Source: Federal Reserve, Javelin Strategy & Research, 2025

About Report

Leading financial institutions appear well-positioned to withstand a sharp economic downturn, according to findings from the 2025 Dodd-Frank stress testing cycle. While credit card portfolios remain the greatest source of potential losses, current assessments show that banks maintain strong liquidity buffers, with Common Equity Tier 1 ratios sufficient to manage risk exposure. Among major institutions, projected losses range from approximately 9.7% for American Express to as high as 23.4% for Capital One and Goldman Sachs. Because credit card lending represents nearly 40% of potential loan losses in a severe recession scenario, understanding how liquidity and credit risk intersect is critical for credit card portfolio managers.

A recent Javelin Strategy & Research report examines the 2025 stress test requirements for large bank holding companies and systemically important financial institutions. It highlights the growing influence of credit cards within the overall risk landscape and outlines key considerations for retail bankers managing operational and liquidity challenges. The report also details the methodology behind stress testing and its role in evaluating banks’ financial resilience.

The post Top 5 Loan Loss Segments appeared first on PaymentsJournal.

Attracting affluent customers has become a top priority for credit card issuers. To capture this segment, Alaska Airlines is launching a luxury credit card and ramping up its loyalty program.

The airline’s Atmos Rewards Summit Visa Infinite card, a co-branded effort with Bank of America, carries a $395 annual fee and offers benefits like discounted fares, $50 travel delay vouchers, and access to airport lounges.

Alaska Airlines is also expanding its frequent flyer program, Atmos Rewards, to include the newly acquired Hawaiian Airlines. The program will allow travelers to choose how they earn points—based on miles flown, price paid, or the number of flights taken.

“2025 is the year for premium cards,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “We’ve seen major launches from American Express, Chase, Citi, Barclays (with JetBlue Airways), and now a premium co-brand from Alaska Airlines issued by Bank of America. The quest is to attract low-credit-risk, high-spend customers—a good demographic to have in the case of an economic downturn.”

Sparking a Surge

Chase and American Express have long been major players in the premium card market, but recent revamps of their products have sparked a surge in luxury card launches. Chase’s Sapphire Reserve and Amex’s Platinum card now offer an extensive range of benefits, including travel and dining perks. Not long after, Citi entered the market with the launch of its Strata Elite card.

With these new offerings, annual fees have climbed sharply. Sapphire Reserve carries a $795 fee, the Premium card cost $695 per year, and Strata Elite comes in at $595 annually. Still, each issuer insist that the value of their benefits far outweighs the price.

Following the lead of the industry’s top players, JetBlue launched a premium credit card with Barclays earlier this year, which comes with an annual fee of $499.

High Scores, High Stakes

All of these premium card launches target savvy, disciplined consumers—most of whom have credit scores over 720. In today’s environment of rising inflation and mounting credit card debt, these financially stable customers have become especially valuable.

While this is the customer base Alaska Airlines hopes to capture, the premium card market is rapidly becoming crowded.

“Economics aside, these kinds of cards transform the brand image into a more premium feel with exclusive offers, lounge access, and perks,” Danner said. “The Alaska Airlines plan expectedly follows the same recipe for success by using a loyalty tier program and points-based reward plan. The $395 annual fee will compete directly with co-brands like the Delta SkyMiles Platinum ($350) and United Quest Card ($350).”

The post Alaska Airlines Joins the Premium Credit Card Movement appeared first on PaymentsJournal.

Building and maintaining a good credit score is generally challenging, but newcomers to a country often face an even steeper climb.

A study by TD Bank found that individuals who have moved to Canada within the past five years have struggled to make headway in the country’s credit system. The survey revealed that roughly 80% of these new residents had applied for credit since their arrival, with the majority encountering difficulties during the application process.

The top three challenges cited were limited knowledge of how credit card rewards work, a lack of understanding of Canada’s financial system, and reduced ability to qualify for higher credit limits and loans.

Many respondents said the lower credit limits and loan amounts weren’t sufficient to meet their needs, and approximately 60% said they would have a better quality of life if they had improved access to credit. Most also said it was difficult for newcomers to build a credit history in Canada.

Shying Away from Risks

Credit bureaus and lenders now have access to more information about consumers than ever before. Research suggests that adult credit access is influenced by childhood experiences, including the family and neighborhood in which a child grows up.

Several factors have recently impacted consumer credit scores across the board—such as high inflation and rising interest rates. These conditions have led lenders to tighten lending standards and lower credit lines. Additionally, many credit card companies are now focusing on affluent customers—considered more stable—and are avoiding higher credit risks.

Impacts on Newcomers

These combined factors particularly affect newcomers to countries who lack extensive credit histories and often do not belong to higher income brackets. These consequences can be far-reaching. According to TD Bank, roughly 22% of respondents who applied for credit reported insufficient access to maintain a comfortable lifestyle.

Because of this lack of access, respondents indicated experiencing increased financial stress levels, limited ability to take out loans, higher interest rates, and even difficulties in securing housing.

The post Why Newcomers to Canada Struggle to Build Credit Histories appeared first on PaymentsJournal.

A new entrant has emerged in the non-prime credit market, offering cards to consumers who don’t meet the underwriting standards of traditional issuers. While this segment has historically posed challenges for mainstream providers, Tilt uses a proprietary scoring mechanism aimed at identifying creditworthy individuals within this group.

The cards are a relaunched version of an unsecured cash back lineup, originally issued under the name Petal to expand access to fair credit. Empower, now operating as Tilt, acquired the Petal portfolio in 2024.

“Many have tried, but few have succeeded in addressing the sub-prime credit card segment, so it will be interesting to see what Tilt will bring to the market,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The risks are high, the margins are thin, and the potential to expand is limited.”

Proprietary Credit Analysis

WebBank will continue to be the issuer of the cards, and Petal’s cashflow-based underwriting technology will remain intact. As with the Petal cards, the issuer can choose to use a proprietary algorithm that may consider factors such as income, savings and spending—in addition to FICO scores—when determining creditworthiness.

This presents a risk, as traditional credit scoring in the U.S., led by the FICO score, has been highly predictive of losses, which underpin the business revenue model. For customers with subprime credit scores, particularly those below the 660 cutoff, issuers must contend with a segment that is especially vulnerable to economic downturns.

A Dangerous Market

If unemployment rises or business revenue declines, this group feels the pinch first. As a result, mainstream issuers have priced these customers higher to ensure that loan-loss reserves and revenue models can absorb the potential risks. This may limit Tilt’s ability to penetrate the market.

“With Tilt’s focus on subprime accounts and the incremental risk involved, we expect they will face some headwinds, as did Petal with their cashflow model,” said Riley. “There is room for companies to address this segment, but they must consider the business model and risks involved with lending.

“And they must think of the comprehensive needs of their customers in the same manner as top banks,” he said. “They need to consider product features that build savings and net worth, address financial needs beyond just credit cards, and consider ways to weight their investments in retail lending, with additional products such as secured auto, BNPL, and the like.”

The post Tilt Enters Subprime Market with a Different Way of Credit Scoring appeared first on PaymentsJournal.

For now, Klarna and Afterpay have declined to participate in the new credit scoring model that incorporates consumers’ buy now, pay later (BNPL) loan information.

In contrast, competitor Affirm has been working with FICO to develop two credit score models that include BNPL data. These models aim to give lenders a clearer picture of how leveraged a consumer is with installment loans. Affirm has also begun reporting its loan data to Experian and other credit bureaus earlier this year.

However, according to the Wall Street Journal, Klarna and Afterpay are pushing back on following Affirm’s lead, citing concerns for their customers. The companies said credit bureaus aren’t receiving real-time, accurate data on BNPL loans, which could negatively impact consumers’ creditworthiness.

“A strong differentiator for BNPL products is to be a way for their customers to use a form of credit without having to necessarily rely on the stricter underwriting of a credit card,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “This is built into the fabric of BNPL firms’ marketing strategies.”

“I see two main issues,” he said. “First, Klarna and Afterpay view the current scoring models as built on the legacy of credit cards and these models are not updated to reflect the novelty of BNPL. Second, Klarna and Afterpay want FICO to guarantee that the scoring data will not penalize the scores of their customers.”

Assessing Phantom Debt

Despite these objections, data from FICO showed that the inclusion of BNPL loan data didn’t have widespread impacts on credit scores. Of the loans taken out through Affirm, FICO found that they affected credit scores by roughly 10 points for over 85% of those surveyed.

Separately, Affirm pushed back against the idea that the surge in BNPL lending has created substantial “phantom debt” that isn’t captured by traditional credit scoring models. It stated that BNPL loans amounted to only a fraction of credit card debt and that delinquencies were rare.

A Tough Ask

Considering this data, the decision by Klarna and Afterpay to withhold their data is perplexing—especially in the case of Klarna, which has been expanding its partnerships and services ahead of a potential IPO this year.

For their part, Klarna and Afterpay argue that if each BNPL loan is treated as opening a new credit line, it could quickly affect customers’ creditworthiness. Afterpay stated it would not share data with credit bureaus until it has concrete evidence that doing so wouldn’t negatively impact its customers—a high bar to clear.

“To satisfy that demand, FICO could only use positive behavior in their scoring, which isn’t objective,” Danner said. “If Klarna’s BNPL delinquency rate is below 1% as they report, it is actually better performing than credit cards—so the impact of reporting does not seem as significant as one might think.”

The post Klarna and Afterpay Opt Not to Send BNPL Data to Credit Bureaus appeared first on PaymentsJournal.

As first-party fraud continues to surge, data from FICO reveals that nearly a third of respondents believe that lying on credit applications is either justifiable in certain situations or simply common practice.

Inflation and high interest rates have placed increasing pressure on consumers in recent years, leading to a surge in credit card debt. In response, many lenders have reduced credit limits, tightened lending standards, and shifted their focus toward more affluent customers.

FICO notes that many consumers are deliberately inflating or misrepresenting details on credit applications in an effort to secure financing—often without fully grasping how these “so-called liar loans” can strain their budgets or expose them to the legal and financial repercussions of committing fraud.

For the average consumer struggling to stay afloat, fraud may be a viable solution—but as FICO highlights, it often just adds fuel to the fire.

Muddying the Waters

First-party fraud, also known as consumer-engaged or friendly fraud, has become the most prevalent type of fraud worldwide. A separate report from Lexis-Nexis shows it accounted for more than a third of all reported fraud cases in 2024—up from 15% the year prior.

One of the biggest challenges for financial institutions is the variety of forms this fraud can take. In one common scenario, a consumer orders a big-ticket item and later files a false fraud claim. In another, the buyer claims that an item was never delivered or falsely reports it as damaged in transit.

Further muddying the waters are the instances in which a legitimate first party is manipulated by an outside bad actor into commiting fraud.

A Strange Dichotomy

Because of the increasing prevalence of first-party fraud, the first step for financial institutions is to classify fraud accurately. Only then can banks and credit unions begin to deliver the fraud defenses that customers expect.

This reveals a strange dichotomy: FICO found that even as more consumers commit fraud themselves, they are increasingly searching for stronger fraud protections.

According to its survey, nearly a third of respondents ranked fraud protection as their top priority when opening a new account—placing it above value and customer service. More than half said that solid fraud protection was a top three consideration when selecting a new account.

The post More Americans Think First-Party Fraud Is Justified appeared first on PaymentsJournal.

The Apple Card was a good idea when Barclaycard launched it. It showed promise when Goldman Sachs (GS) took it on. Now, it appears to be headed to Chase, where it will likely be re-engineered into a profitable card program—one that benefits the broader Chase organization, and not least of which is protecting its No. 1 position as the top U.S. issuer, even after the Capital One/Discover merger.

We will not bore you with the details of why this shift is happening; you can read about it here, here, and here. We promise not to criticize Goldman Sachs. Instead, we praise its efforts to challenge the norms in U.S. payments and its ability to maintain balance despite heavy losses. Kudos to David Solomon for making a radical decision to enter retail banking and knowing when to pull back without hurting Goldman Sachs. And Apple? Who doesn’t like Apple, except maybe Android users?

Today, the focus is on the buzz surrounding the WSJ release regarding “advance talks” about Chase acquiring the portfolio, which Reuters picked up.

The Mechanics of a Deal Like This

Chase will acquire the loan books from Goldman Sachs, limited to the Apple-branded cards. GS sold its interest in the General Motors card to Barclaycard last year.

In the world of payment cards, portfolios carry value and risk beyond the sum of their credit portfolios. With about $20 billion in book value, Chase will require a discount. Factors influencing that discount include credit risk.

Industry buzz around FICO scores, which are the standard for assessing credit quality, indicates that about 15% of Chase’s massive portfolio has scores beneath the subprime cut-off of 660. At Apple, that metric is a whopping 34% according to some sources. It’s safe to assume that Chase will apply a deep discount on the book value. The big question is: how much? 

We know that Barclaycard balked at GS’s discount, but we also know that Chase CEO Jaime Dimon and Head Retail Banker Marianne Lake would love to close a deal like this. My prediction—and it is no more than an educated guess by a longtime credit card expert—is that Chase will likely carve out a 10% discount, or around $2 billion. How they book the revenue and related goods will be up to the accountants.

Also, Apple’s particular technologies were up for sale in April, and Visa was chomping at the bit to outpace Mastercard. Chase, a long-time Visa-friendly issuer, will likely lever the Visa network, but it might also exploit some of the components, like wallet integration into its broader business.

What Chase Gets Out of the Deal and What it Has to Fix

Chase is historically a conservative, disciplined lender. Consider the numbers of FICO scores discussed above. They do not lend speculatively. The first step will be to clean up risk with a broad brush. Expect marginal credit scores to drive credit line decreases. Expect a low tolerance for sloppy payments. They will also need to streamline the billing process and convert the one-cycle billing strategy to Chase’s load-level billing process, which uses 18 billing cycles. On my Apple Card, which bills only on the first of the month, this will be a relatively easy task if they let me pick my billing date. Consistent with Chase’s conservative credit policies, it would not be a surprise to see a quick write-down on some marginal accounts to clean up the portfolio further.

But Chase lands back as the top U.S. card lender. With its deep penetration of households in the U.S. market, there will likely be few new accounts, but it does protect Chase’s flank and endears its card to the iPhone.

How Does This Affects Javelin Card Bench?

Javelin Card Bench is a leading competitive intelligence tool that provides reconnaissance on credit card offers by top banks. Goldman Sachs is one of the issuers tracked, along with American Express, Bank of America, Barclaycard, Capital One, Chase, Citi, Discover, TD Bank, U.S. Bank, and Wells Fargo. Card Bench handled the GM-Barclaycard transition seamlessly and will use the same strategy to integrate Apple into Chase when the deal closes. The next step will be to replace Goldman Sachs with another leading issuer, and we will soon announce which one of the three issuers will complete the field.

The post Finally, a Solution for the Apple Card Is in Sight appeared first on PaymentsJournal.

After exiting the market several years ago, Citi is reentering with a premium credit card designed to take on Chase and American Express.

Like its rivals’ top-tier offerings, Citi’s Strata Elite card boasts an array of perks. For weekend diners, it offers 6x points on restaurant purchases made on Friday and Saturday. Shoppers also receive a $200 annual splurge credit usable at select brands including American Airlines, Best Buy, and Live Nation.

Travel rewards are also in the mix, such as a $300 annual hotel credit that can be applied to a two-night stay. However, there is a caveat—most travel perks are only available when bookings are made through Citi’s travel portal. While that may not be a dealbreaker for everyone, it exemplifies the importance of reading the fine print when it comes to premium cards.

“These luxury cards are great, but before investing, you will need to think through what you want from your latest favorite credit card,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “I have an Amex Platinum, a downgraded version of Citi Strata, and I closed my Chase Sapphire after two years. After reviewing the terms and conditions of all three, you know that the cards can more than pay for themselves—but you must also learn how to use them effectively to achieve a return on your investment.”

A Timeless Cache

According to Citi, Strata Elite can return roughly $1,500 per year to its cardholders. However, like other luxury card products, the card comes with an annual fee. Still, Strata Elite’s $595 per year price tag clocks in lower than both Chase’s Sapphire Reserve and Amex’s Platinum card, which have fees of $795 and $695, respectively.

“If you want all three, it will cost you a combined $2,000 a year, so this is not for the weak of heart,” Riley said. “I like the Amex Platinum because the card has timeless cache, it was cool before all others. However, to maximize my return, I need to do a little work, ensuring that I use my Uber credit monthly and transfer my personal New York Times subscription to my American Express card.”

“Similarly, with Sapphire Reserve, there is an excellent credit for Apple Music and Apple TV+,” he said. “However, if you use Amazon Music and YouTube, you will need to make adjustments. Nevertheless, you can still be a winner with Chase Travel. Similarly, Citi’s Strata Elite is terrific if you like Citi Travel, and who wouldn’t want the nice $200 splurge credit?”

Keep Your Eyes on the Ball

Citi’s reentry into the premium card market is part of a larger trend in which financial institutions are increasingly focusing on the affluent customer base. As economic pressures have battered the everyday consumer, individuals with high credit scores have become a sought-after commodity.

However, it remains to be seen if the market has room for another premium credit card.

“Keep your eyes on the ball—these cards are great if you maximize your options, but what is going on behind the scenes is the real issue,” Riley said. “Notice the importance of merchant-funded rewards in bulking up the value proposition. Keep your eyes on the second-year benefits because that might change your position in 2026. We wrap up some subtle and not-so-subtle industry shifts in rewards here.”

The post Citi Launches Premium Credit Card to Rival Amex and Chase appeared first on PaymentsJournal.

Artificial intelligence has been a part of the credit landscape for a while now, but generative AI promises to fully change the game. From the ubiquitous chatbots to enhanced credit scoring to personalized loyalty programs, AI is trained on every aspect of the credit industry.

In From Hype to Impact: How AI Is Transforming Credit, a new report from Javelin Strategy & Research, Ben Danner, Senior Analyst, Credit and Commercial, looks at what changes lie in store for card issuers. “Generative AI is changing the way financial institutions analyze data and is streamlining customer service operations,” Danner said. “But it also comes with considerable risks.”

The Existing Use Cases

The most visible example of AI now is the chatbot, which we can expect to get more intelligent as AI capabilities expand. Instead of a basic chatbot that sends you through a link list or a hierarchical checkbox list, the improved bots will use natural language processing to have more intelligent and human-like responses. The enhanced intelligence comes with some challenges, presenting the prospect of an untamed chatbot going off the guardrails and saying all sorts of strange things to customers.

In the credit scoring and decisioning spaces, AI has been used for a while to work through unstructured data. Generative AI can output new modes of information based on what it’s been learning. But there are potential regulatory hurdles limiting how that data can be used for scoring and decisioning. Credit scoring is tightly regulated, with a variety of laws that have been on the books for years and haven’t caught up with some of the advances in AI tech.

Companies like FICO say they’re not using AI at all right now in their credit scoring. But other companies that provide data to FICO are leveraging AI technology. They are using it to analyze unstructured data, like social media, email, and even tax returns and rental agreements.

“A rental agreement or an invoice might come to you in a PDF, for example,” Danner said. “But if you need to provide that to your credit agency, a human would have to sit there and look through that document, find what you owed and if you paid it on time, and all that. AI can look at those unstructured invoices, aggregate all the data together, and build that profile for you.”

Unstructured data has a lot of promising uses for evaluating creditworthiness. But regulatory concerns have limited its use when it comes to actually constructing a credit score.

Problems to Be Solved

As a rising and rapidly changing technology, AI still has several kinks to be worked out. By now, everyone has become familiar with AI’s problems with hallucinations.

“I used ChatGPT this morning when I was trying to analyze a certain graph,” Danner said. “I asked it to spit me back three sentences on what it thought this graph was about, and it sent me back numbers that were incorrect. I think it interpreted an 8 for a 6 on one of the charts and sent back data that was completely wrong, but it defended it like it was correct. That’s been one problem that’s plaguing data.”

Another concern is the transparency of the model. AI tends to be a black box, which makes explaining how some of the algorithms arrived at their choices difficult. A credit regulator needs to know how the model comes up with its decisions.

“If you can’t explain the result to me, then we can’t use that,” Danner said.  “That’s something all the AI companies are trying to figure out. That’s why there’s all this verticalization of AI and using their own data internally, so that they can fully explain their model. They’re not just going out and getting data from all over.”

Finally, there is algorithmic bias. Training an algorithm from data collected by humans will introduce biases, and those biases will be reflected in the outputs from the algorithm. A study from Lehigh University looked at racial disparities in large languages models and found these disparities persisting in mortgage underwriting.

“It’s perpetuating these social inequalities,” Danner said. “The banking industry’s been trying to correct those mistakes, especially in credit. Those are things that need to be solved for with these models before a wider application.”

Personalizing Loyalty and Rewards

Credit card companies have also begun incorporating AI into their rewards programs. Much of the data they’re using is derived from transactions. Every time a shopper swipes a credit card, the issuer is collecting that data, then using it to offer different merchant rewards.

For example, Chase has its Chase Offers platform built into its mobile app. Every swipe builds another piece of a huge transaction history. AI has the ability to take a large data set like that, with thousands and thousands of transactions, and personalize it to just one individual.

“Let’s say I know Ben likes to buy coffee in the mornings at 8 a.m.,” Danner said. “Should we present some type of offer to him at 7:45?  If a human had to do that, you would have to hire a whole team of people to sit there and figure all that out. We can now have AI analyze all that transaction data. That’s an opportunity for card issuers that are historically sitting on millions of data points but don’t have a good way to analyze or leverage that information.”

The Next Steps

The new agentic AI shopping models will make the world even more complicated. We will soon have AI agents making payments on behalf of customers. Consumers will eventually figure out how to use that system to find the best deal for hotels, for example, but issuers will also use it to garner more usage from their cardholders.

“Visa gave us a little bit of a hint into their how their AI analytics is going to work,” Danner said. “They presented a picture of a cellphone with a person requesting a hotel, saying, ‘Could you find me the best hotel in the area?’ And it popped back and said, ‘Sure, would you like to add your card to this?’”

The post Smart Cards: How AI Is Changing the Credit Industry appeared first on PaymentsJournal.

New research suggests that adult credit access is shaped by childhood experiences—especially neighborhood environment and surrounding social influences.

The study from Opportunity Insights found that credit scores tend to solidify by the time a person is in their mid-twenties, with credit behavior deeply linked to formative years and early life circumstances.

The area where a child grows up has a significant impact on their future credit score. Children who live in communities where people tend to repay loans are more likely to do the same as adults. For example, each additional year spent in Bergen County, New Jersey—a high-repayment area—increases a child’s likelihood of repaying loans by 0.4 percentage points compared to time spent in Baltimore—a low-repayment area.

Family background, particularly parents’ credit score, is another key predictor of future credit outcomes. Moving from the bottom to the top of the parental credit score distribution reduces the likelihood that someone will fall 90 days behind on a loan repayment in early adulthood by 50 percentage points. This effect holds regardless of the individual’s own income or financial situation.

Regulatory Concerns

Industry experts caution that the law prohibits credit scoring from considering certain socioeconomic factors.

“The risk assessment must be blind to some factors that often fall into alternative credit scoring,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “Top credit scoring companies refrain from including certain items that are protected by law. When alternative scoring addresses items such as college major and internet activity, scoring can be influenced by items that touch on social or economic factors with underlying datapoints that breach existing rules.

“When you start decomposing ZIP codes, for example, and compare 10708 to 10033, a whole set of sociological issues come into play,” he said. “These are not appropriate for the clinical requirement of credit scoring, which is to assess credit risk.”

Opportunities for Learning

The Opportunity Insights study suggests addressing these credit gaps by investing in communities well before children are old enough to enter the credit system. It recommends teaching responsible borrowing and repayment behaviors early in life.

“This research highlights the structural problems faced by borrowers and underscores the need for further investment into early financial literacy and education,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin. “Every high school should have a course on household budgeting and financial planning, including how credit scores work.”

The post Credit Scores Start to Take Shape During Childhood appeared first on PaymentsJournal.

After ending its decade-long partnership with Citi, Wawa is relaunching its credit card as a cobranded offering with First National Bank of Omaha (FNBO). This shift from a private-label card to a cobranded one is expected to provide greater flexibility for Wawa customers, allowing them to use the card beyond just Wawa’s convenience stores.

Wawa operates more than 1,100 locations, primarily in the Mid-Atlantic region. Citi first issued the chain’s private-label card in 2015, but as the payments landscape evolved, the card struggled to keep pace. While neither Wawa nor Citi has commented on the reasons for the partnership’s end, online complaints suggest the old card was not compatible with the Wawa app.

“Nothing pissed me off more than having a Wawa credit card that couldn’t be used in my Wawa app,” said one commenter on Reddit. “What a joke.”

Another complained they couldn’t add the card to their digital wallet or use tap-to-pay.

Experience with Convenience Stores

FNBO is a logical partner to step in, especially given the growing concerns about using private-label cards at gas pumps.

“FNBO is no stranger to cobrands,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “They have quite a few in their portfolio, including Amtrak, Best Western, MGM, and Chrysler. They’ve also built expertise in the c-store/fuel retailer space with the Sheetz partnership, which launched a revamped cobranded card last year.”

This switch also reflects a broader decline in private-label usage. According to data from Javelin, private-label cards accounted for 26% of the credit card market in 2022, dropping to 20.8% by 2024.

Mending Fences with Mastercard

The new partnership also reunites Wawa with Mastercard nearly two years after a bitter legal battle between the two, stemming from a 2019 data breach. Malware stole credit card data from Wawa customers for at least nine months before Visa alerted Wawa that something was wrong.

After the breach, Mastercard issued a $17.8 million reimbursement assessment against Bank of America, Wawa’s bank. Wawa alleged Mastercard of breach of contract and “unjust enrichment,” but eventually lost its $10.7 million lawsuit against the payments giant. Wawa eventually settled a $12 million class action lawsuit over the data breach, as well as an $8 million payment to seven states in which it operates.

The post Wawa Moves from Private-Label to Cobranded Card appeared first on PaymentsJournal.

Digital cards saw a significant boost in adoption during the pandemic, initially driven by necessity. However, it quickly became clear that hygiene was just one of many benefits—and not even the most compelling one. Both consumers and retailers have found digital to be faster, more cost-effective, and more efficient than traditional physical options.

In a PaymentsJournal podcast, Fiserv’s Wesley Suter, Senior Director of Product, and Kush Patel, Senior Product Advisor, as well as Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed the advantages digital cards offer over their physical counterparts, and how banks can tap into those strengths.

The Card-Not-Present World

Post-pandemic, the world has shifted from predominantly card-present to card-not-present transactions. Consumers can now order groceries from the comfort of their couch, then drive to the store where someone loads them into the car. There’s also been growth in digital acceptance at the point of sale, as merchants adopt tap-to-pay systems.

“Roughly 30% of in-person transactions are click-to-pay or digital wallet transactions, and that’s going to grow to over 50% in the next couple of years,” said Patel. “Anecdotally speaking, I live in a neighborhood where our restaurant association has gone completely cashless. Tap-to-pay and digital wallet transactions are very important to cardholders, not just at home but when they’re shopping in stores and at restaurants.”

Beyond shopping, businesses are working to make it easier for cardholders to digitally complete tasks that were traditionally done through human interaction. That can include something as simple as activating a card or more complex and curated experiences like disputing a transaction.

Ultimately, it’s not just about making cardholders’ lives easier, but making it easier for them to do business with issuers. Engaging customers to the point where incorporating digital tools becomes a part of their routine sets the stage for stickier relationships, cross-selling opportunities, and deeper engagement.

“When you see the throughput that the integrated experience has with the debit and credit card portfolios, you start to think about the foundational aspects of card management,” said Suter. “How do we get those cards not only in their hands, but active and used. With the integrated model, we have seen digital banking platforms increase 5% to 7% month over month in activation and usage.”

Integrating Debit and Credit

One area in which digital platforms have made a difference is in integrating credit and debit accounts. Issuers used to treat debit card holders differently from credit card holders. They might ask a debit card holder to download an app to manage their card, but if that same user had a credit card from the issuer, they could be directed to a third-party website to make a payment or view statements.

“It’s not the consumer’s problem how the silos might exist in different companies,” said Riley. “To them, it’s a card that they want to use to conduct a transaction. Whether they want the money to come out of a bank account with a debit card or to use a credit line, making that whole process seamless is important.”  

By unifying debit and credit accounts, digital platforms make it easier for cardholders to do business with their issuer. It also better positions the bank to cross-sell between the two accounts.

Creating More Engaged Customers

Another advantage for issuers is that cardholders who can quickly access their funds tend to transact more frequently than those who are less digitally engaged. Credit card transactions were once primarily for big-ticket items, but thanks to digital cards, we’re now seeing an increase in smaller transactions across debit and credit. This results in greater engagement in terms of transaction volume and overall portfolio spend.

They also give cardholders more uninterrupted access to their funds. When a card is lost or stolen and not promptly replaced, 40% of affected cardholders are likely to switch to another issuer or card, leaving the original one behind.

Similar to merchant-specific cards hosted on their own portals, issuers are now beginning to offer digital-only solutions as well, like the Apple Card. Additionally, virtual cards are being rapidly adopted by commercial and small businesses to enable better expense management, faster transaction settlement, and greater control over overall spend.

This trend may also carry into the consumer space as online transactions become more common. Increased online activity exposes cardholders to higher risk and privacy concerns, prompting consumers to adopt virtual cards—whether one-time or merchant-specific—as a way to protect themselves.

Fighting Fraud

Digital transaction also makes it easier to fight fraud. Fiserv’s technology, for instance, can provide contextual evidence around the purchase transaction. Issuers that have adopted this technology at a rate of 75% or higher have seen a reduction in fraud of over 20%. Those with lower levels of engagement are seeing a more modest 5% to 6% reduction in fraud.

“I can tell a layman cardholder right off the street that this is where your transaction was conducted, how much it was for, and where the message came from,” said Suter. “They immediately understand whether it is a legitimate transaction or potentially illegitimate. That deputizes the cardholder, allowing them to understand with pure context whether they performed that transaction or not.”

Behind the scenes, Fiserv leverages neural networks, insights and machine learning not only to fight fraud but also accelerate customization—such as personalized offers based on geolocation. These elements can drive increased spend on those cards.

Steering Them to Digital

We live in a digital-first ecosystem. We can manage our thermostats, do our grocery shopping, and call a rideshare—all from our phones. Our digital banking and finance experiences are a natural extension of that. It’s important to have digitally integrated engagements that accommodate the shift in how consumers interact with their financial institutions.

“Over half of consumers would like to engage with their banking institutions via digital channels rather than going into a branch,” said Patel. “Younger generations expect this at a much higher rate, but more than half of baby boomers and Gen Xers also expect to engage via their mobile channels.”

Every consumer is at a different stage in their lifecycle. Fiserv continues to iterate on its platform to help guide both consumers and businesses in tokenizing their cards into digital wallets.

“Anything that I can do on the phone or in branch now needs to be steered towards that digital component, from disputing a transaction to more engaged relationships around rewards and fulfillment,” said Suter. “At some point the card has to be reissued or replaced. True digital card management is the ability to manage the entire lifecycle relationship of that card and that consumer.”

The post Beyond Plastic: Why Digital Cards Are the Future appeared first on PaymentsJournal.

When Chase and American Express unveiled plans to enhance rewards for their luxury credit cards—and raise their fees—it seemed that these lenders were focusing on the most rock-solid customer base amid economic upheaval.

Though macroeconomic factors have played a part in the renewed focus on affluent customers, these moves involve much more than is apparent at first glance.

As Brian Riley, Director of Credit Payments at Javelin Strategy & Research, detailed in the report Amex and Chase Face Off on Credit Cards, but the Backstory Is More Interesting, smaller credit card issuers can take critical cues from the top issuers’ strategies.

The Timing Is Perfect

In addition to the economic backdrop, the credit card industry is approaching one of the most important shifts in dynamics in decades.

“You have the biggest merger in the history of credit cards going on right now with Capital One and Discover,” Riley said. “The timing of doing this is good because they’ve got to integrate this portfolio, and all of a sudden Chase is going to lose its position as top issuer—it’s now going to be the new Capital One. With all the chaos, the timing is right for Chase and Amex to readjust this piece.”

The issuers are recalibrating by addressing the three best segments in the credit card market.

First are the big spenders, who can afford to make the substantial investment in a product that others receive for free. Next are the strategic buyers, who are willing to pay a high fee for the potential to reap high rewards. The final segment is responsible cardholders, those who have FICO credit scores above 720.

Another attractive trait about the premium segment is that Discover doesn’t have an offering in this space. Capital One does—with its Venture X card—but the$395 annual fee card doesn’t deliver the same caliber of rewards as the Chase and Amex products do.

“Capital One and Discover are middle-market players, but they do have some great accounts,” Riley said. “So here the two biggest players on the premium side aim directly at the top-end segment, so that’s a big deal.

“There are subsegments within that, because you also have the smaller banks in the mix. Here, you are taking on little community banks; you’re marching into their area. You’re presumably going to be taking the top of all their customers and leaving the middle-market stuff there, so the portfolios become less sound outside of Chase and Amex.”

Safeguarding the Segments

Smaller banks won’t be the only institutions affected as Amex and Chase duke it out over premium cards. Other top issuers, such as Bank of America, Citi, and Wells Fargo, will have to shift to defend their top customers.

However, the affluent cardholder base isn’t the only segment that these institutions must safeguard.

“Another big thing here is that—for the first time—Chase is adding their small-business card into the mix,” Riley said. “Now, Amex has always done that in the Platinum card, but it shows you how Chase is addressing the market. That is a real big focus, and it’s a great time to be in the market because with small businesses—yes, some will fail—but many will succeed, and it’s a good choice.”

Investing in the small to medium-sized enterprise market is a strong strategy because typical card spending ranges from $20,000 to $50,000 per month. The arrival of Chase means other issuers must reevaluate their offerings to this sought-after segment.

Betting Against Regulation

Additionally, the moves by Chase and Amex are revealing about the regulatory environment. The credit card industry has come under the microscope in the past few years because of the fees charged to merchants and consumers.

While the Dodd-Frank Act reduced interchange fees on debit cards many years ago, it did not affect credit cards, because credit cards are an independent product not governed by the FDIC.

Some regulators have attempted to remedy this with the Credit Card Competition Act (CCCA), which sought to force price controls on credit card interchange.

“The CCCA has been looming out there, but it is far from being the law of the land,” Riley said. “Here, we’ve got the two of the largest credit card organizations who are really mature—Amex and Chase have been strong players in the U.S. credit card market literally from Day 1. Their bet is the CCCA is not going to happen when you see these premium cards enter the market, or else the revenue dynamics could not support the reward offers.”

Because two of the strongest credit card issuers are enhancing their premier reward programs, other issuers should consider following suit. However, this should be done only if the issuer’s business allows for it. Adding 100 basis points to a card might make it more competitive but also makes it less profitable.

Another area where smaller institutions can follow in the footsteps of top issuers is by benchmarking their card data. Companies like Chase and Amex are constantly adjusting their products based on market conditions, as evidenced by data from Javelin’s Card Bench,  a competitive intelligence card acquisitions tool.

“Offers get honed through the year,” Riley said. “We tracked that there were more than 1,200 different offer changes on just the 200 cards provided by the top 10 issuers. It shows you that when Chase does something, Citi reacts.  Or when Amex amps up an offer, Bank of America antes up. You take the United Airlines Card from Chase and they compete against the Delta card from American Express—when one adds 10,000 points, the other adds 12,000 points.”

Protecting Against an Unbalanced Market

In addition to fine-tuning their offerings, issuers should also constantly reevaluate their relationships with their customers, across all segments. Many of the top banks, such as Wells Fargo, have long been focused on cross-selling other financial products to their existing customers.

“You just don’t have one Wells Fargo product, you have a few others,” Riley said. “Chase is very strong with in cross-selling their financial products. They’ll solicit you for a credit card, and once you get in there, they’ll see how you are, and they’ll go for your deposits. That’s a really healthy way to do this.

“There are some banks that do that better than others. Bank of America has a great program for that, and it’s a good time for issuers to be doing that.  So does U.S. Bank. Nobody knows what unemployment is going to be, and new tariffs are still funky. The timing is interesting, but you have to keep in mind the whole risk of credit cards is still unbalanced right now.”

The post What Premium Card Overhauls by Chase and Amex Reveal About the Credit Card Market appeared first on PaymentsJournal.

Small business credit cards aren’t just for covering day-to-day expenses—they’re strategic tools that can streamline operations, improve cash flow, and even build business credit. Whether it’s managing employee spending, earning rewards on regular purchases, or separating business and personal finances, these cards offer real advantages when used wisely.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Riffing on Tariffs: Now is the Time to Build Your Small Business Card Portfolio

Percentages of Where Small Business Cards Get Used

• 52% – Utilities
• 48% – Advertising and marketing
• 45% – Procurement
• 42% – Insurance
• 41% – Online services

Source: Javelin Small Business Payments Insights, Questions 26a and 26a1 (2025)

About Report

Small businesses play a critical role in driving the U.S. economy, yet many continue to grapple with cash flow challenges that threaten their long-term stability. With tariffs adding pressure and supply chains becoming less reliable, operating expenses have become harder to predict. These conditions highlight a growing demand for flexible financial solutions—creating a strategic opportunity for credit card issuers to deliver products that help small business owners manage uncertainty and maintain control.

The post Top 5 Use Cases for Small Business Credit Cards appeared first on PaymentsJournal.

When Apple and Goldman Sachs—undisputed leaders in consumer tech and investment banking, respectively—teamed up to launch a cobranded Apple credit card in 2019, as part of Goldman’s broader strategy to enter U.S. retail banking, many expected it to be a runaway success.

“When that big Apple announcement came, it was a typical Silicon Valley deal, the new best in the world,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The attitude was, ‘This is going to beat everybody else.’”

Instead, it flopped. Fewer than five years later, Apple moved to sever the partnership. Goldman appeared blindsided by the poor credit quality of Apple’s cardholders, which fell well below industry norms. As credit losses piled up, so did tensions between the two companies.

There were also more mundane, yet critical, operational issues, including disruptions at the call center, that further strained the relationship.

“At Apple, everyone was billed on the same day, and that caused everyone to basically call on the same day,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “You’ve got to build 10 more call centers to be able to account for all these new customers that are coming in. It clearly didn’t seem like Goldman Sachs was ready for it, to be able to scale up to service the customers and abide by the contract that Apple wanted. It turned out to be a nightmare for them.”

The Airline Model

Javelin estimates that 29% of the nearly 600 million credit card accounts are cobranded. The model is simple: an issuer partners with a merchant to tap into its loyal customer base, offering targeted marketing opportunities. In return, merchants are compensated through rewards-based purchases, partner payments, and revenue-sharing agreements.

When they work, cobranded credit card alliances can last for decades, delivering value to both parties. The three major airlines—Delta, United, and American—have maintained issuer relationships (American Express, Chase and Citi, respectively) dating back to the 1980s.  

So what makes these partnerships succeed, while other seemingly promising ones—like the alliance between Apple and Goldman—appear doomed from the start? Many factors play a role, but the most important one seems to be cooperation. Merchants and issuers that actively work to create mutual value tend to see their partnerships thrive.

Delta’s relationship with American Express was once so strong that, when Delta was on the brink of bankruptcy in 2004, it secured as much as $600 million in badly needed financing from American Express. Most of that came as an advance payment for miles that cardholders would eventually earn on their cobranded SkyMiles credit card.

“What keeps the airlines in business is these bank partners are spending millions of dollars to buy reward points, which then they can go back and offer to their customers,” said Danner.

Riley added: “This is a reliable income stream, and the airlines have what’s attractive to issuers, which is a very broad, loyal following of people who spend. That sets the foundation for a good relationship in the cobrand business. Within the airline industry, it’s friendly people and a process that works well.”

What Makes a Partnership Work?

There are two primary factors common to successful cobranding programs.

The first is what Riley refers to as the ability to play nice in the sandbox with your partner.” A cobranded card is, by definition, a team effort. A strong, long-lasting program must deliver benefits to both parties. The greater the mutual benefit, the more enduring the partnership is likely to be. If either the issuer or the brand is indifferent to the success of the other, the alliance is unlikely to last.

The second factor is being prepared to manage the fundamental aspects of running a card program.

“It’s critical for the issuer to take care of the small things, like posting transactions on time,” said Danner. “If you call the call enter, you should be able to talk to somebody within 10 minutes. If there’s an issue, it gets handled quickly. If the issuer is holding up their end of the bargain, the merchant shouldn’t have anything to complain about.”

As the Goldman Sachs example shows, a bank can’t just issue a card and expect the money to roll in. Customer service is a critical component—and one that becomes more challenging as the program scales.

Take Walmart, for example. When it partnered with Capital One in 2018, it brought along 10 million cardholders. By 2023, Walmart had filed a lawsuit to end the relationship, alleging that Capital One was failing to meet customer service expectations. A year later, a judge agreed, ruling that Capital One has not provided the requisite level of customer service promised in the 2018 agreement. That marked the end of the partnership.

Put Everything in the Contract

Typically, partners sign a contract that lasts between five and ten years. To ensure the merchant has a clear understanding of the service they can expect, it’s vital to document every expectation in the contract—down to the specifics like response times from the call center.

In the Walmart/Capital One lawsuit, Walmart noted that in a particular month, Capital One had mailed only 98.01% of replacement cards within five business days—falling short of the contractual requirement of 99.9%. When managing a portfolio of 10 million credit cards, a 1.89 percentage-point shortfall can have significant operational and reputational consequences.

The cobranding contract includes detailed service level agreements (SLAs) that cover all aspects of operating a credit card program. These SLAs specify conditions ranging from call center dispute resolution timelines to the chatbot technology that will be used.

“All this stuff is measured and tracked,” said Danner. “When an issuer starts to not be able to do those things, the merchant is going to have financial problems. It’s generally in the contract that if you don’t meet these SLAs, the issuer needs to pay the merchant X amount of dollars.”

Get the Right-Sized Partner

The partners have to be aligned in several key areas, and one fundamental consideration is size. Citigroup, the third-largest issuer of credit cards in the U.S., has a well-defined strategy focused on partnering with brands like Home Depot and Best Buy. That approach, however, doesn’t suit less-established merchants.

“If you’re a small business and you go to Chase and say you want a cobranded card, they are probably going to laugh,” said Danner. “You wouldn’t do enough purchase volume with customers for them to even care.”

Small and mid-sized issuers may offer a more suitable path. For small or medium-sized retailers, many fintech companies now provide end-to-end management of cobranded card programs, guiding them through the entire process of launching their own cards. These fintechs handle the complexities of working with issuing sponsor banks—relationships that retailers may not have or be familiar with.

Small and mid-sized businesses create opportunities for entities like Cardless, which works directly with retailers to launch cobranded cards. Cardless has a dedicated team focused solely on the merchant side of its credit card business, managing partnerships with banks to support these programs.

For example, a local merchant operating only in California might benefit from launching a cobranded program with a smaller, California-based bank. Similarly, Midwestern sporting goods chain Scheels has launched a cobranded card in partnership with the First National Bank of Omaha. While larger banks may not be interested in regional retailers like Scheels, the sheer number of small businesses presents a significant opportunity in this space.

“Smaller issuers have also built their infrastructure specifically around those accounts,” said Danner. “When you have a relationship with a merchant that is a substantial part of your books and a lot of money invested in that relationship, you’re going to work on that relationship.”

Understand the Structure

One of the small but critical missteps that doomed the Apple/Goldman Sachs card was Apple’s decision to issue bills on the same day each month. Issuers need to understand how merchants structure their payment processes—and adapt accordingly. Failing to do so can lead to serious operational headaches.

“The worst time to call a call center is Monday at lunchtime,” said Riley. “People have gotten through the weekend and now they’re dealing with their problems. The way the bank card business has solved that from the beginning of time is that you spread them out through the month.”

Most issuers offer a 20-day grace period for payments and stagger billing across 18 to 20 cycles throughout the month. This spreads the workload, ensuring that only a portion of the portfolio is billed at any given time. But with the Apple Card’s single billing day, that Monday became a nightmare—every cardholder with an issue flooded the call center at once.

“That’s indicative of how the card was not properly engineered,” Riley said.

Had Goldman Sachs anticipated this, it could have worked with Apple to restructure the billing cadence into something more sustainable. But as a relative newcomer to retail finance, Goldman seemingly failed to do its homework. In the end, the bank would have been wise to follow the Boy Scout motto: be prepared.

“A well-thought-out strategy is essential to make it work,” said Riley. “That’s the only way a partnership will work for both people, if it’s balanced and fair to both sides. That’s like any good relationship, right?”

The post Smells Like Team Spirit: What Makes Cobranded Credit Cards Work appeared first on PaymentsJournal.

After lawsuits by hundreds of merchants, London’s Competition Appeal Tribunal unanimously ruled that the interchange fees charged by Visa and Mastercard are a violation of Europe’s competition law.

According to Reuters, the legal team representing the merchants called the ruling a major victory for businesses that have long been burdened by what they argue are unfairly high interchange fees imposed by Visa and Mastercard.

However, this is far from the first time interchange fees have been challenged, both in the UK and abroad, and there has yet to be a significant shift in these fees. For their part, both Mastercard and Visa voiced their opposition to the ruling, and Mastercard said it would seek to appeal the “deeply flawed” decision.

“It’s more of the same warmed over—merchants don’t want to pay fees to accept card payments” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The facts are the same though, if you eliminate interchange fees as a source of income for card issuers, they will be forced to raise prices and/or raise underwriting standards to curtail losses—both of which deflate spending power of consumers.”

A Polarizing Topic

Despite these concerns, interchange fees have become an increasingly polarizing topic in recent years. Just months ago, the UK’s Payment Systems Regulator (PSR) criticized Visa and Mastercard for raising fees and consolidating their dominance in the card payments landscape.

PSR reviewed the market and found that debit and credit card fees on these payment rails add an extra £170 million ($219.7 million) in annual costs for businesses. Additionally, the regulator stated that Visa and Mastercard have increased service fees to acquirers by roughly a quarter over the past eight years, offering little justification for the hikes.

Due to these rising costs, interchange-related legal actions have continued to crop up around the world. For example, a law was recently passed in Illinois that banned credit and debit interchange fees on taxes and tips. However, it has already faced significant pushback from financial institutions.

There was similar contention in the decades-long battle between U.S. merchants and Visa and Mastercard. While a $30 billion settlement was reached last year—declared a win for merchants—a judge ultimately rejected it, stating that it didn’t go far enough to compensate retailers.

Unlocking Payments Opportunities

One reason for the growing pushback against interchange fees is that many merchants are struggling with difficult macroeconomic conditions. This has also led some merchants to begin surcharging their customers—a practice that is often best avoided. Similarly, reducing interchange fees could have significant impacts.

“If you have taken an econ class, think about the definition of a market in equilibrium,” Apgar said. “For example, what’s the right price for a gallon of milk? If milk is too expensive, consumers won’t—or can’t afford to—buy it. However, if milk is too cheap, farmers won’t be incented to produce it, so maybe they make cheese instead.”

“We covered this in our recent research on in-house payment systems, and—while not apples-to-apples with interchange—one of the key findings in our research is that merchants need to focus less on the cost of payments and focus more on leveraging what opportunities payments can unlock for their business,” he said. “Remember it’s card payments that enable buy online and pick up in-store, payment at time of order for restaurant takeout, unattended kiosk payments, etc.”

The post Visa and Mastercard Interchange Fees Face UK Challenge appeared first on PaymentsJournal.

After a year of research, FICO is introducing two new credit score models that incorporate buy now, pay later data in their calculations.

FICO Score 10 BNPL and FICO Score 10 T BNPL will be available alongside the existing versions of the FICO Score at no additional cost, giving lenders the ability  to evaluate the impact of BNPL data within their current evaluation processes.

Impacts of BNPL Loans

FICO’s year-long joint study of BNPL data confirmed that consumers frequently open a large number of these loans within a short period. As a result, FICO aggregated separate BNPL loans when calculating certain in-model variables.

However, the presence of these loans had less impact than some might expect. In examining BNPL loans taken out through Affirm, FICO found that new BNPL loans affected credit scores by approximately 10 points for more than 85% of the customers surveyed.

Furthermore, that movement was more likely to be positive than negative. Most consumers who had recently taken out five or more Affirm loans either saw their scores increase or experienced no change. 

Casting a Wide Net

In developing the new models, FICO also consulted with some of the largest lenders in the U.S. Across this group, there was broad consensus that integrating BNPL data into credit scoring would allow lenders to make more informed and accurate decisions.

“FICO Scores continue to be the top predictor in credit quality, and issuers use the score from stem to stern in the credit process,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “That means issuers take advantage of the FICO scoring process at the acquisition point, through the credit management cycle, and even when they securitize their portfolios in Asset-Backed Securitizations.”

These changes have been in motion for some time. In June 2022, the Consumer Financial Protection Bureau requested that consumer reporting companies incorporate BNPL data into core credit files. The only major BNPL provider to begin reporting its loan data was Affirm, which ultimately partnered with FICO on the new scoring models.

“FICO leads the scoring function in the U.S. and many other markets,” said Riley. “Their integration of BNPL certainly adds a solid perspective, just as the latest version of FICO 10-T. BNPL is here to stay, and this dimension will ensure that the product has the visibility consumers and lenders want.”

The post FICO Debuts Credit Scores with BNPL Data appeared first on PaymentsJournal.

Americans are carrying more revolving debt than ever, and 2025 could push those numbers even higher. Credit card balances have ballooned as inflation eats into wages and borrowing costs stay stubbornly high. With economic uncertainty still looming, the big question is whether consumers will keep swiping—or start pulling back.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Seven Credit Card Warning Signs in 2025: Don’t Stop Lending, but Watch Out

U.S. Revolving Debt, Year-End Totals (in trillions of dollars)

• In 2022, the U.S. revolving debt total was $1,213 trillion.
• In 2023, the U.S. revolving debt total was $1,319 trillion.
• In 2024, the U.S. revolving debt total was $1,317 trillion.
• In 2025, the projected U.S. revolving debt total is $1,375 trillion.

Source: Federal Reserve, Javelin Strategy & Research projections

About Report

For credit card managers, navigating shifting risk indicators is a constant challenge. Today’s landscape sends conflicting signals: unemployment remains low, inflation has eased but is still elevated, and consumers are tightening their belts on nonessential purchases. Meanwhile, lender confidence is waning and delinquencies have climbed well above typical levels. The inevitability of a future recession only adds to the uncertainty.

In this new report from Javelin Strategy & Research, seven core metrics—revolving debt, consumer confidence, lending outlook, unemployment, inflation, delinquencies, and charge-offs—are analyzed in depth. The report also offers strategic guidance for credit managers looking to mitigate exposure and maintain portfolio health.

The post Will Revolving Debt Increase in 2025? appeared first on PaymentsJournal.

As consumer expectations for seamless buying experiences continue to rise, independent software vendors (ISVs) that embed payments into their platforms position themselves to capture greater market share in a growing and increasingly competitive software landscape. Consider this: the global ISV market clocks in at USD 2.35 billion in 2025, growing to USD 5.5 billion by 2030, reflecting a compound annual growth rate (CAGR) of 18.5 percent.ⁱ

With such rapid growth ahead, distinguishing your business requires more than a presence in the market—it demands forward-thinking innovation. So, how do you differentiate your business and capture a greater share of the market?

A strategic approach is essential to building scalable, adaptable solutions that support long-term growth in a rapidly evolving industry. ISVs that understand this are more successful in a crowded marketplace. How you implement these services, however, is what truly sets you apart. Your financial services framework should extend beyond payments to deliver a comprehensive, value-driven experience.

Implementing lending functionality through API integration is part of a broader approach to delivering greater value to your customers. Capitalizing on this trend now can give your business a competitive edge in a market poised for exponential growth. Analysts estimate the embedded lending market will reach USD 7.66 billion in 2025 and grow to USD 28.43 billion by 2032, with a CAGR of 20.6% from 2025 to 2032.ⁱⁱ

Let’s look at how embedding lending functionality into your software can maximize your revenue potential while scaling your business. To understand the tangible benefits of this approach, it’s important to explore how embedded lending can directly contribute to your bottom line. Primarily, ISVs can monetize embedded lending by earning referral fees or revenue shares. This creates a valuable new income stream without requiring significant investment or operational overhead.

Not only does it open up new revenue streams, but your software solution enables users to access financing options without leaving the software environment. This creates a smooth and intuitive experience that enhances customer satisfaction and loyalty. The advantages extend beyond lending alone—by enabling ISVs to offer flexible financing solutions, you empower your clients to boost customer purchasing power, which drives higher conversion rates, lowers cart abandonment, and increases average order values.

Let’s explore a specific use case: a home services-focused ISV that offers scheduling software with integrated payments and embedded lending tailored for plumbing companies. By incorporating point-of-sale financing directly into the platform, the ISV empowers plumbing businesses to offer immediate lending options for emergency or high-cost jobs.

For example, when a customer needs a new HVAC unit, ABC Plumbing can present a financing solution at checkout, making the expense more manageable. Once approved, the financing provider pays the plumbing company in full right away, ensuring the job can proceed without delay.

This model creates value for all parties involved. The consumer benefits from flexible payment options that ease the burden of unexpected expenses. The plumbing company receives prompt payment, improving cash flow and enabling timely service delivery. Most importantly, the ISV deepens its role as a strategic operational partner, reinforcing its value to the service provider while also generating revenue through a share of the lending activity.

As embedded finance continues to reshape the software industry, integrating lending functionality offers ISVs a strategic edge. ISVs can deliver more value to their users, differentiate themselves in the market, and grow their businesses in new and sustainable ways. We can help.

U.S. Bank | Elavon – Putting it All Together

It’s paramount to find the right payments partner that can develop the framework for your success. Backed by the strength and stability of U.S. Bank, Elavon can empower you to optimize your payments and financial services strategy to accelerate your speed to market, maximize your revenue, and scale your business for future growth. Discover what’s possible with our award-winning APIsⁱⁱⁱ, comprehensive integrated software solutions ecosystem, and Avvance™, our point-of-sale lending solution.

Whether you’re new to the industry or a seasoned ISV, we’ll help you build your long-term strategy. Decades of experience working with partners has driven us to develop an exceptional implementation, training, and incubation experience that enables you to achieve your maximum potential as a partner with us. It’s why more than 1,000 integrated partners, 1,700 financial institutions and 350 ISOs/MSPs trust us to grow their business.

Find out what’s possible. Call us at: 800.725.1243.

ⁱ Mordor Intelligence

ⁱⁱ Coherent Market Insights

ⁱⁱⁱ 2023 API World Awards – “Best in Payments APIs”

The post Embedded Lending as a Growth Strategy for ISVs—How to Maximize Revenue Potential appeared first on PaymentsJournal.

As credit card debt hovers near historic highs, American Express and JPMorgan Chase are preparing to revamp their luxury credit card offerings.

Amex has long catered to a higher-end customer base with its line of cards that offer perks at airlines, hotels, and exclusives, all for an annual fee. At the top of its portfolio is the Platinum card, and American Express recently announced that major changes are on the way for both the consumer and business versions of this card later this year.

The $695 annual fee card is expected to offer more rewards and experiences for its luxury user base. In an interview with CNBC, Howard Grosfield, President of U.S. Consumer Services at Amex, said the benefits of the Platinum card would “far, far, far exceed the annual fee.”

American Express’ announcement follows news that JPMorgan Chase is planning a refresh of its Sapphire Reserve card. Although the travel and dining rewards card has been around for less than a decade, it has quickly emerged as a strong competitor to Amex in the premium space.

The Sapphire Reserve credit card currently carries a $550 fee, but there has been speculation it could rise as high as $795 once new benefits are rolled out. There is also talk that Amex might follow suit with an annual fee increase for its Platinum card.

A Piece of the Pie

These potential fee increases come as more credit card companies bolster their loan loss reserves in anticipation of higher defaults. Inflation has placed considerable weight on consumers, many of whom are struggling with mounting debt and elevated interest rates.

As these challenges persist, credit card issuers are likely to continue their focus on premium products.

“Everyone wants a piece of the pie when it comes to an affluent customer base,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “These are customers that are more resilient to economic downturns and market pressures, and—of course—spend more, which profits the issuers.”

“These are cards that are certainly competing for the same base, especially with the high annual fees which would dissuade most from wanting to have both (who wants to pay over a thousand dollar in annual fees?),” he said.

Changing Perceptions

Despite the fees, customers of all ages have been flocking to premium cards to reap the rewards. However, these perks do more than just attract customers, they also offer credit card issuers an opportunity to build relationships and reshape perceptions.

“I expect Amex to refresh some of its statement credit partnerships–maybe changing out Walmart+ credit?” Danner said. “For Chase, I’d expect some boosted travel perks and maybe a higher annual travel credit and additional rewards point verticals—perhaps to change its image as more than an enhanced travel card.”

The post Chase and American Express Plan Premium Card Revamp appeared first on PaymentsJournal.

Citi announced that it is increasing loan loss reserves. And the issue isn’t Citi’s well-run credit card business; it is indicative of what to expect in the months to come. A recent report from the Federal Reserve stated that the consumer’s challenge is not rising unemployment, but rather persistent inflation.

Yahoo Finance reports a recent Bloomberg story on Citi’s loan loss reserves:

• Citigroup Inc. is set to put aside hundreds of millions of dollars more than it did last quarter to account for potential losses on loans, an early sign that the biggest U.S. banks may be bracing for deteriorating economic health.
• Now, Citi’s hundreds of millions span a wide range of credit collateral classes, but know that cards are in the mix. It isn’t just Citi; Jamie Dimon, the most quotable banking CEO, has been sounding the inflation alarm for months. In NBC Markets, the Park Avenue Powerhouse, which cut its teeth on credit cards decades ago, Dimon stated that the economy’s “soft landing” would likely appear weaker going forward.

Javelin Has Been Sounding the Siren on This Issue for Months

In a recent research report, “Seven Credit Card Warning Signs in 2025: Don’t Stop Lending but Watch Out,” we discussed the growth of revolving credit, which is projected to reach $1.5 trillion. We explained why consumer confidence is low, and lenders are pushing back about lending to consumers. In March, we stated that unemployment is not the primary concern; inflation is the immediate risk. And most importantly, watch the 90-day delinquency pipeline, as it is at historically high levels.

Yet don’t stop lending. We believe the lending opportunity is now with small businesses, and we have laid out a strategy in this research report: Riffing on Tariffs: Now is the Time to Build Your Small Business Card Portfolio.

Loan Losses are Key to Credit Quality

The objective of bank policies is to protect liquidity and ensure our financial systems are maintained safely and soundly. Credit card debt is considered a bank asset, but when it becomes delinquent, that asset becomes increasingly doubtful. Regulations require that the bank recognize a particular account as a worthless asset when it reaches 180 days delinquent.

In anticipation of this shift in loan loss, banks prepare for the impact by building up their loan loss reserves. Strong players slightly overprotect against their losses, so that when the asset charges off, banks are prepared for our loss. That’s the story behind Citi’s recent comment about increasing loan loss reserves. They are bracing for an increase in credit losses. You should also.

The post Credit Card Losses Soon to Get Ugly: Prepare Now appeared first on PaymentsJournal.

As Walmart turns back to Synchrony to issue its store-branded cards, the biggest winner may be OnePay, the Walmart-launched fintech. OnePay will partner with Synchrony on the new offering, expanding its portfolio—currently comprising debit cards, savings accounts, installment loans, a digital wallet, and peer-to-peer payments—to include credit cards.

Starting this fall, OnePay will offer both a general-purpose card and a private-label card for Walmart purchases. The cards will be available to millions of Walmart customers through the OnePay app.

Ready for the Big Time

Walmart launched OnePay in January 2021, but it is now co-owned by Ribbit Capital, which helped raise $300 million to power the fintech’s great leap forward this year. The capital was intended to help secure a replacement for Capital One, which had handled Walmart’s credit card business from 2018 through mid-2024.

OnePay helped Walmart add buy now, pay later (BNPL) to its roster of services earlier this year. Although there had been speculation that OnePay might handle the BNPL offering itself, Walmart ended up enlisting Klarna for that service. The latest decision may suggest that the training wheels are now off for OnePay.

Synchrony Re-Enters the Picture

Another big winner is Synchrony, which managed Walmart’s credit card prior to Capital One—before the partnership collapsed amid a hailstorm of lawsuits. After a two-decade relationship, Walmart sued Synchrony for $800 million, claiming the company was refusing to underwrite weak credit card accounts. The suit was later dropped, and Synchrony kept its status as the issuer for the Walmart subsidiary, Sam’s Club.

“The latest development between Walmart and Synchrony is an interesting rekindling between two large players in retail payments,” said Brian Riley, Co-Head of Payments at Javelin Strategy & Research. “You may recall a messy breakup in 2019, where the Walmart-Synchrony relationship fell apart due to concerns about underwriting. Walmart claimed that Synchrony’s underwriting strategy was too conservative, Synchrony felt Walmart was not risk averse. The relationship crumbled, and Walmart partnered with Capital One, which also crumbled.”

Questions remain about the quality of the market Synchrony will be re-entering.

“Walmart will need to think about the importance of risk when it returns to credit card issuance,” said Riley. “As Goldman Sachs learned with the Apple Card, high risk issuances steal profits. The same works with Walmart. The deeper you go with highly predictive FICO Scores, there must be a strategy to cover the risk. It is not about volume, but rather credit quality.”

The post Walmart’s Credit Card Business Lands at OnePay, Synchrony appeared first on PaymentsJournal.

PayPal’s ever-expanding footprint is taking a step into the past with the launch of its first physical card. Issued by Synchrony, a longtime partner in several other ventures, the PayPal Credit card can be used both online and in stores.

The new offering pivots off PayPal Credit, which has long been available to customers shopping online. Eligible existing PayPal Credit customers will be notified about the option to upgrade, and the physical card will begin rolling out to U.S. customers in the coming weeks.

“PayPal Credit is one of our most popular products and customers have long been requesting the ability to use it on the go as they look for more choice and flexibility wherever they shop,” Scott Young, SVP, Global Head of Consumer Financial Services, at PayPal, said in a statement. 

Forays into Physical Cards

Last year, PayPal expanded further into the physical payments space with the introduction of the PayPal Debit Card for use in brick-and-mortar stores—though it required consumers to maintain a balance in their PayPal account. The new card joins the PayPal Cashback Mastercard, giving consumers another way to pay in-store and online.

As an enticement, PayPal Credit is offering a limited-time travel offer: customers will pay no interest on eligible travel purchases made with the physical card through January 31, 2026, as long as the balance is paid in full within six months. In addition, special financing is available on PayPal purchases over $149, giving cardholders more ways to manage their spending.

“PayPal has been a trusted name in payments since it cut its teeth with eBay almost 20 years ago,” said Brian Riley, Co-Head of Payments at Javelin Strategy & Research. “Over the years, PayPal evolved to become a global force in payment acceptance, money movement, and credit.”

A Longstanding Alliance with Synchrony

As mentioned, the new card builds on the longstanding partnership between PayPal and Synchrony. The two companies signed an agreement in 2018 for Synchrony to serve as the exclusive issuer of the PayPal Credit online consumer financing program through 2028. Synchrony also backed the Venmo Credit Card—a subsidiary of PayPal—when it launched in 2020.

“PayPal’s recent announcement to issue their credit card with Synchrony is exciting and will find success in the market,” said Riley. “Synchrony is a top provider in U.S. payments, and like all Mastercard and Visa products, their acceptance is universal.”

The post PayPal Credit Moves into the Physical World appeared first on PaymentsJournal.

Most organizations factor in the cost of doing business when pricing their products or services. However, the costs of credit card acceptance have been a sticking point with many merchants for years, prompting some to tack on a surcharge when their customers use a card.

Although this line of thinking may be understandable, as Craig Lancaster, Payments Analyst at Javelin Strategy & Research, found in Surcharging on Card Transactions: In Search of Balance, substantial risks come into play when a business decides to surcharge, and there are often better ways to pass on costs without alienating customers.

Scaling the Conversation

Most businesses don’t itemize their overhead or supplier costs when presenting the price of their product or service because it immediately invites questions from customers.

“I recently bought a car, and if they had put in front of me that here’s what we’re going to pay the salesperson for having brokered this deal, I would have said, ‘What, you weren’t willing to negotiate with me on price? I see exactly where you could give me a little bit of a break,’” Lancaster said. “Not just in commission, but things like, ‘Do you really need a facility fee?’ or whatever.

“There’s a reason that they don’t line all that stuff out—because they don’t want to put the cost of doing business in the face of the people who come in and buy their products.”

Although it is often not the best practice to single out credit card card acceptance fees as the expense to pass on to customers, there are instances when it is appropriate.

Lancaster examined the case of a small, independent Montana bookstore whose owner took to social media to inform her customers that card acceptance fees were becoming a burden.

The bookstore owner understood that card acceptance was a necessary part of business and did not want to surcharge the full 2.6% interchange fee. Instead, the business owner instituted a 15-cent transaction fee on card payments, a cost imposed by the payment processor. Most of her patrons were sympathetic.

“She said she has seen more cash payments since making the announcement,” Lancaster said. “Cash has its own risks—not the least of which is that it’s sitting there in the till—but a small merchant like that doesn’t have a lot of options. She can accept checks and all that goes with that, and she could guide her customers to cash, and that’s pretty much it.”

Although there are digital options like ACH or even real-time payments, small businesses don’t yet have the tools to implement these payment types for everyday operations.

Additionally, a bookstore owner’s options are limited by the fact that most barcodes on the back of a book are embedded with a price.

“It’s not like she can raise her prices 3% across the board,” Lancaster said. “The customer will ask why the bookstore is charging $18-plus on a $16.95 paperback. I think she probably did the most responsible thing she can do. She’s going to offset her per-transaction cost because that’s locked in, and she has a personal relationship with her patrons where she can guide them toward cash. You can scale that conversation if you own an independent bookstore.”

Penalties and Pushback

Although the bookstore owner took the right tack, many other businesses aren’t surcharging appropriately.

“I stumbled across this one by accident,” Lancaster said. “It was a restaurant in Montana that I hadn’t been to before, and I wanted to try it out. I got up to the front and there’s a sign that declared, ‘We’re going to surcharge 3.5% on all card payments, both credit and debit.’ But surcharging debit cards is in violation of their card network agreements—you can’t do that.”

A small restaurant or merchant may get away with surcharging on debit cards for some time, but the card networks have increasingly begun to crack down on these infractions. Visa and Mastercard have even utilized mystery shoppers to investigate if a business is compliant with these rules.

If they aren’t, the merchant could face thousands of dollars in penalties, just on the first offense.

“If you persist, you can end up on a blacklist where you cannot accept card payments anymore, and that’s not a place a merchant wants to be if you accepted them in the first place,” Lancaster said. “It’s not an abstract risk; it’s a real one. This restaurant might get away with it for a long time, but it absolutely should not be doing it. It’s in violation of its card network agreements.”

Beyond repercussions from the card companies, there is a substantial possibility that the restaurant’s policies will drive business away. Even if some customers aren’t aware that they can’t be surcharged for debit card transactions, many will resent the extra fee.

If they are aware, it puts the customers in the tough position of having to stand up for themselves over what some may view as a nominal charge.

“Do you want to have this fight with a beleaguered restaurant owner while everybody else is sitting around trying to have their breakfast?” Lancaster said. “I glancingly asked the guy—he wasn’t the owner—who was ringing up my sale, ‘What do you think of the surcharge?’ He goes, ‘I wish we didn’t do it; we get too much pushback.’”

Merchant Dependent

Resistance from customers who are simply using their preferred method of payment—which happens to be the predominant payment type in the United States—isn’t likely to diminish. However, some consumers may endure a surcharge in certain scenarios.

“If they like your restaurant or they like your product, they’ll suck it up,” Lancaster said. “If you’re a coffee shop owner and you’ve got a lot of competitors, you have to be mindful of the cost you’re presenting them for what you deliver. If you’re a specialty person like an RV upholsterer and you’ve got very few competitors, you can pretty much tell people, ‘Hey, this is what it costs to do what I do. Take it or leave it.’”

Although some merchants may be able to surcharge with near impunity, the more that fees mount up, the more likely it is that customers will be deterred. For example, during the recent egg shortage, some restaurants decided to institute a per-egg surcharge.

Much like credit card surcharges, most customers probably understood that the price of their meal was higher because of circumstances outside the business owner’s control. This increased transparency would even allow the customer to choose an item that didn’t include eggs to avoid the fee.

However, the more that customers must be selective about the items they order or the types of payment they use, the greater the chance that the customer experience will be diminished. This could have a significant impact on a local retailer.

“It’s the smaller merchants who are the ones that are most likely to surcharge because the Walmarts and the Targets and the big-box stores of the world can erase it with volume,” Lancaster said. “The smaller merchants are the ones that are more likely to surcharge, but they’re also the ones that are in the most tenuous position with their customers.”

Off the Receipt

There are several factors that small businesses should consider as they seek a balance between offsetting interchange fees and pleasing their customers. First off, they must understand their role.

“Do you know your customers?” Lancaster said. “I don’t mean that in the authentication way. I mean that when a guy walks through the door, do you say, ‘Hey, Wesley, how’s it going? it’s good to see you again.’ If you’ve got that relationship, you can leverage that for, ‘Hey, man, listen, I got to tell you, these card processing fees eat me up. I love having you in the store; I love catering to your tastes. Is there any chance you could bring cash?’”

Most consumers are reasonable, and they understand the concepts of card acceptance. If they have a personal relationship with a merchant, the customer will likely be amenable to shifting from their norm.

Beyond steering customers to other payment types, the cost of card acceptance—like other business expenses—should be folded into the price whenever possible.

If a business must charge a fee, it is often best to itemize the charge by another name. For example, if a bar has bouncers, it could list the charge as a security fee. If a theater troupe rents performance space, it could call the surcharge a facility fee.

Regardless of the approach a business takes, card acceptance costs are best kept off the receipt.

“I call surcharging a perfectly understandable bad idea because that’s what it is,” Lancaster said. “My own personal view is that it’s too risky in any number of ways, but mostly in the customer relationship. If I show up somewhere and I want a product or a service and I can’t pay the way I want to pay, that’s the quickest way to drive my business somewhere else.”

The post A Perfectly Understandable Bad Idea: Why Merchants Should Reconsider Surcharging appeared first on PaymentsJournal.

United Airlines is teaming up with JetBlue in a new alliance called Blue Sky, allowing passengers to use their air miles interchangeably across both airlines.

As early as this fall, JetBlue TrueBlue members will be able to earn and redeem points on most United flights, and United MileagePlus members can do the same on JetBlue flights. United Premier elite members and JetBlue’s Mosaic members will also enjoy reciprocal benefits such as priority check-in and complimentary checked bags.

“This partnership will be a win for United Airlines and JetBlue credit card customers who can now leverage their rewards across airlines,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “This merging of loyalty programs will enable more customers to generate rewards and will encourage more flying between the airlines.” 

Both airlines have a strong footprint in the New York City area: Newark Liberty International Airport serves as a major hub for United, while Queens-based JFK International Airport has long been JetBlue’s home base. The alliance offers more options to travelers in the tri-state area when booking their flights.

“One of the historic problems with attracting card customers to a co-branded airline card was the primary airport the customer uses,” Danner said. “If I lived in Boston, for example, I’d want a card that caters to airlines flying out of Boston Logan Airport.”

Prospects for Expansion

More importantly, one of the side agreements to the alliance is that JetBlue will provide United access to slots for up to seven daily roundtrip flights out of JFK. United, which has not had a long-term presence at JFK since 2015, sees that as a significant step in beefing up its international capabilities.

The JFK expansion appears to be the key incentive for the much larger United to partner with the financially shaky JetBlue. Some industry observers view this as a potential first step toward United eventually acquiring the smaller airline.

A Thwarted Alliance with American

The new partnership comes nearly two years after a federal judge effectively ended JetBlue’s similar Northeast Alliance with American Airlines. In that arrangement, American and JetBlue coordinated schedules and shared valuable gate space in New York, while also extending benefits from American Airlines AAdvantage and JetBlue TrueBlue to members of each airline’s loyalty program.

That partnership was scuttled following a prolonged legal battle with the Biden administration, which argued that the alliance was anti-competitive. However, with a new administration in place, United and JetBlue may now find a more favorable legal environment for their own collaboration.

The post What’s Inside the New Alliance Between United and JetBlue appeared first on PaymentsJournal.

While credit delinquencies in the U.S. continue to reach historical levels, Canada is facing a delinquency crisis of its own.

A report from Equifax reveals that one in 22 Canadian consumers missed at least one credit payment during Q1. The delinquency rate rose nearly 20% year-over-year, reaching 1.43%. Young consumers were the most affected, with delinquency rates among those ages 18 to 25 increasing by 15.1%.

This trend persists even as both consumers and issuers pull back. Average monthly spending by Canadian cardholders has dropped to $107—the lowest level since March 2022.

Meanwhile, Q1 2025 also saw a 10.3% decline in new card originations. Notably, one area of growth was among consumers with lower credit scores, pointing to heightened financial stress within this group.

Cardholders Are Paying Less

Consumers feeling the pinch paid, on average, just 52.9% of the credit card balances in Q1. Those under 35 saw the most significant drop, with their average payment rate falling from 62.9% to 58.9%. This same group also recorded the largest increase in the share of cardholders paying only the minimum balance.

Equifax said the lower payments reflected excessive caution on the part of cardholders.

“Our data shows card payment levels, especially for younger consumers, are starting to fall, indicating this spending slowdown is likely driven more by consumers trying to be prudent rather than switching from credit to debit for financing,” Rebecca Oakes, Vice President of Advanced Analytics at Equifax Canada, said in a prepared statement.

Tracking the U.S.

Trends in Canada are mirroring some of the economic patterns currently unfolding in the U.S. According to the New York Fed, U.S. credit card delinquencies ticked up to over 7% in Q1 2025, up from 6.86% a year earlier.

Delinquent auto loans—those at least 90 days past due—climbed to 3% in Q4 2024, marking the highest level since 2010. Brian Riley, Director of Credit at Javelin Strategy & Research, noted that auto loans can serve as a key indicator of financial strain, especially among riskier borrowers for whom these loans represent the largest monthly debt payment. 

In contrast, Canada’s auto loan delinquency rate stands at a markedly lower 1.08%. However, that figure represents a 15.3% increase over the previous year.

The post Canadian Cardholders Are Also Feeling the Pinch appeared first on PaymentsJournal.

Credit card issuers move billions of dollars in purchases every day, steering bank strategy, shaping consumer habits, and fueling economic activity. A small group of dominant players handles most of this volume, battling for market share in a space where size, speed, and customer retention drive success. Their scale isn’t just a status symbol—it’s the result of deep infrastructure, bold marketing, and the confidence of millions of cardholders.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Databook, Part 2: Balancing Risk and Reward in a Resilient Economy

Largest Issuers by Credit Card Purchase Volume, 2023 (in Billions of Dollars)

• JP Morgan Chase – $1,164
• American Express – $1,127
• Capital One – $606
• Citi – $592

Source: Discover investor presentation; company financial reports (2024)

About Report

The U.S. consumer credit card market continues to perform well for issuers, but underlying trends signal the need for careful oversight. While cards remain a favored payment method among consumers, profit growth is beginning to taper off, and there’s a noticeable uptick in delinquencies and charge-offs. These warning signs are more pronounced among smaller issuers, who often take on higher-risk borrowers through more relaxed underwriting. A new report from Javelin Strategy & Research explores the key market signals and challenges issuers must monitor as they work to grow their portfolios while managing exposure.

The post Top 4 Issuers by Credit Card Purchase Volume appeared first on PaymentsJournal.

The Credit Card Competition Act may face a vote on the floor of Congress next week, after Sen. Roger Marshall (R-Kan.) filed an amendment attaching it to the stablecoin bill currently advancing through the Senate.

The GENIUS Act would create the first regulatory framework for stablecoin issuers. The bill is still undergoing amendments ahead of the expected vote.

The credit card amendment is likely to be one of many considered before a final decision. Republican leaders, including Senate Majority Leader John Thune (R-S.D.), told Semafor it was not yet clear whether Marshall’s amendment would be one of the measures brought forward.

Opening Up the Competition

The Credit Card Competition Act, which has been kicking around the halls of Congress since 2022, “would require banks with at least $100 billion in assets to enable credit cards to be processed over at least one unaffiliated network like Star, NYCE or Shazam in addition to Visa or Mastercard,” reports Convenience Store News. Its stated aim is to open up the current situation, where Visa and Mastercard control 80% of all payments, ultimately reducing costs for consumers.

If enacted, the legislation is expected to foster competition that could save merchants and their customers more than $16 billion a year in swipe fees, per Convenience Store News. However, critics argue that it may also have the unintended consequence of reducing or eliminating credit card reward points.

The act has gained support from retail organizations like the Merchant Payments Coalition and the National Retail Federation, but faces significant opposition from financial institutions and the credit card industry.

Strange Bedfellows

Marshall and Dick Durbin (D-Ill.) have been the Senate’s longtime bipartisan supporters of the credit card bill. Durbin, who is on record as opposing the stablecoin bill, said that appending his pet cause to the larger legislation “puts me on the spot.”

Adding the swipe fee bill would draw in Democratic senators like Durbin, who are unsure about the stablecoin legislation but support the credit card law. However, it also risks losing support from Republicans.

“It’s awful policy,” said Sen. Thom Tillis (R-N.C.) told Semafor. “I’d go from being a co-sponsor to trying to figure out how to tank the [stablecoin] bill. 

The post Credit Card Legislation May Be Amended to Stablecoin Bill appeared first on PaymentsJournal.

In its first major announcement since Barclays US took over the business, General Motors is relaunching its rewards credit cards with changes to how points are earned and redeemed for automotive purchases. Barclays has overhauled the program, consolidating several branded rewards programs into a single, streamlined offering.

Instead of Cadillac Rewards, Chevy Rewards, Buick Rewards, and GMC Rewards, all benefits will now be offered through the My Rewards program. Ralph Darmo, Head of GM Rewards, told the Detroit Free Press that the points can now be used across all GM brands for the purchase of a new or used GM vehicle, effective immediately. 

While the program also includes other enhanced benefits, this marks an important first step toward a stronger, more unified program.

“We expected card enhancements with the new GM-Barclays partnership in a move to acquire customers,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “Integrating the loyalty offering into one single program simplifies a once-complicated structure. I can’t imagine the confusion of trying to buy a Cadillac and the salesperson saying they aren’t sure if the GM card points will work.”

Upping the Intro Offer

To make a splash, the new program greatly expands the points consumers can earn. The card offers up to 10 times the points on eligible GM purchases, while all other purchases qualify for three times the points. Based on Javelin Card Bench findings, Danner noted that the enhancement increased the introductory offer from 15,000 to 30,000 points. 

Later this year, GM and Barclays will also launch the GM Business Mastercard. It will again offer a higher earn rate on GM purchases, along with expanded redemption options.

A Long-Simmering Acquisition

Barclays took over the General Motors line of credit cards in October, assuming control of the card business from Goldman Sachs. Goldman had managed the GM credit card program since 2022 but has since decided to scale back its consumer lending operations.

Barclays had bid on the GM credit card program in 2020, but ultimately lost to Goldman, which reportedly paid $2.5 billion to acquire the business from Capital One.

Nevertheless, the GM rewards program has delivered measurable value for the automaker. On average, rewards members purchase vehicles with 5% higher retail prices than non-members, visit GM dealerships twice as often, and typically return to buy another GM vehicle nearly three years sooner.

The post Barclays Revamps GM Cards, Simplifying Offerings appeared first on PaymentsJournal.

Concerns over spiraling buy now, pay later (BNPL) debt potentially entrapping consumers have prompted the UK to propose new regulations designed to govern the industry.

According to CNBC, City Minister Emma Reynolds compared the current installment loan landscape to the “wild west,” stating that a stronger regulatory framework would not only better protect UK citizens but also provide the industry with a more stable foundation for growth.

The proposed rules would require BNPL companies to conduct credit checks to ensure borrowers can repay their installment loans and to simplify the process for customers seeking refunds. Consumers would also gain the ability to lodge complaints with the Financial Ombudsman, a UK consumer protection agency.

Initial reactions from BNPL leaders Klarna, Affirm, and Afterpay to the UK’s proposed rules have been largely supportive.

“The major BNPL vendors have been preparing for potential legislation in this area for quite a while now,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “Most are prepared for the credit underwriting standards and this is why we are hearing a relatively positive statement from vendors.”

“Implementing higher credit risk controls at underwriting will protect the vendor and the customer and we view it as a good thing for the industry, particularly as BNPL has become a mainstream payment method,” he said.

Mounting Phantom Debt

BNPL services gained prominence as a mechanism to break down larger purchases into loans that are often fee- and interest-free. However, as credit card debt and interest rates have skyrocketed, more consumers have leaned on BNPL for a wide range of purchases—from weekly grocery runs to music festival tickets.

BNPL has been especially popular among younger and lower-income users, as these products typically haven’t required credit checks. Because BNPL companies haven’t been required to report their loan data like credit card issuers do, concerns have emerged about an increasing amount of “phantom debt” that is mounting up.

Navigating the Waters

For their part, BNPL firms have vehemently denied that installment loan debt is soaring. Despite this pushback, BNPL companies have largely supported better regulations for the industry, both in the UK and abroad.

As more countries plan a similar approach, all eyes will be on the UK as it navigates these waters.

“U.S. regulators will certainly be closely watching developments in the UK when it is implemented next year,” Danner said.

The post UK Proposes Legislation to Rein in Excessive BNPL Usage appeared first on PaymentsJournal.

The specter of looming tariffs has created a great deal of uncertainty for the backbone of the American economy: small businesses. As if inflation and high interest rates were not stressful enough, many smaller enterprises in retail and manufacturing face the prospect of supply chain disruptions, impeded cash flow, and questions about operating costs.

This uncertain landscape is also creating opportunities for card issuers. In Riffing on Tariffs: Now Is the Time to Build Up Your Small Business Portfolio, Brian Riley, Director of Credit Advisory Services at Javelin Strategy & Research, examines the ways small businesses use their credit cards and how forward-looking lenders can help them stay on their feet.

Keeping the Lights On

The primary reason small businesses fail is cash-flow problems. They need a vehicle to manage their cash flow, which in most cases means a credit card. Consumers need a steady cash flow to keep the household running and pay the rent, but businesses require a different strategy. In addition to the same pressures to pay expenses, it also must make sure it has change in a till drawer. A household risk going delinquent without destroying its financial situation, but that could be more of a challenge for a small business.

Javelin’s research has found that the primary use for small businesses’ credit cards is paying their monthly utility bill. Utilities represent a significant expense for many small businesses as an ongoing charge that they need to pay every month. If an enterprise runs late on a utility bill, it risks being unable to conduct business. Tying utility bills to a small-business card allows the owners to set up a recurring payment and free up some cash while at the same time harvesting points.

The spending on small-business credit cards is very high, and it’s not unusual for them to have $50,000 credit limits. But owners need to be careful where they spend that money.

“It’s not really where you want to go for working capital,” Riley said. “The interest rates tend to be higher. But by the same token, if you’re not well-established, it might be the only place you have to access some readily available funds.”

The use cases vary for different enterprises, but the cards are particularly valuable for entities in seasonal businesses, like agriculture. Income comes in quickly when such businesses are selling seed or produce. But there might not be revenue coming in for months when the crops are maturing. Business owners have to be able to finesse that timing, and a credit card can help.

The Case for a Single Card

The typical household has three or four cards. The typical small business, by contrast, has only a single credit card, primarily because of the relationship it builds with its bank. Businesses are loyal to the banks that serve them.

But that doesn’t mean the market is closed off when a business already has a single card. Issuers should look for reasons to become an entity’s second card, especially amid the economic uncertainty many are expecting. Being the next card in the owner’s wallet or purse is still an opportunity to gain a new account. Spending will follow once the new account booked, and there’s a chance for a bank to provide the business with even more services.

“Small businesses tend to be less organized,” Riley said. “Some of them use very simple software packages to manage their finances, and there might be some easy opportunities there.”

Getting In on the Ground Floor

Small-business cards represent an area that some top banks have addressed aggressively. But not all of them have, leaving an opportunity for smaller institutions that rely more on personal relationships to come in with an alternative.

“It’s a good spot for credit unions and community banks to grow,” Riley said. “They have very different proposition than big banks. It’s more of a personal relationship with their customers, creating the down-home feeling of a small bank versus a money center bank.”

Small-business cards are dominated by American Express, which has more small-business volume than MasterCard and Visa combined. Amex approaches the market with more than a dozen card plans aligned to either the firm’s iconic brand or a top co-brand partner.

Selling a small-business card is in many respects like selling a consumer card. Issuers love to market to people in college, when they are just getting established.

“Once you’re there, this person’s going to have a spouse or a partner along the way,” Riley said. “They’re going to move into their own place. And then sooner or later, they’re going to need a car. There will be lots of financing opportunities along the way.

“The same thing goes on the small-business side. You want to get your foot in the door, so that you are then be able to upsell and cross-sell to the business. The ultimate goal is to get the business owner into deposit products. You’ve moved from the small-business credit card to a full-service relationship. If the small business ends up doing really well, you will be able to get into the whole lifecycle management.”

Uncertainty and Risk

But the looming economic uncertainty means issuers will have to be careful about managing risk. Small businesses need higher credit lines and will spend more than holders of consumer cards, so an issuer can expect volume but will need to stay vigilant.

“The financial institution should carefully assess the credit score on the way in and keep scoring throughout the relationship,” Riley said. “Watch for pattern changes, deep economic challenges, and the nuances of the different business sectors.

“Small businesses really need their credit cards, especially now. Smart business owners will be ahead of the curve when it comes to managing their cash flow, while those who are not prepared will need the cards even more.”

The post Tariffs May Create an Opportunity in Small-Business Cards appeared first on PaymentsJournal.

The ongoing race between credit and debit card issuers to claim the title for the most transactions carried out on their payment cards continues. In past years, credit and debit often flip-flopped in a close race.

With an unstable economy plagued by inflation, interest rates, and now tariffs, it turns out that credit has dominated U.S. consumer spending.

According to the Federal Reserve’s recently published Survey and Diary of Consumer Payment Choice, here are three factoids for you to know.

1. For 2024, the Survey and Diary of Consumer Payment Choice found that the share of transactions made with cash continued to decline. U.S. cash payments now account for only 14%, down from 16%.

2. Consumers continued to move away from paper methods. Significantly fewer consumers reported using cash and paper checks in the past 30 days. Only 36% of consumers used checks in 2024, down from 40% in 2023.

3. Of the two-thirds of payments made by consumers, credit cards accounted for 35%, and debit cards only accounted for 30%. The last time debit outpaced credit was in 2021, when debit held a 29% rate and credit held 28%.

What’s the Big Deal About Credit Being More Active than Debit?

It’s more than just the bravado of saying my card product is bigger than yours. There are two essential readings from this metric.

First, it illustrates that household budgets continue to deal with liquidity issues. As debt continues to grow and revolving credit reaches a historic high, people are increasingly relying on their credit cards to offset budget shortages. That is good news in the short term for lenders, as it generates incremental revenue. And through the wonders of accrual accounting, revenue continues until the account is charged off. In short, it is a front-end gain that kicks off back-end credit risk.

Next, it says that debit rewards continue to be limited. There are instances where issuers are attempting to revive debit rewards, which were previously shut down after Dodd-Frank reduced interchange fees. Credit card rewards typically yield a return of about 1%-2% at most issuers. If you do it right and select the best-in-class reward cards, such as the American Express Blue Preferred card, you will earn 6%, or my personal favorite, the Chase Amazon Visa, which fills all your needs at the world’s favorite e-commerce solution.

And for the consumer, sure it is best to extinguish your everyday expenses, but it will not help you build your cherished FICO score, like a good, up-to-date credit card payment.

What to Expect in 2026?

I’ve witnessed numerous business cycles over the many decades I’ve spent in credit. I say it’s going to get ugly very soon. Ugly means charge-offs will surge, credit will tighten, and collection queueswill swell to the point that card issuers will need more sophisticated strategies. 

You can read about it in Javelin’s recent reports: Seven Credit Card Warning Signs in 2025: Don’t Stop Lending, but Watch Out | Javelin and Riffing on Tariffs: Now is the Time to Build Your Small Business Card Portfolio | Javelin.

The post Three in a Row: Credit Beats Debit appeared first on PaymentsJournal.

Credit card managers often have an annual business development goal in place of expanding their loan portfolios. In practical terms, a good year requires the issuer to offset voluntary and involuntary attrition with new account bookings, with a 6% to 8% net growth model. In normal years, attrition is approximately 15%, with half of the account closures resulting from individuals leaving voluntarily, and the other half due to the credit card being 60+ days delinquent and subsequently closed. For a bank with just one million credit cards, the calculus is 1,000,000 cards minus 150,000 closed cards, plus 80,000 new accounts. That means the credit card manager’s new account goal is 230,000 new accounts.

DOGE published an update on its efforts to trim card-related spending at X.Com, where more than 30 federal agencies were identified. Usage values vary, with one estimate of 6 million government credit cards linked to 90 million transactions. MSN, Newsweek reported on the latest progress, which marks a recent step toward final closure, including the reduction of credit limits to $1.

So, What to Do When You Need Sundry Supplies?

Just like consumer credit cards, small business credit cards, and corporate credit cards, government agencies also need credit cards to perform routine tasks. There are numerous business cases where FEMA, the domestic emergency relief agency, may require access.  Similarly, a National Park staff member might need a can of bear repellent at Yellowstone National Park. And, the Department of Education? So many different and diverse needs. (You can read more about small business credit cards here, and commercial credit cards here.)

But for now, think about the chaos of handling routine purchases by agencies that protect the vulnerable, feed the hungry, or provide basic human requirements. Either we will need to stock up on products like bear spray for national parks, warehouse necessary products, or lean on to federal employees to fill the void with their own card products. In the meantime, DOGE will need to establish an efficient process to settle necessary expenses.

For credit card managers, the task will be to mitigate credit card attrition in their respective government sectors. It is a good time to discern if you want to align with government-issued cards, plan for a federal product rebid, or ignore the request. Prepare for similar actions if this goes to the state or municipal level!

The post Credit Cardholder Attrition: The Big Enchilada Is in Play appeared first on PaymentsJournal.

The process of collecting defaulted student loan payments has resumed after a five-year pause due to COVID-19, and the outlook is fairly bleak. As of February, more than 20% of all federal student loan borrowers with payments due are over 90 days delinquent.

According to data from TransUnion, the current student loan delinquency rate stands at 20.5%—the highest on record. That figure is nearly double the rate from February 2020 and more than twice the current delinquency rate for credit cards.

This week marks the end of a yearslong pause that began when the Department of Education suspended federal student loan payments in March 2020. The policy remain in effect throughout the Biden administration.

During the pause, loan servicers were directed not to report delinquencies to credit bureaus unless borrowers were 90 days or more past due on federal student loan accounts. Borrowers who were current on their payments did not face any penalties during this time.

An Avalanche of Default

Roughly 5 million student loan borrowers are currently in default, according to the DoE. An additional 4 million are in late-stage delinquency—91 to 180 days behind on payments. DoE estimates that by this summer, nearly 10 million borrowers could be in default.

The impact of these numbers will ripple through the credit industry. Borrowers should be prepared for collection efforts to intensify.

“With the winds changing in Washington, students and graduates will need to brace themselves for aggressive government collection actions,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “This will involve third-party collection agencies and the right to reduce loans to judgment.”

Credit Scores Will Feel the Pinch

The New York Fed has estimates that more than 9 million student loan borrowers will see significant declines in their credit scores during the first half of 2025. 

“Many credit bureau reports will begin to reflect student debt and their delinquent statuses,” Riley said. “What the industry needs to anticipate is that credit scores will begin to deteriorate as the loans get classified as delinquent.

“Even for those who are not delinquent, they might find that their ability to repay a new loan may be diminished because of the student loan liability. One thing is for sure: the new world of student loan collections will be harsher than prior years.”

The post Delinquencies Run Rampant as Student Loan Collections Return appeared first on PaymentsJournal.

The credit card industry seems headed for uncharted waters. Inflation, better than a year ago, remains high. Nonetheless, consumers are tamping down discretionary spending as the fears of a recession loom. Government jobs—a traditionally safe, well-paying sector—are under extreme pressure, and border states and the manufacturing sector are wary of the impact of tariffs.

In the current environment, issuers must expect the unexpected. In Seven Credit Card Warning Signs in 2025: Don’t Stop Lending, but Watch Out, Brian Riley, Director of Credit at Javelin Strategy & Research, looks at how this economy will affect the industry as a whole. “We’ve got to deal with what’s next,” Riley said, “and what’s next is uncertainty.”

A Season of Uncertainty

Plenty of worries are already visible in the numbers. In 2022, 3 of every 100 cardholder balances entered 90-day delinquent status. In 2025, the same metric sits at more than 7 of every 100 cardholder balances. Accounts in the 90-plus-day delinquency segment are considered extremely risky and in danger of being charged off, which diminishes credit card revenue.

Why is this happening now? Coming out of the pandemic, many lending standards were loosened so issuers could book more accounts. To get transaction volumes up again, banks brought in some shakier accounts, which become even more sensitive when the economy shows signs of trouble. Given the way FICO scores are distributed, 40% of these accounts are less than prime. That puts an awful lot of credit card holders in a dangerous spot.

Turning to Credit

There’s generally an ebb and flow between credit and debit card usage. In ideal cases, smaller purchases like gasoline and everyday expenses go on a debit card. When consumers start putting milk and eggs onto their credit card, the bank starts to worry.

“I do it by design because I get points for it, and I get 6% back on a card from American Express,” Riley said. “But the person who buys groceries on credit for the first time is an issue. That’s one of the reasons we talk about the importance of knowing your customer in ways that go beyond the typical KYC programs. Is this a customer who’s never carried a balance over from month to month? Are they late for the first time?”

Those sorts of questions become critical at the 90-day point, because that’s when card companies must take action to alleviate the situation. At 180 days delinquent, issuers must take the loan off their books, and it becomes a charge-off. The entire balance then comes straight out of the operating income of the business.

Write-off Numbers in Dangerous Territory

For the private-label credit card business, the sweet spot for these write-offs is around 6% to 7%. If the business is losing 3% of its accounts, that is usually not a problem. But if the business is writing off 6%, that threatens the issuer’s profitability.

Big banks are currently writing off at about 4% of their credit card loans, but small banks are writing off closer to 10%. Riley expects to see industry consolidation resulting from this because smaller banks can’t afford to carry the loss alone.

“At any given point, Citi or Chase might have a million accounts that are in delinquency or in some kind of bad status, but they have sophisticated account queuing that allows them to triage the resources,” Riley said. “They can look at somebody who’s delinquent for the first time and say this person’s never been delinquent before—something happened there, like they lost their job.”

Larger banks also have a bigger account base, which allows them to spread their risk better. Instead of having to adopt dangerous lending standards to add more cardholders, they can lower those standards just a little bit.

The Value of Revolving Debt

One of the most significant data points Riley tackles in his report is the value of revolving debt, which shows how much credit card debt is carried over from month to month. Revolving credit ended Q4 2024 at an estimated $1.3 trillion, which is flat compared with 2023 but 25.1% higher than in 2021.

This number represents a mixed blessing for card issuers. The interest on credit cards is how they make most of their money, so they want this figure to be robust. But the greater the debt becomes for cardholders, the more likely they are to default on it. During the Great Recession, bankruptcy shot through the roof, which is one way to get rid of credit card debt.

“Some people budget their money accordingly and assume some debt, and then all of a sudden the transmission goes,” Riley said. “They put it on their credit card, which is a natural way to survive. When people get stuck in that loop, issuers make tons of money. But now they have a riskier card member because this person can’t pay their bills. Although it’s good income for the issuer, it also means they’re assuming more risk on the portfolio.

“It’s one thing to put a refrigerator on your card and expect to pay for it in 10 months. It’s another thing to pay the minimum due on that refrigerator for 30 years, and it will be out of warranty before you ever pay the thing off.”

Keeping an Eye on Unemployment

The threat of inflation throws another wrench into that equation. The core of the lending calculation is a customer’s ability to repay, so if their salaries are not keeping up with inflation, a problem develops on several levels.

Unemployment will be an important metric to watch. Obviously, people who lose their jobs have trouble paying their bills. Many studies have been conducted over the years that link credit losses to the unemployment rate. If unemployment goes to 6%, charge-off rates are likely to accelerate.

“You always expect lending to government and officials to be very stable, and now they’re losing their jobs,” Riley said. “It’s not just the government employees, but the regulators are at risk, and that changes things as well. And then we have to worry about what’s going to happen to prices at Walmart, which is the biggest importer Mexico and China. There’s so much unsteadiness that lenders really need to pause a little bit.”

The post The Warning Signs Looming Over Credit Card Lending appeared first on PaymentsJournal.

Americans are holding more private-label credit cards than ever—store-branded cards tied to specific retailers rather than major networks like Visa or Mastercard. These cards, often pushed with promises of discounts or perks, are piling up in wallets across the country.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Data Book, Part 1: Risk and Opportunity Metrics in a Trump 2.0 Business Environment

Number of Private-Label Credit Cards Owned

• 41% of people who own a private-label card own 1 card.
• 28% of people who own a private-label card own 2 cards.
• 23% of people who own a private-label card own 3-5 cards.
• 8% of people who own a private-label card own 6 or more cards.

Source: Javelin Strategy & Research, North American PaymentsInsights (2024)

About Report

The 2025 U.S. credit card landscape appears steady, with economic momentum carrying over from the previous year. However, shifting political priorities under the new administration could introduce policy changes worth monitoring—particularly around tariffs and proposed, though unlikely, interest rate caps. This report from Javelin Strategy & Research—part one of a two-part series—explores the broader economic and regulatory forces shaping consumer credit card programs. It also offers strategic guidance for issuers navigating the evolving environment.

The post How Many Private-Label Credit Cards do Consumers Own? appeared first on PaymentsJournal.

As reports of merchants imposing surcharges on credit card transactions continues to rise, credit card users remain frustrated by these fees. Many feel they’re being nickel-and-dimed when asked to pay extra for credit card processing.

These findings come from WalletHub’s Credit Card Processing Fees Survey, which reveal that many consumers have been charged a fee for using their credit cards, and they aren’t happy about it. In fact, two-thirds of respondents said they would avoid using their credit cards altogether if they were subjected to such fees.

A New World of Surcharges

Charging extra for credit card transactions is a fairly recent practice. Surcharging for credit card usage was generally illegal until a class-action lawsuit in 2013 permitted merchants in several states to implement surcharges in their businesses.

Surcharging is now legal in all but four states. In 2021, Colorado repealed its ban on surcharges to better align with national regulations. At the same time, Kansas legislature considered but rejected a ban on surcharges.

Some states are pushing back on this. Last year, New York passed a law that required merchants to fully disclose their credit card surcharges or eliminate those fees altogether. The Durbin amendment to the Dodd-Frank law made surcharge fees on debit cards illegal.

Consumers Voice Discontent

The WalletHub survey suggests that customers want more legislation in this area. More than 60% of respondents stated that it was unfair for merchants to pass payment processing fees onto their customers.

A similar majority also felt that merchants were not transparent enough about the fees they charge for credit card usage. At the very least,  merchants should be upfront about these additional costs.

“From what I’ve encountered a merchant may not even have a proper sign posted that they impose a surcharge on credit cards,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “Or the sign is posted in a place away from the point of sale. It’s fairly obvious that when a consumer reaches the point of sale, they are not going to want to pay an extra fee just for using a card product.”

The post Credit Card Users Resent “Nickel and Dime” Surcharges appeared first on PaymentsJournal.

It is more than a big deal that the Capital One-Discover acquisition passed its last two regulatory hurdles. The biggest credit card deal in U.S. history moves forward in mid-May 2025.

In an all-stock deal, more than $100 billion in loan book will pass to Capital One, leaping the Richmond, VA lender to the top of U.S. credit card issuing, as The New York Times reports.

For Richard Fairbank, the CEO since the company IPO’d in 1985, the acquisition is quite an accomplishment and will bring a business transformation to the firm and to U.S. payments itself.  This is not the firm’s first acquisition, but it is undoubtedly the largest. Capital One is a spin-off of Signet Bank, a financial institution that dates back to its organization in 1795, when it was organized as a Morris Plan bank. A Morris Plan bank is chartered to make small consumer loans, in contrast to a broader commercial bank.

Welcome Discover

Aside from its massive size, this acquisition is interesting because it is not one large bank swallowing up another bank. In that scenario, there is a common bond of a bank culture that is tied together by deposits. This is the marriage of two significant credit card businesses that both struck out as alternative card issuing companies: Capital One as a bank spin-off and Discover as a retailer-based firm that broke the norm with a new payment network brand, facing off directly with American Express, Mastercard, and Visa.

In contrast to card rewards tied to airline miles, Discover brought the first Cash reward program that is now key to every other issuer. Discover also brought a focus on U.S.-based call centers, which will likely change with its large business that will need to contend with call center overflow and diversion. Based on the firm’s new size, it will likely queue up one million collection calls a day, which will require plenty of machine learning and artificial intelligence to make it through the workday.

The two firms overlap in many of its strategic focuses, but there are some differences.  According to Javelin Card Bench, a competitive intelligence tool engineered for top credit card issuers, Capital One has 31 one card programs aligned to specific card products, while Discover operates all cards under the “it” line.  Legacy Discover cards have traditionally lower APRs than Capital One, and while both issuers do not generally charge annual fees, it will be interesting to watch what happens to APR rates.

The New Business Is More of a Challenge to Top Issuers than Small Banks

Small issuers have enough problems to deal with as they contend with 4-digit charge-off rates.  The proposition for small banks is to sell service, local presence, and down-home community support. Local presence is an angle that the new Capital One will need to contend with as the new organization has less than 500 branches.

But for top banks, the likes of Bank of America, Citi, Chase, and Wells Fargo, the battlefield is full of questions. How much does the new business overlap with their portfolios? Will the new Capital One integrate Discover’s payment network and shift American Express’ aspirational card model to an every-man (or woman’s) card network? Can Capital One change the game and use their model to self-issue and service smaller banks? So many opportunities to consider.

Kick-Off begins in Less Than a Month

You can be certain that the business integration team is dealing with hard business issues, like credit policy and aligning best practices. Melding the cultures will be interesting to watch. Will it be the Capital One card running on the Discover Network, or a new snappy name? And merging the cultures will be interesting. Will they take a page out of the successful integration of Fiserv and First Data, where the business took a creative approach and painted everything orange?

But for now, the thing to watch is the stability of the portfolios, and you can be sure that the entrepreneurial Capital One business head has his eyes on the ball.

The post Capital One Moves Forward appeared first on PaymentsJournal.

Whether by design or sheer repetition, many consumers have memorized their debit or credit card numbers. That may be a handy piece of knowledge, but those who know their card numbers also tend to spend more—and rack up more debt.

A survey from Western & Southern Financial Group found that nearly a third of Americans surveyed have memorized at least one debit or credit card number. What’s more, 20% of respondents who know their card numbers spend more than $500 per month online, compared to just 13% of those who haven’t. They also carry, on average, 10% more debt than non-memorizers.

Generational Differences

The survey found a significant generation gap, with almost half of respondents who memorize their card numbers falling into the millennial group. Overall, more than a third of millennials have memorized at least one card number.

The reasons people gave for memorizing their numbers also varied across generations. More than two-thirds of Gen Z respondents said they did so to make online shopping easier, while, 20% of baby boomers memorized their card numbers specifically to avoid using digital wallets.

Gen Z was also the most likely to feel that knowing their card numbers led to more impulse buying and overspending. In contrast, a third of the baby boomers were the most likely to report that memorizing their card numbers had improved their financial discipline.

There is some evidence that memorization goes hand in hand with responsible behavior. A total of 70% of memorizers checked their credit card or bank statements at least weekly, compared to 61% of non-memorizers.

However, impulse buying was also slightly more common among memorizers. Roughly 26% made unplanned purchases, compared to 23% of non-memorizers. Memorizers were also somewhat more likely to shop when stressed.

Security Throws Up Roadblocks

The most common reason respondents gave for memorizing their card numbers was simply frequent use. However, this may become less common, as new security measures are making it harder for users to keep these numbers in their head.

The Apple Card’s Advanced Fraud Protection feature, for instance, automatically rotates the three-digit security code after the number is viewed in their Apple Wallet or auto-filled in Safari, making it impossible to memorize. Unlike other credit cards, Apple Card’s security code is stored in the Wallet app, not on the physical card.

The post Memorized Card Numbers Linked to Increased Spending, Debt appeared first on PaymentsJournal.

Although it has found success with a wide range of personal finance products, UK-based fintech Revolut faces an uphill battle as it eyes entry into the rewards-based credit card market. In Europe, this segment is not only limited due to structural factors but has also long been dominated by American Express.

Revolut tested the waters last July with the launch of a debit card that introduced its proprietary rewards system, RevPoints, which allows users to redeem points for gift cards or airline miles. From its early days as a prepaid debit card provider, the company has expanded into digital banking, crypto services, and an investment platform. With over 50 million customers globally, Revolut has built a reputation for its mobile banking services and multicurrency accounts.

Taking on American Express

Credit cards appear to be a logical next step. Sifted reports that Revolut plans to launch a set of points-based credit cards aligned with its various subscription tiers. But American Express has long been recognized as the dominant provider of points-based purchases in Europe.

“Amex is a legacy brand with international appeal and a strong presence,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “It’s going to be tough to launch a premium card product that must justify its cost with good rewards drivers in the European market.”

In North America, the rewards credit card market is thriving amid fierce competition. In contrast, European consumers have relatively few opportunities to earn rewards points through credit card spending.

One reason is that alternative payment methods have become much more popular across Europe, leaving credit cards somewhat sidelined. Revolut is already a leader in pay-by-bank, which ranks among the top three payment methods in the UK, Netherlands, Finland, Spain, and Germany.

Capped Fees

Even in the credit card market, the options for a rewards card are constrained by regulation. The EU’s Interchange Fee Regulation caps interchange fees on consumer debit and credit card transactions. For transactions conducted entirely within the UK, for instance, interchange fees are limited to 0.2% of the transaction value for consumer debit cards and 0.3% for consumer credit cards. 

“Card companies use interchange fees to fund the rewards programs on the cards,” Danner said. “Compared to the U.S., the weaker interchange earnings means less rewards funding and a weaker overall value proposition to the consumer.”

The post Revolut Enters a Tough European Market for Rewards Credit Cards appeared first on PaymentsJournal.

Back in the old days of 2023, regulators were calling late fees “junk.” We kept calling them “contractual commitments,” as you can read here.

Today, the American Banker notes that regulators have backed down from their attempt to mandate that credit card late fees be reduced from an average of $32 to $8, in a turnaround that will close outstanding litigation, as they report on the latest change. The CFPB has asked a Texas Court to Vacate Credit Card Late Fee Rule, the American Banker says, adding:

• The Consumer Financial Protection Bureau has sided with bank trade groups in asking a federal court to dismiss the credit card late fee rule.
• The CFPB’s chief legal officer claimed in court documents that the bureau under the Biden administration violated the law by refusing to allow banks to collect penalty fees on credit cards. 
• Industry-watchers expected the bureau to settle the litigation.
• The rule would have cut credit card late fees to $8 from their current $32. Ending the lawsuit and getting rid of the rule saves the credit card industry an estimated $10 billion a year.

Humble in Victory, Proud in Defeat

So said Churchill, but this is not a time for bankers to gloat. The timing is probably bad for consumers, who face tariff-related threats to their 401(k) accounts and still sting from inflation.

But for credit card lenders, $10 billion back in the revenue line is important. It is also a sign of a more favorable regulatory environment.

Squirrel those big bucks away, you’ll need them!

Consumer credit risk is looming. Read our latest report about it here. We look at revolving debt, consumer confidence, lending sentiment, unemployment, inflation, delinquencies, and charge-offs, and prescribe actions credit managers can undertake to moderate matters. In Q4 of 2024, credit card charge-offs were 4.48%, up from a historic low of 1.57% in 2021.

Now we see the charge-off indicator hitting the 5% mark in a relatively short term, and for smaller banks, we expect it to break into double digits. Revolving debt held flat in the short month of February, at $1.3 trillion, and consumers are waiting for their tax refunds, which will help. But 2025 looks like it will be a long, risky year.

That $10 billion will not offset the risk. But it will help.

The post Late Fees: No Longer Junk, Back to Contractual Commitments appeared first on PaymentsJournal.

Over the past 12 months, consumer spending habits have continued to evolve, and so has the way people pay. We look at which payment cards—credit, debit, and prepaid—have been most commonly used. By breaking down the data, we get a clearer picture of what’s driving consumer choices and which types of cards are gaining or losing ground.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 21st Annual U.S. Open-Loop Prepaid Card Market Forecast, 2024-2028

Top 5 Payment Cards Used in the Previous 12 Months

• 82% – Major credit card usable anywhere
• 66% – Major debit card usable anywhere
• 35% – In-store gift card
• 31% – General prepaid gift card (non-reloadable)
• 29% – Store-branded credit card

Source: Javelin Strategy & Research

About Report

Javelin Strategy & Research’s latest annual report on the open-loop prepaid card market outlines key developments and forecasts across several major categories. It highlights projected growth in areas such as general-purpose reloadable cards, payroll and benefits cards, and corporate expense cards. The report links these trends to broader economic indicators, noting that improvements in the economy and regulatory landscape are creating favorable conditions for certain card types. For example, lower inflation and evolving financial regulations are helping drive interest in benefit and general-purpose cards, which can serve as alternatives to higher-interest credit options. On the flip side, factors like a stronger job market and shifts in government aid programs are slowing growth in areas like unemployment-related cards.

The research also shows that consumer sentiment toward prepaid cards remains strong. Buyers are continuing to use these cards frequently, especially in high-volume categories, with many planning to maintain or increase their usage. This year’s findings build on previous trends, confirming that prepaid solutions are becoming a stable part of how Americans manage and spend money.

The post What Payment Cards Have Been Used in the Previous 12 Months? appeared first on PaymentsJournal.

The WSJ reported that Visa is considering a $100 million bid to shift the Apple Card’s network alignment from Mastercard to Visa. While this change will not help Goldman Sachs navigate its way out of its troubled consumer lending issue—which Goldman announced it wanted to shutter back in 2022—the deal illustrates the importance of Apple’s payment technologies.

Apple’s Tech Is Different from Goldman Sachs’ Loan Book

Goldman’s loan portfolio has had its warts. High charge-offs were an issue with the GM co-brand when Barclaycard took over the receivables. Prior to that, the business was run effectively by Capital One, but at Goldman, it saw skyrocketing 10% loss rates. Goldman bought lender GreenSky for $1.7 billion but sold it for half that amount. The Apple portfolio has been on the market, with a handful of top issuers that could absorb the portfolio, but only with rumored interest, despite the $20 billion receivable potentially being discounted by more than $1 billion.

But the Apple technology is what is interesting today. Whether Mastercard ups the ante or not, it illustrates the importance of the wallet and the smooth integration into the mobile device we all know and love. In payments, where transaction volume is key to revenue generation, the tech takes a slice of the processing fee. With some market upsets on the horizon as the Capital One/Discover merger moves along, Visa’s play is aggressive and can add cache to the dominant U.S. credit network.

The Tech Sale Will Not Fix the Credit Card Problem

Goldman reported that its loan loss provisions for Q4 2024 were $341 million, bringing the total for 2024 to $1.348 billion, a 31% increase from 2023. With the economy’s current stress, any portfolio buyer will need to consider the sensitivity to strained budgets and the uncertainty of a recession. (See the latest on credit risk: Seven Credit Card Warning Signs in 2025: Don’t Stop Lending, but Watch Out | Javelin). However, there are still other issues to consider.

Some operational issues extend beyond the tech purchase, affecting total operating expenses. Experienced lenders, such as American Express, Chase, and Synchrony, each of which has been identified as a prospective buyer for the credit-stressed portfolio, understand how to reduce costs and mitigate risk. Issuing expensive metal cards was a cool idea at the time because they are neat, but does a portfolio that drives transactions to a wallet really need to incur the cost? It adds up when receivables have more than a million accounts.

And billing? Innovative issuers will need to fix the fact that all Apple cards bill on the first of the month, which creates call center havoc, rather than the practical 20 billing cycles most banks use to load balance statement rendition and call center volume.

What’s Next

If Visa is considering an offer, you can be confident that Mastercard is appraising its future interest. For both firms, which are top global payment technology companies, Apple is a plum client. For Apple, $100 million is a significant amount of money, but with $53.8 billion in cash on hand and a market cap of $3.4 trillion, it won’t move the needle. The big question remains: how do you put the $20 billion Apple receivable into the hands of a top lender that can generate a profit from the extensive portfolio? And the next question becomes will the Apple credit card standards get tightened, redefining their 1984 Macintosh tagline “…for the rest of us.”

The post No Buyers for the Apple Card, but the Technology Is Hot appeared first on PaymentsJournal.

Credit card rates remain high for two main reasons, according to a new study from the New York Fed: steep operating costs and undiversifiable risks. An economic downturn could threaten an issuer’s entire portfolio, making risk management a key factor in pricing.

Although the average credit card interest rate currently sits at a lofty 20.09%, it has eased slightly from a record high of 20.79% in August 2024. A decade ago, in late 2013, the average rate was just 12.9%—meaning it has nearly doubled over the past 10 years.

The New York Fed sought to understand the drivers behind these high rates. Their research found that credit card operations come with exceptionally high operating expenses, ranging from 4% to 5% of total balances annually.

Issuers like Capital One have become some of the world’s top marketers, with advertising budgets comparable to Nike and Coca-Cola. On average, credit card banks allocate 1% to 2% of their assets to marketing—ten times more than traditional banks. These costs account for about half of default-adjusted APR spreads.

Additionally, banks with higher operating expenses tend to charge substantially higher interest spreads and enjoy greater gross margins. This suggests that large credit card banks wield considerable pricing power, but they need to incur sizable expenses to maintain that power.

Unable to Diversify the Risk

Credit card rates incorporate a large default risk premium because the risk of default is undiversifiable. No matter the cardholders’ credit rating, charge-offs tend to rise during economic downturns. As a result, default risks become particularly high in times of economic distress.

The study also found that issuers’ returns strongly decrease as FICO scores improve. The average interest rate spread is 14.5%, though it varies widely depending on the borrower’s credit score.

“At the super-prime level, where scores exceed 800, the spread is less than 10%,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “On the other side of the coin are subprime scores of 650 or less, where rates are 18% and beyond. The interest rate spreads ensure that an excellent cardholder does not subsidize the risk of a less creditworthy customer.”

Disregarded Factors

The Fed study also examined two other commonly cited factors behind rising interest rates. The first was the notion that default risk is higher because credit cards are unsecured, unlike other types of loans backed by collateral. The second was the impact of credit card rewards, with the six largest card-issuing banks spending $67.9 billion on rewards in 2023 alone.

While these factors may contribute to higher rates, the Fed determined that their overall effect was minor.

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The Malaysian central bank found that most of the country’s buy now, pay later (BNPL) users came from the lowest income brackets—workers earning less than $1,130 per month.

According to the South China Post, one reason lower-income Malaysians rely on BNPL is its widespread acceptance among merchants, especially for smaller purchases. For example, fast-food chain KFC faced criticism after announcing that customers in Malaysia could buy the company’s signature fried chicken on an installment plan.

The KFC promotion targeted consumers who wanted to eat but waiting for their next paycheck or those who “never have enough money,” according to its social media posts—later taken down.

Detractors of BNPL in the country argue that there are no existing safeguards to stop consumers from taking on multiple BNPL loans, which could lead to crippling debt as the cost of living continues to increase.

Holding to the Same Standards

This same sentiment has been echoed in the U.S., where BNPL installment loans aren’t held to the same regulatory standards as credit cards. This has led many to speculate that a growing mountain of BNPL “phantom debt” remains unreported to credit bureaus and doesn’t appear on credit scores.

This may be changing, as Affirm has recently taken the initiative to report its BNPL data to credit bureau Experian. However, while this is a significant step for the industry, it will take time for the credit scoring model to adjust and include accurate BNPL data.

Everyday Use Cases

In the meantime, BNPL has expanded to cover more use cases, many of which involve smaller purchases. For example, Klarna recently inked deals with Walmart and food delivery company DoorDash.

BNPL has been popular with lower-income users worldwide because there often no credit checks, and payments typically carry zero interest. However, borrowers must still consider potential ramifications, such as late fees.

“BNPL is a credit product that must eventually be repaid and consumers need to be careful with their debt burden,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “Lax underwriting standards and lack of visibility into financial health could lead to significant repercussions down the road for both borrowers and lenders.”

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Credit card issuers are navigating a landscape filled with macroeconomic challenges, regulatory uncertainty, and financially strained consumers. Unfortunately, the road ahead remains uncertain, making it critical for issuers to take proactive measures to protect themselves as charge-offs and delinquencies mount.

In the Credit Card Databook, Part 2: Balancing Risk and Reward in a Resilient Economy report, Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research, detailed the challenges plaguing the credit card industry and the steps issuers can take in the face of increasing uncertainty.

Higher Rates, Higher Risk

The report delved into the macroeconomic factors impacting the industry—from unemployment to inflation. High interest rates have also posed a key challenge for both consumers and organizations.

Though the U.S. Federal Reserve has kept rates high, it has recently considered rate cuts that would lower the prime loan rate for banks, potentially reducing credit card interest rates.

“There’s a whole art and science as to when to initiate those cuts,” Danner said. “Credit card interest rates have skyrocketed into 23% to 24% range. The Fed started to cut rates, so they’ve been coming down slowly. That’s offered a bit of breathing room for consumers, especially since credit card balances have been historically high.”

The historic level of consumer credit card debt did not abate in the latter half of last year, leading to an increase in delinquencies and charge-offs. As a result, credit card issuers are closely monitoring the number of customers making full balance payments.

“Everyday consumers are holding on to these record-level high balances at these high interest rates, so there’s going to be a lot of pain with revolvers and in vulnerable segments,” Danner said. “We’ve seen a rise in the amount of customers that are making only the minimum payments, which is a little scary because it means they’re revolving. It’s a number you don’t want to see go up.”

A notable discrepancy exists between large and small banks. Many regional banks have different value propositions than their larger counterparts and, as a result, often maintain lower underwriting standards.

For this reason, smaller banks typically experience higher delinquency rates on credit cards than larger banks. This has led to surge in delinquencies, with smaller banks reaching over 7.5% in their card portfolios compared to 3% for larger financial institutions. The gap is even more pronounced because most larger banks are better equipped to weather these challenges.

A Mantra of Uncertainty

Credit card issuers are also braving a regulatory environment with little certainty moving forward. In recent years, several proposed rules could directly impact the industry, such as the Sanders-Hawley bill, which would cap credit card interest rates at 10% for a five-year period.

“That would have severe consequences,” Danner said. “Interest income is a huge piece of how credit card programs operate, and if you were going to cap that at 10%, that would have very significant consequences for programs. You could see things like increased annual fees on cards, declining rewards programs, and you could even see some programs going away entirely because they wouldn’t be able to fund it.”

There have also been recent discussions about reviving the Credit Card Competition Act, which was designed to curb the market dominance of Visa and Mastercard. The bill would require issuers to provide retailers and organizations with an alternative card network not operated by the credit card giants, potentially leading to substantial industry shifts.

Additionally, a new presidential administration in the U.S. brings further uncertainty, as many of its initiatives could directly affect the credit card industry. For example, several actions by the Consumer Financial Protection Bureau (CFPB) have been shelved or eliminated, leaving the future of these efforts in limbo.

“It’s the mantra that we’ve been using, but there is still a lot of uncertainty out there,” Danner said. “Even the idea with all these tariffs on some of our closest trade partners, that could have profound changes. It could trickle down into higher prices for consumers on goods, and higher prices means potentially less spending because consumers are tightening their wallets. It’s a cascading thing with some of these economic topics—it gets complicated quickly.”

Tightening Standards

With so much doubt, it has become clear that risk management is a central priority for credit card issuers. This has already been reflected in originations, where issuers are tightening their underwriting standards. As a result, fewer subprime and below-prime customers may be approved for credit cards in the coming months.

“The other tool they have in their toolkit is the way they can adjust the credit lines,” Danner said. “Overall, over the past year or so, credit line increases have been declining. They’ve been tightening the amount of available credit that they’re putting out to customers. It’s just another way of mitigating risk ever so slightly, although it’s less refined.

Many card issuers have fewer mechanisms in place to decrease credit lines than to increase them, even though credit line reduction programs are an important risk management tool. If a customer is struggling to pay their bill, it’s critical to have a program that can reduce their available credit, as this helps limit the bank’s exposure on that card product.

The overarching trend in the credit card industry toward tightening controls was confirmed by data from the Senior Loan Officer Opinion Survey conducted by the U.S. Federal Reserve.

“They’ve been somewhat loosening standards over the past year, but might end up tightening up again, particularly as they have to curtail some of these issues with delinquent and charged-off accounts with the higher rates that we’ve been seeing,” Danner said. “Issuers have been looking at all these trends and they’ve been responding. If you’re not responding, maybe now is the time to tighten up your underwriting just a little bit.”

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Many Americans are waking up to substantial declines in their credit scores as delinquent student loans begin impacting them for the first time since the pandemic-era repayment pause ended.

The New York Fed estimates that more than 9 million student loan borrowers will experience significant credit score drops in the first half of 2025. The report also finds that over 15% of all student loan holders are now likely behind on their payments. This news comes amid rising delinquency rates in other borrowing sectors, such as auto loans.

A Slow-Rolling Process

As the country emerges from the pause on federal student loans, repayment requirements have been slowly rolling out, catching many borrowers unaware. 

After three and a half years, the payment pause officially ended in September 2023, marking the beginning of a one-year on-ramp phase during which loan servicers were not allowed to report late or missed payments to credit agencies.

Although this grace period has passed, overdue loans are not yet considered delinquent. Servicers cannot report a loan as delinquent until it is 90 days past due, meaning that late payments are just now beginning to show up on credit scores.

In a sense, the rising credit scores represent a return to the landscape that existed prior to the pause. When repayments were paused, all delinquent loans were marked as current, leading to a jump of 74 points in the median credit score between Q4 2019 and Q4 2020. By the end of 2024, borrowers with loans in delinquency had scores that were on average 103 points higher than at the end of 2019.

Repayment Options Are Returning

The good news for those seeing their credit scores decline is that the Trump administration has reinstated several Biden-era programs to help individuals get creative about repaying student debt. A court injunction issued last month had directed the Department of Education to cease initiatives like the Saving on a Valuable Education (SAVE) Plan.

However, recently, the U.S. Department of Education’s Office of Federal Student Aid reopened the online income-driven repayment plan, which caps borrowers’ monthly payments at a percentage of their earnings.

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United Airlines and Chase Bank have made several changes to their credit cards, aiming to attract frequent business travelers.

United is increasing fees on several of its cards while adding new perks, such as seat upgrades, higher spending limits that contribute to elite status, and award discounts. This strategy appears to target deep-pocketed business travelers, who prioritize benefits like  expanded airline lounge access over card costs.

These annual fees play an important role in the airlines’ business model. According to its annual report, United’s non-ticket and non-cargo revenue rose by $315 million in 2024, an increase of nearly 10%. The airline credited this growth to revenue from partnerships, including credit card spending with JPMorgan Chase Bank.

“When some of these co-brand partnerships were established decades ago, the focus was on sheer usage,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “Now, top issuers are focusing on revenue generation, so there is no surprise to see a deeper focus on the business traveler. Business travelers are often less sensitive to long-term planning and often need a shorter window between booking and travel, which creates a higher-priced seat. They tend to be in the air more and can be less sensitive to price than a traveling family.”

Steeper Annual Fees

All United cards that charge an annual fee will see an increase in cost. The United Explorer card will rise to $150 a year from $95, the United Quest card will increase to $350 from $250, and The United Club Infinite card will go up to $695 from $525. These new fees take effect immediately for new applicants, while existing cardholders will see the higher fees applied on August 1.

In return, United Explorer members will gain benefits such as an annual $100 United travel credit after spending $10,000 on purchases over the course of a year. However, some perks are becoming more complicated to use. For instance, United Explorer offers up to $60 in annual ride-share credits, but these are now divided into $5 monthly increments, and annual enrollment is required.

Following Delta’s Lead

United’s announcement follows a similar strategy to the one Delta and American Express rolled out last year. Delta hiked the annual fees on all its Amex cards in exchange for benefits like additional credits for rideshares and perks at Delta Stays, its hotel reservation service. 

The shift in strategy appears to have worked for Delta. Revenue from sources other than passenger and cargo grew by $1.5 billion last year, an increase of 18%.

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In a significant move for the buy now, pay later (BNPL) industry, Affirm will begin reporting data on all its products to credit bureau Experian.

As borrowers seek alternatives to high-APR credit cards, BNPL installment have gained traction. These loans often come with little or zero interest and are typically available regardless of the consumer’s credit score.

Until now, BNPL companies haven’t been required to report their loan data to credit bureaus like Experian and Equifax, unlike credit card companies. The growing demand for BNPL, coupled with the lack of transparency surrounding the debt consumers are racking up, has prompted greater scrutiny of BNPL providers like Affirm and Klarna.

Affirm’s decision to start reporting its customers’ data to Experian aims to promote greater transparency and encourage responsible lending.

“This is a major change for the BNPL industry that once differentiated itself from other credit products with not reporting to the credit bureaus,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “Now, lenders will have Experian pay-over-time history, which will allow them to have a more holistic picture of the credit applicant.”

The Phantom Debt Crisis

While more clarity will no doubt be welcomed by lenders, Affirm’s move is intriguing because one of the main selling points of BNPL has been its availability to all consumers, regardless of creditworthiness.

Affirm’s leadership has repeatedly defended BNPL against criticisms that the lack of data on installment loans could lead to a crisis of “phantom debt” with far-reaching impacts.

The company has pointed out that total transactions make up less than 1% of the over $1 trillion in consumer credit card debt, and that delinquencies are rare.

Affirm also recently conducted a yearlong study, in collaboration with FICO, to determine the effects BNPL loans have on credit scores. The study found that any ramifications on credit scores was negligible, and when there were impacts, they were often positive.

Responsible Lending Practices

Considering these efforts, the new integration with Experian may seem at odds with Affirm’s philosophy. However, it could signal that the company anticipates more regulation in the industry and is taking proactive steps to stay ahead of it.

Although Affirm will begin reporting its data next month, the BNPL data won’t immediately be factored into consumers’ credit scores, as a new model will need to be developed. Still, lenders will be able to see the number and amount of BNPL loans a potential customer has borrowed.

“BNPL had been scrutinized for lack of transparency when it comes to reporting, with so-called ‘phantom debt’ looming among consumers,” Danner said. “Now, responsible lending practices will ensure that customers are not being consumed with a debt they aren’t able to pay. It’s a move that we view as fiscally responsible and part of any good credit lending program.”

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Americans expect it to become harder to obtain a new credit card over the next year, to the point that many are no longer bothering to apply.

The New York Fed’s Survey of Consumer Expectations found that the share of respondents who expect it to be harder to obtain credit a year from now jumped to 46.7% in February. The share of discouraged borrowers—those who want credit but did not apply for fear of being denied—reached 8.5%. That’s the highest percentage since the New York Fed began its survey in 2013.

The percentage of individuals being denied an increase in their credit limit is also high. After surpassing 40% in October—another record high for this survey—it was still at 39.7% in the most recent Fed report.

“Consumers are worried about getting more credit,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “But in an uncertain economy, we will have to see if the need for more credit outweighs the objective of resisting it, if they can.”

Delinquency Rates Remain High

Issuers are understandably worried about their lending standards as the U.S.  economy braces for a potential recession. Even in a relatively healthy economy, credit delinquency rates have remained elevated over the past couple of years. Recently, overall credit card delinquency rates climbed to 3.2%, their highest level since 2012.

“Card issuers are just as worried about the economy, particularly as delinquent accounts and charge-offs are rising,” said Riley. “The concern is for those in higher risk segments, particularly with FICO scores below 720. And with pressure on government workers, there is a whole new segment to worry about.”

Worsening Expectations

Consumers’ year-ahead expectations regarding their households’ financial situations deteriorated considerably in February, per the Fed. Expectations for missing at least one debt payment over the next three months rose to its highest level since April 2020.

Beyond credit cards, other forms of credit are also being perceived as more daunting. The rejection rate for mortgage refinance applications has climbed to 41.8%, up from 26.7% just a year ago.

For auto loan applications, the perceived probability of rejection reached 33.5%. Last month, the New York Fed reported that the overall percentage of auto loans classified as delinquent rose to 3% in Q4, a figure considered a sign of financial strain for risky borrowers.

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Many older adults carry credit card debt from month to month, but that is not necessarily a sign of profligacy. In fact, nearly half of respondents surveyed by AARP said they consistently have credit card debt, with many of the debts incurred due to unexpected expenses.

Credit card debt remains the most common type of debt carried by adults over the age of 50. Not surprisingly, half of those surveyed said that medical expenses contributed to the debt they carry month to month.

Additionally, nearly nine in 10 respondents reported that unexpected expenses contributed to their credit card debt, with the most common type of unexpected expense being vehicle-related costs.

Older adults can often find themselves caught of guard by significant expenses, especially when it comes to vehicle costs, which can arise unexpectedly from mechanical breakdowns or accidents. However, the good news is that, for the most part, these expenses are not causing  undue hardship for credit cardholders. Indeed, half of all older adults with  credit card debt still report feeling financially secure.

Lack of Insurance

Vehicle-related debt is just one form of debt that keeps consumers up at night. Medical debt is another common issue among U.S. adults. Among those who said medical care was driving their credit card debt, dental expenses were the most frequently cited. Once again, these are often unexpected costs, and many older adults remain uninsured. Medicare doesn’t offer dental coverage for wellness-related or preventive procedures, only those deemed medically necessary.

Other common medical reasons respondents reported carrying credit debt included areas where they are uninsured or underinsured, such as vision care and prescription medications.

Avoiding Medical Credit Cards

Despite this debt, AARP found that older adults have largely avoided using medical credit cards—a special type of card typically offered through doctor’s offices, hospitals, or other healthcare providers. Three-quarters of respondents reported not using such cards, while only 12% said they carried debt on a medical credit card.

This may be due to growing scrutiny of the medical credit card industry in recent years. In 2023, the Consumer Financial Protection Bureau (CFPB), the Department of Health and Human Services (HHS), and the U.S. Department of Treasury launched an inquiry into medical cards and installment loans amid concerns that incentives provided to healthcare providers to promote these financial products were driving patients deeper into debt.

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In the latest clash over card interchange fees, the UK’s Payment Systems Regulator (PSR) has criticized Visa and Mastercard for ratcheting up fees and dominating the card market.

Following a review of UK market conditions, the PSR determined that debit and credit card fees on these payment rails add an extra £170 million ($219.7 million) in annual costs for businesses. Over the past eight years, the regulator also found that Visa and Mastercard have raised their service fees to acquirers by roughly 25% without justification based on costs, competition, or innovation.

“The switches can be a bit of an easy target,” said Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research. “When global multinationals are put in contrast to small businesses in a given country it can certainly seem like big beating up on small, but I would say these fee structures are not pulled from the air—they’re designed to create an appropriate balance between the needs of the merchant and the needs of the issuer.”

“The issuer is effectively being asked to cover risk that the cardholder buys something and doesn’t eventually pay for it,” he said. “The card is meant to be an encouragement to spend more on a given visit, i.e. more than the cash you might have in your pocket. The merchant realizes the benefits of not having to manage credit and not having to account for countless cash drop-offs.”

Reconciliation Outside of Regulation

Despite the benefits card networks offer merchants, the interchange fees they charge have been controversial. In the U.S., a $30 billion settlement between Visa and Mastercard and merchants—largely based on interchange fees—was tabled after a federal judge determined the settlement amount was too low.

However, the best hope for reconciliation between merchants and card networks might lie outside of the courtroom.

“The regulators don’t want to wade in and legislate outcomes, they want to legislate the circumstances that drive optimal outcomes,” Thomas said. “That is having conversations between the merchant associations and the banks to say, ‘Tell us why you think your pricing is fair or not fair, and we will try—in as not heavy-handed a manner as we can—to ensure that everybody remains happy.’”

The Appropriate Balancing Act

This approach has been successful in areas like Canada, where agreements between card networks and merchants—that are not imposed by regulators—have established processes to periodically review interchange fees and ensure they are priced appropriately.

“It’s a balancing act,” Thomas said. “When you read provocative statements designed to grab headlines, I don’t think you get the full picture of what’s going on. The process should be to hash through the issues such that everybody gets heard and you get the optimal outcome where maybe nobody’s happy, but it’s the appropriate balancing act.”

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In a cautionary signal for the lending industry, auto loans delinquencies are reaching new heights, particularly among borrowers with poor credit.

A study from Fitch Ratings shows that the number of subprime auto borrowers who are at least 60 days past due on their loans has reached its highest level since the agency began tracking this data in 1994. Last month, The Federal Reserve Bank of New York reported that the overall percentage of auto loans classified as delinquent—at least 90 days past due—rose to 3% in Q4 2024, the highest level since 2010.

According to Brian Riley, Director of Credit at Javelin Strategy & Research, auto loans are a key indicator of financial strain among riskier borrowers. For many subprime borrowers, these loans represent their biggest monthly debt payment, as they often don’t have mortgages or student loans. 

Lending Standards Have Held Tight

The increase in delinquency does not appear to be the result of loosening credit standards, as was the case during the subprime mortgage crisis. While auto loan balances have grown steadily since 2011—expanding by $48 billion in 2024—this growth has largely been driven by borrowers with higher credit scores.

For other borrowers, loan originations have held steady. Indeed, the average rejection rate for auto loans has been growing, increasing by 0.4 percentage points to 11.4% in 2024—the highest level recorded since the Fed began tracking this data in 2013.

Auto loans for consumers with the lowest credit scores are generally issued by what the Fed refers to as non-captive auto finance companies, such as AmeriCredit Financial. Loans from these lenders have experienced the most pronounced rise in delinquency rates in recent years, reaching roughly 5.5%, while delinquency rates from larger banks have remained below 3%.

Would Tax Deductibility Help?

Earlier this week, President Trump proposed a way to ease this problem: making interest on loans for American-made cars tax deductible.

According to Experian, the average loan for a new car is around $40,000, with an interest rate of 6.8%. Over the first year of a 60-month loan at that rate, borrowers would pay around $2,500 in interest. A household in the 24% income tax bracket could save $1,794 over the life of the loan.

However, these savings would benefit only a small subset of consumers—namely the 10% of taxpayers who still itemize deductions. Since these taxpayers tend to be wealthier, the overall impact on auto loans would likely be negligible.

The post Rising Delinquencies on Car Loans Send a Warning to Lenders appeared first on PaymentsJournal.

Consumers have become increasingly aware of the benefits of emerging payment methods and are accustomed to using different payment mechanisms in various scenarios. Gen Z, in particular, is especially payments-savvy—one of the reasons Mastercard is launching its One Credential platform.

One Credential allows customers to choose from multiple payment methods like debit, credit, buy now, pay later (BNPL), and prepaid, all within a single interface. Users can manage their selection of payment options through Mastercard’s online platform or app.

The payments giant believes this solution will appeal to younger consumers, who are digital natives and prioritize personalized experiences. This preference for experiences has fueled a resurgence in shopping at physical malls among younger consumers. However, Gen Z hasn’t abandoned e-commerce; instead, they are blending aspects of in-store and online shopping to create a hybrid shopping experience.

Structuring Credit

Another key aspect of One Credential is that it will provide structured credit solutions aimed at helping Gen Z build their credit scores and improve their creditworthiness.

Gen Z consumers haven’t been hesitant to embrace credit cards. A recent study by the Federal Reserve of Dallas found that younger consumers in Texas are more likely to own credit cards than previous generations at the same age and tend to use them more frequently.

Roughly 60% of Gen Z respondents reported having at least one credit card in their early 20s, with nearly a third saying they had a credit card that was 75% or more of its credit limit.

Filling a Role

Mastercard’s latest effort represents a growing trend in the financial services industry, where organizations are adapting their models to align with Gen Z’s preferences. Just as Gen Z adults are becoming more active with credit cards at an earlier age, younger consumers are also starting their investment journeys sooner. The digital-first mindsert of Gen Z investors has driven a shift toward AI tools and self-directed platforms.

Gen Z is also influencing a shift toward mobile and digital banking solutions at traditional financial institutions. While technology solutions are important, many younger consumers are also looking for guidance—an opportunity that financial institutions can seize.

“Gen Z consumers often have to rely on free financial education and advisors because they don’t have any alternative,” Gregory Magana, Digital Banking Analyst at Javelin Strategy & Research told PaymentsJournal. “Older generations, which are more financially established, have an easier time getting in-person help. There could be a significant return on investment from offering Gen Z consumers Finance 101, so they can boost their financial confidence.”

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Credit cards have evolved far beyond simple plastic payment cards, adapting successfully to rapidly shifting technologies. However, despite their growing popularity, credit card issuers face three key obstacles this year: a disrupted business model, deteriorating credit quality, and the shifting definition of what a credit card is.

The industry landscape was examined in 2025 Credit Payments Trends, a report from Brian Riley, Director of Credit and Co-Head of Payments, and Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. It outlines how issuers can map out a path to stability, increase net revenue, and leverage artificial intelligence to their advantage.

The Importance of Stability

Persistent inflation and high interest rates weren’t new headlines last year, but they continued to strain consumers. Total U.S. credit card debt reached $1.14 trillion in Q3 2024, according to the Federal Reserve—the highest level in over 25 years of tracking this statistic.

More consumers are now making only  the minimum payment on their credit card bills, leading to a corresponding rise in credit card delinquencies.

“The write-off rate is just around 5%,” Riley said. “The sweet spot in the card business is typically 3.5%, so we’re north of that. It has doubled in the last two years, so that’s a concern. The most important thing the industry needs to do is to stabilize—it is normally in a growth mode, so tempering that a little is important.” 

Uncertainty remains in the market. While some consumer segments are faring well, middle-income households continue to face financial stress.

Beyond economic factors, the credit card industry has been in flux due to a multitude of regulatory efforts. The Consumer Financial Protection Bureau (CFPB) has spearheaded several initiatives, including a rule to cap credit card late fees at $8.  

According to Riley, the good news for issuers is that the CFPB will likely not succeed on the delinquency fee issue in the current political environment. However, card issuers must pay attention to the economy’s fragility and the fact that some businesses are entering uncharted waters.

The CFPB was also the driving force behind the Credit Card Competition Act, designed to reduce the dominance of the Visa and Mastercard networks. The bill would require issuers to offer retailers and organizations an alternative rail to those operated by the credit card giants.

The bill has faced numerous roadblocks. Critics argue that the legislation would prompt major credit card companies to shift funds from consumer rewards programs to merchant incentives and force financial institutions to support networks they don’t wish to offer. Practically speaking, Riley expects the Card Competition Act to fizzle out.

Though these efforts may not prevail, other proposals could dramatically impact the industry—such as the recent push to cap credit card interest rates at 10%. The lingering uncertainty surrounding regulatory changes makes it paramount for credit card issuers to focus on controlled growth, liquidity, and conservative lending practices. 

“We have little expectation that 10% credit cards are on the horizon,” Riley said. “Issuers do not even cover their margins. Consumers with great FICO Scores—such as those between 810 and 850—do not even get priced at 10%, so how could riskier segments get that rate?”

“Lending is an art and a science, but it is also a business,” he said. “The model has to work or there is no reason to lend. First you need to cover the funding costs, then cover operational expenses like people and rewards. Then, you need to carry the cost of charge-offs. Before you know it, the model is upside down.”

Seeking Profitable Growth

Stability allows card issuers to regain balance. It also provides issuers with the opportunity to study how consumers are adapting to higher prices and environmental changes. Once stability is achieved, issuers should shift their focus to revenue—not just increasing gross dollars, but concentrating on net revenue.

The loans that credit card issuers offer are largely based on a risk-adjusted pricing model, with the expectation that the consumer will repay the loan. If circumstances change, however, the issuer is locked into the rate established during underwriting, which may no longer align with the account’s risk.   

“This static pricing model came out of Dodd-Frank, and it does not allow the issuer to recalibrate their risk-based pricing as things change, so it has to be right the first time,” Riley said.

This deterioration in credit quality has had widespread impacts on the industry.

“The profitability of the card business has been on the downswing,” Riley said. “It typically runs in the 4% of assets level. General banking runs more like 1.5%, so cards can be almost three times as profitable. However, after COVID, profitability dropped significantly because people were expecting credit losses. It was in the 3% range for 2023 and we expect that to dip further—probably into the high two level when the final numbers are in for 2024.”

These credit quality issues mean that card issuers must anticipate potential swings before booking the account, continuously monitor the account throughout the relationship, and have a strategy in place for when the account approaches charge-off.

“The story for this year will be that growth is good, but profitable growth is what is most important,” Riley said. “It’s not about getting credit cards out there. There are 220 million people and 600 million cards in the U.S., so quick and dirty math says there’s already around three cards per household. Focusing on the importance of net revenue—not just new accounts—is what’s big.”

Walk, Not Run

For all the recent buzz around artificial intelligence, it’s not entirely new to the credit card industry. Machine learning has been deployed by credit card firms since its inception, especially for fraud detection and credit management. However, there are still plenty of future use cases, such as application approval.

“With those 600 million cards in the U.S., and probably a 15% turn between customers, it means there are a good 150 million customers a year that go through the underwriting process,” Riley said. “A third of the number survive the process, and the other two-thirds don’t, so artificial intelligence can do some work there to improve that.”

AI can also play a role in identifying struggling accounts. Many of the larger financial institutions, such as Citi or Chase, can process roughly one million delinquent accounts a day. They need tools to help them sort through the data and queue accounts to collectors.

In addition, AI could be applied to credit scoring. FICO scores are important gauges for both consumers and lenders, and artificial intelligence could be deployed throughout the cycle to ensure these scores stay accurate.

All in all, AI holds an array of possibilities for issuers, from booking new accounts to workflow management and expanded fraud management solutions. However, the risks associated with this emerging technology mean that issuers should take a measured approach to AI.

“We think that card issuers need to walk on this, not run toward it,” Riley said. “Whatever’s slick and shiny is going to be in place first at the top issuers, but the middle market should not focus on it. Their platform service providers like Fiserv will level the field over time and make sure that they have the competencies they need.”

Instead, small- to mid-market institutions should focus on the fundamentals of solid underwriting, effective credit management, and the operational bottom line this year.  

The post In a Challenging Environment, Credit Card Issuers Should Prioritize Stability Over Growth appeared first on PaymentsJournal.

Younger consumers in Texas are more likely to own credit cards than previous generations at the same age, and they tend to use them more frequently. While this can lead to more delinquencies, it could also result in higher credit scores over time.

The Federal Reserve Bank of Dallas recently examined the credit card habits of Gen Z in the state and found that they use credit differently compared to millennials and Gen X at the same age. Some 60% of Gen Z respondents had at least one credit card in their early 20s, compared with 54.5% of millennials and 57% of Gen X consumers at those ages.

With higher card ownership, Gen Z also uses credit cards more than previous generations. Nearly a third of this generation had a credit card that was 75% or more of its credit limit, which is higher than other generations.

But here’s an interesting twist: when the Federal Reserve Bank of Dallas looked only at those with credit cards—rather than the entire generation—Gen Z fell to the bottom of the list. Just 28% of Gen Z cardholders reached that 75% credit limit, compared to 33% of millennials and 37% of Gen X.

It’s important to note that this data focuses on a small group of consumers from one state, rather than looking at a wider audience. However, these generational differences persist despite other studies showing that younger generations are more rate-conscious. Gen Z, for example, uses credit cards more for shopping and dining, while baby boomers spend more on fuel and hotel lodging. As a result, younger generations are less focused on rewards and more concerned with rates and terms.

The Effects of Higher Usage

Looking at older generations, the Federal Reserve Bank of Dallas found two divergent paths when it comes to credit card usage. Millennials with higher card usage in their 20s saw an average of 21% of their lines of credit become seriously delinquent in the next decade. For members of the same generation who had lower credit card usage rates in their 20s, just 9% of their lines of credit became seriously delinquent.

However, when younger cardholders live within their limits, that additional usage often pays off. Millennials who used credit cards at lower-than-average rates in their early 20s had an average 62-point higher credit score in their early 30s compared to their peers.

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Credit card debt among U.S. consumers reached $1.21 trillion, the highest level on record since the Federal Reserve began tracking the data over 25 years ago.

According to its Q4 2024 findings, credit card balances increased by $45 billion in Q4, reflecting a more than 7% year-over-year increase. At the same time, credit card delinquency rates remained high, with 7.18% of balances reported as delinquent over the last year.

Despite rising credit card balances and increased delinquencies, U.S. consumers continued to accumulate debt throughout the holiday season. More than a third of respondents said they took on additional debt during the period, and nearly half stated these expenses were unplanned. According to LendingTree, the average consumer added $1,181 to their credit card bill in the holiday season, up from $1,028 the previous year.

Continuation of a Trend

Data from the Federal Reserve points to a continuation of an ongoing trend. Not only is credit card debt mounting, but over 10% of consumers are also making only the minimum payments on their balances.

Inflation has been one of the culprits behind the rising dependence on credit cards, a trend that accelerated in the wake of the pandemic. In addition, high interest rates have made carrying a balance even more expensive.

Over the past few years, the Federal Reserve has raised interest rates, causing the average credit card rate to skyrocket over 20%. However, despite the Fed lowering its benchmark rates in the latter part of last year, credit card rates have yet to decline significantly.

Fragile Segments

The strain of rising prices and interest rates has particularly impacted lower-income households. In addition, more retirees—who traditionally live within fixed budgets—have turned to credit cards to make ends meet. According to data from the Employee Benefit Research Institute, over two-thirds of U.S. retirees carried outstanding credit card debt last year, a substantial increase from previous years.

“What is important here is that not all card segments are showing signs of stress, but the most fragile segments—those with low FICO Scores, lower incomes, and less experience with credit—indicate downfield risk in 2025,” Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, told PaymentsJournal.

“When you consider that revolving consumer debt is at an all-time high, the problems of inflation continue to stress household budgets, and issuers must keep a keen eye on vulnerable portfolio indicators,” he said.

The post Credit Card Debt Continues to Mount for U.S. Consumers appeared first on PaymentsJournal.

Virtual cards have been a popular option for consumers for years, but they’re just now gaining traction among businesses. With an increasingly globalized economy, corporate entities are seeking efficient ways to move money across borders, and virtual cards are filling that role—maximizing efficiency while reducing costs.

Mark Anthony Spiteri, Global Head of Card Business at Nium, sat down with Brian Riley, Co-Head of Payments at Javelin Strategy & Research, during a PaymentsJournal podcast to discuss the growing demand for B2B cross-border payments and the emerging use cases driving their adoption in industries like insurance and travel.

The Pandemic Effect

B2B payments have been a cornerstone of commerce for decades, but like many other aspects of business, the pandemic brought significant changes. For one, companies had to grapple with the possibility of their suppliers going out of business. This created an urgent need for processes that could move funds quickly between merchants and suppliers, ensuring payments were delivered reliably.

Post-pandemic, many companies diversified their supply chains to reduce risk and work with multiple global suppliers The challenge, however, is that the payment rails in some of these countries may have not been tried and tested. Fundamentally, businesses need assurance that they can pay and get paid quickly, cost-effectively, and reliably across borders.

Volatility and Regulation

Since the pandemic, two additional factors have been changing the fundamental nature of B2B payments. The first is the impact of volatility.

”At the moment there’s a lot of volatility across the political landscape,” said Spiteri. “We saw what happened in the U.S. election and how the Asian market reacted, with significant impact to the Chinese Yuan. Suddenly, there was a lot of fluctuation in FX. If that happens, you need to be able to control those payments in a way that you can predict exactly what’s going to happen. It needs to be accurate, reliable, and in real-time.”

The second is the increasingly complex regulatory landscape. Given the heightened scrutiny from regulators, it has become more difficult for businesses to rely on a single payment method for global transactions.

The immediacy of virtual cards has helped alleviate many of these concerns.

“Something I’ve always liked is how quickly you could settle real-time payments across borders,” said Riley. “The Eurozone was a leader in real-time payments, but now it’s moving through many different countries, and it’s finally in the U.S. These payments settle once they hit the books, and they clear very quickly and safely.”

Advantages of Virtual Cards

As a self-confessed ‘cards guy’, in Spiteri’s opinion the biggest challenge with real-time cross-border payments is how you connect a fragmented landscape of localized, regional networks around the world. In addition to global real-time payment networks like that offered by Nium, this is where virtual cards come into play. Being able to move money quickly and securely across borders with virtual cards is a powerful way for businesses to improve liquidity and cash flow management.

“Before it was like, pay in 30 days, or pay in 60 days, right?” said Spiteri. “Now, you can pay now. And one of the best ways to do that effectively and guarantee when the payment will arrive is with a virtual card.”

One key difference between virtual cards and other real-time payment methods is the chargeback protection that cards offer. If a supplier or merchant goes bankrupt, buyers are guaranteed to recover their funds.

Virtual cards also offer better controls. When employees use corporate cards, for example, it can be difficult to reconcile transactions and track where payments are going. Overall, they offer more flexibility. They can be configured as single-use or multi-use cards. A virtual card might be restricted to a specific merchant, set for a particular spending limit, or designated for use only at restaurants. This level of customization gives finance and procurement teams more control and granularity—and provides real-time transaction information to the employer.

“From the use cases I’m familiar with, where most cards are single-use, it simplifies reconciliation dramatically,” said Spiteri. “You can match the card to the original transaction, automatically plug the information into your ERP or accounting system, and you have end-to-end matching.”

Industry Use Cases

The travel industry was among the first to adopt this technology, primarily due to the immediate need for liquid cash flow and guaranteed payment protection. For every online booking, travel agencies and other intermediaries  must make payments to their airline and hotel suppliers around the world. Travel companies of all kinds also face sizable expenses, such as fuel purchases, often in cross-border locations. For instance, when planes require maintenance, businesses need the ability to quickly and securely transfer funds to cover repair costs.

Nium is also seeing strong demand in the B2B insurance sector, working with leading insurance firms to deliver innovative virtual card solutions. In one use case, Nium is the global issuer behind the launch of a new healthcare payment card, enabling members to pay for eligible outpatient treatment without using their funds, needing to submit a claim, or contacting their insurer to pre-authorise their treatment before they pay it.

“If I’m travelling and have an accident abroad, I need to find the hospital and get treatment urgently,” said Spiteri. “I pay with my own credit card, then I have to fill out some forms, then claim it back, then send it to my insurer, and so forth. Even then, I may not be reimbursed if my claim doesn’t meet the criteria of my cover plan. It’s a complicated process that is very time consuming, both for the customer and the businesses involved as money can take time to flow between the insurer and the hospital.”

“With the real-time healthcare payment card, now when I’m travelling and something happens, I can generate a virtual card on the insurance app in my Apple Pay or Google Pay wallet. When I pay for the treatment, it’s actually the insurer paying the medical facility immediately. No reimbursement headaches. All I have to do is upload an image of the treatment invoice to the app to be processed.”

Expect to see consolidation in the B2B payments industry in the coming years. The focus will likely shift toward addressing challenges like those in the insurance sector—a need that forward-thinking companies like Nium are already anticipating and solving.

“With consumer payments, you make a solution work,” said Spiteri. “You don’t throw everything at it and hope that it works, or else no one will use it. And that’s what’s going to happen in the B2B space. This will drive consolidation and increase the focus on solving tangible business problems with innovative payment solutions.”

The post What’s Driving the Adoption of Virtual Cards? appeared first on PaymentsJournal.

Following up on a pledge made by President Donald J. Trump during his campaign, the unlikely team of Josh Hawley and Bernie Sanders has proposed a law capping credit card interest rates at 10%. The two senators have proposed similar legislation in the past, but both senators’ previous proposals would have capped rates at a much higher and more realistic level.

Hawley, a conservative Republican from Missouri, introduced legislation last year that would have prohibited card companies from charging more than 18% annual percentage rates. In 2019, Sanders, a liberal independent from Vermont who caucuses with the Democrats in the chamber, proposed a cap of 15%.

During last year’s presidential campaign, Trump upped the ante by saying he would “put a temporary cap on credit card interest rates” of 10%. The Sanders-Hawley bill would immediately cap those rates at 10% and remain in effect for five years. According to the latest numbers from the Federal Reserve, the average credit card interest rate is currently 22.8%.

Turning the Industry Upside Down

Industry experts warn that capping rates at such a low level would severely limit the number of households that have access to credit cards. According to estimates from Javelin Strategy & Research, the cost of lending, as defined by expenses in interest and non-interest costs, will be about 13% in 2025.

A 10% interest cap would require lenders to stop investing in consumers whose FICO scores were less than 800. In the U.S. market, that would limit credit access to around 200 million people, or about 80 million households.

“The 10% cap would be unserviceable and not cover revenue requirements, let alone profitability,” said Brian Riley, Director of Credit at Javelin. “Issuers would need to offer cards to only super-prime cardholders and leave middle America without a channel to support their household budgets.”

Riley expects the legislation to provoke challenges from merchants, hospitality providers, and retailers who rely on the benefits of credit for their customers. A higher cap, such as those suggested earlier by Hawley and Sanders, would be more tolerable for the credit card industry.

Alternatively, Riley pointed out that a simpler way to benefit borrowers would be to restore the tax deductibility of credit card interest. The Tax Reform Act of 1986 eliminated deductions for interest paid on all consumer loans, with the exception of mortgage interest. “Revitalizing that benefit would temper the impact to consumers,” Riley said.

The post Capping Credit Card Interest Rates at 10% Would Disrupt the Industry appeared first on PaymentsJournal.

Q4 spending by American Express’ more affluent customer base rose by 8% year-over-year, driven particularly by strong shopping activity among millennial and Gen Z consumers.

Spending picked up after a 6% growth rate in both Q2 and Q3 2024, according to CNBC. Among Gen Z users, transaction volumes surged 16% in Q4 2024, while millennials saw a 12% increase compared to the previous year.

This spending zeal was largely relegated to younger adults. American Express reported that Gen X spending grew by 7%, while baby boomer billings increased by just 4% in Q4. Despite sluggish spending growth in these groups, Christophe Le Caillec, Chief Financial Officer at American Express told CNBC that the increase in shopping among Gen Z and millennial customers “gives us a lot of optimism for 2025.”

A Concerted Effort

American Express has made a concerted effort to appeal to younger age cohorts, a strategy that seems to be paying off. Many of Amex’s young consumers are diving straight in with premium cards, like the $695 annual fee Platinum card, rather than starting with no-fee options.

Gen Z and millennial users exhibit a higher comfort level with membership and subscription fees, recognizing the value American Express provides beyond the cost. For example, the Gold card offers 100,000 membership rewards points after spending $6,000 on eligible purchases within the first six months and 20% back in statement credits made at restaurants during the initial period.

These promotions are attractive to younger adults who are often in search of experiences, as opposed to physical products. According to Le Caillac, Amex’s restaurant and travel rewards are making an impact—travel and entertainment billings rose 11% in Q4 24, compared with 8% for good and services. Much of the Q4 2024 boost in the travel segment came from airline spending.

Highly Sought After

The Gen Z and millennial customer base is highly sought after because they typically have higher incomes and credit scores than older cohorts. Many Gen Z consumers have also started investing at an earlier age than previous generations. Gen Z is highly tech-savvy, and their investment habits have been influenced by social media and gaming.

Though Amex has already shifted its strategy to reach this cohort, the wealth management industry has struggled to accommodate the preferences of the new generation of investors. Younger adults are looking for digital-first solutions that are tailored to their unique demands, and financial firms in all industries must acknowledge these preferences and adjust their strategies accordingly.

The post American Express Sees Year-End Spending Surge, Driven by Younger Adults appeared first on PaymentsJournal.

Many consumers are sticking to just the minimum payments on their credit card bills, according to a recent report from the Federal Reserve.

The data, covering through Q3 2024, revealed that over 10% of consumers were simply getting by, continuing a three-year trend. As average credit card interest rates have surged, delinquencies have also risen, reaching their highest point in over a decade.

“The economy is still in tender shape and credit card managers should be aware that there are subtle elements that drive risk,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The current trend of increased consumers paying only the minimum due is a predictive metric that illustrates household budgets are under continued stress.”

Downfield Risk

The lingering impacts of inflation have put pressure on consumers for years, and there has been much speculation about whether these conditions will persist or if improvement is imminent.

To provide a clearer picture of consumers’ situation, Riley highlighted two salient indicators from the Federal Reserve data:

• 30-day delinquency rose by 10% to 3.52% in Q3 2024, signaling continued deterioration in new delinquent accounts.
• The number of consumers making only the minimum payment during this period climbed to 10.75%, up by 9%.

“What is important here is that not all card segments are showing signs of stress, but the most fragile segments—those with low FICO Scores, lower incomes, and less experience with credit—indicate downfield risk in 2025,” Riley said. “When you consider that revolving consumer debt is at an all-time high, the problems of inflation continue to stress household budgets, and issuers must keep a keen eye on vulnerable portfolio indicators.”

Long-Term Solvency

Concerns about mounting credit card debt were brought forward in the results of this year’s DFAST stress tests, which were designed to measure how major U.S. financial institutions would respond to a hypothetical set of negative economic events.

The tests found that banks would face total credit losses of roughly $684 billion, with $175 billion from consumer credit card losses alone. These indicators suggest that credit card firms should prioritize long-term solvency over short-term profits.

“Credit card issuers surely make increased income when consumers pay only their minimum due payments, but the revenue is short lived when chargeoffs move towards 6% to 7%,” Riley said. “That is far beyond the 3.5% comfort zone issuers managed two years ago.”

The post A Record Number of Consumers Are Making Minimum Credit Card Payments appeared first on PaymentsJournal.

In a reversal of a deal that was supposed to happen four years ago, CardWorks is now buying Ally Financial’s credit card business.

The news follows reports from last December that Ally was seeking a buyer for the credit card division it had acquired in 2021. Ally, which began as GMAC, the lending arm of General Motors, held $2.3 billion in credit card receivables with 1.3 million active cardholders as the end of 2024. While the sale itself wasn’t unexpected, the identity of the purchaser is somewhat ironic.

That’s because, in 2020, Ally announced a deal to acquire CardWorks, best known as a subprime credit card lender and the parent company of Merrick Bank, for $2.65 billion. However, the agreement was mutually terminated with the onset of the pandemic. The uncertain economic landscape made the business too risky. As Brian Riley, Co-Head of Payments at Javelin Strategy & Research, noted at the time, if the pandemic had caused Ally’s chargeoffs to slip from 4% to 10%, it wouldn’t have had enough savings to cover the risk.

A Home in Subprime

Merrick is the 18th largest credit card issuer in the U.S., with 3.64 million cards in circulation. According to Forbes, the average credit score at Merrick at the time of the first Ally deal was just 630, which is well below the standard definition of subprime. To mitigate the risks associated with these higher-risk cardholders, nearly all of Merrick’s card products require a security deposit.

This aligns with the niche Ally has long targeted. In December 2021, Ally spent $750 million to acquire Fair Square Financial, a digital-first credit card company. Fair Square’s primary offering was the Ollo Card, which catered to borrowers with mid-to-low credit scores.

However, that business began to show signs of strain under Ally’s ownership. During last year’s Dodd-Frank stress tests, Ally projected loss rates exceeding 40% under severely challenging  economic conditions, while the industry as a whole saw loss rates between 16% to 20%, according to Riley. During its Q3 2024 conference call, Ally acknowledged that the shifting operating environment had created increased uncertainty in its short-term forecasts, especially regarding credit costs and profit margins. 

Meanwhile, CardWorks had been beefing up its back-office operations. In 2023, it acquired Dataline Systems, a provider of business process outsourcing and financial services operations support. Additionally, CardWorks was part of a consortium that purchased GreenSky, the largest lending platform for home improvement loan originations by U.S. banks, in 2024.  

At the same time, Ally was searching for a solution to its longtime credit card woes. “We’ve been trying to figure this out for years and years,” Ally’s then-CFO, Jennifer LeClair, said in 2021. The hunted had become the hunter.

The post Flipping the Script, CardWorks Buys Ally’s Credit Card Business appeared first on PaymentsJournal.

Highnote announced the launch of its acquiring solution, which, combined with the firm’s existing issuing solution, will create a unified card payments platform for organizations.

While more aspects of payments processing have been embedded into software solutions, many businesses still rely on multiple providers to meet all their payments needs. Highnote’s platform, however, is designed to support full pay-in and payout functionality.

“It’s an all-in-one unified platform with a centralized general ledger at the core,” John MacIlwaine, CEO of Highnote, told PaymentsJournal. “It’s not a bolt on, we’re not pivoting the business. We’re strong believers in core issuing, but most of our customers are also excited about being able to acquire the cards that they’ve issued and even general acquiring as well.”

In the Cards

For four years, Highnote has built its operations around a platform that helps businesses issue an array of card options—from customizable debit cards to credit cards to loyalty cards. However, the inclusion of acquiring has always been part of the plan.

“My background has been in acquiring,” said MacIlwaine. “I came from Braintree, which is PayPal’s acquiring business. When we started Highnote, we were looking at both issuing and acquiring, but we needed to pick one to start with because otherwise you get spread too thin. We felt like the bigger near-term opportunity was in issuing and embedded finance, but we wanted to architect the platform knowing that we’re going to incorporate acquiring.”

Highnote’s API-based acquiring platform enables companies to accept card payments online via plug-in checkout software or custom features they design. It’s directly integrated with major payment networks, improving data access and transparency while lowering costs for customers.

Securing Funding

Highnote also raised $90 million in Series B funding, bringing its valuation to more than $750 million. With the new funding, Highnote plans to invest more heavily in its platform to deliver tailored embedded finance solutions for its clients.

According to MacIlwaine, the company aims to create a secure and scalable platform using APIs that gives its clients comprehensive access to their data—down to the ISO message level. This allows their clients to create custom fraud rules, conduct velocity checks, and share information with their consumers in the way that best suits their needs.

“What’s the differentiator?” MacIlwaine said. “We have a product platform that essentially allows customers to innovate. We thought, how can we create this platform that allows for innovation to occur by our customers because they know their markets better than we do? They know how to compete; they know how to drive revenue.”

“The analogy is, if you look at an Apple iPhone, you don’t go to Apple to build all the apps,” he said. “Their engineers are not building the apps, they built a platform that has the APIs and it’s secure, but all the innovation is done by customers. That is something that hasn’t really existed in payments.”

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A judge in Illinois’ Northern District has determined that challenges to a law aimed at banning credit and debit interchange fees on taxes and tips may have merit.

The Illinois Interchange Fee Prohibition Act (IFPA), passed last summer, is set to take effect this July. However, in August, the Illinois Bankers Association, American Bankers Association, America’s Credit Unions, and Illinois Credit Union League filed a complaint against the Illinois Attorney General, alleging that the IFPA is preempted by federal laws, unconstitutional, and invalid.

Chief Justice Virginia M. Kendall ruled that these claims have standing, but granted the request for a preliminary injunction only for national banks and federal savings associations. Judgment was reserved on federal credit unions, state banks, and credit unions. While not a complete victory, the ruling is seen as a positive step by those who consider the IFPA to be an overreach.

“It’s another example of government, in this case the state of Illinois, jumping in to regulate the industry without fully understanding how it operates,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The technical complexities alone are daunting—every credit and debit card terminal and point of sale system, including gas pumps and the like, would need to be reprogrammed to send tax and tip amounts separately and not as part of the purchase total.”

“The reporting that would be required to help the merchant reconcile their fees would also be very complex,” he said. “What’s worse is that this bill allows merchants to send in paper requests for fee reimbursements if they cannot communicate these details electronically, which places a huge manual burden on a highly automated process that serves millions of merchants.”

Tipping Points

Adding to a complex situation, the interchange fees that would be prohibited by the IFPA are paid by the card issuer. These fees often help offset the costs of operating the card program and covering losses from customer defaults. 

“A cardholder dining in a restaurant is presented with a $100 check and leaves a $20 tip, for a total purchase of $120,” Apgar said. “Under this law, the issuer only receives interchange fees on the $100 portion, but if the cardholder defaults on their account, the issuer will lose $120. In this scenario, it’s entirely possible that card issuers will refuse to post transactions for which they don’t receive interchange fee reimbursement.”

If implemented, cardholders might be limited to leaving tips in cash. Instead of increasing net tip amounts by eliminating fees—the IFPA’s intended purpose—this change could lead to a decline in net tips if cardholders can’t add them to their purchase.

“While this law attempts to restrict processors’ ability to ‘raise other fees to compensate,’ sending a tip amount separately from the check amount could be easily treated as a second transaction,” Apgar said. “It effectively doubles the number of transactions submitted by a restaurant and thereby doubles their processing costs.”

Tax Complications

Eliminating interchange fees on sales tax presents its own set of issues. If card issuers are not reimbursed, they could refuse to allow sales tax to be posted to a card account. It means a whole spectrum of cashless and unattended sales will no longer be available since tax would have to be paid in cash. 

“This would result in a giant step backwards in making payments frictionless and easy for consumers,” Apgar said. “Merchants already have the ability to add up to a 3% surcharge to credit card sales to offset their costs of interchange and processing fees, so this proposed law adds nothing but unnecessary complexity and inconvenience to a highly efficient and competitive service.”

The post Judge Grants Partial Injunction in Illinois Interchange Fee Case appeared first on PaymentsJournal.

The Consumer Financial Protection Bureau (CFPB) has sued credit bureau Experian, citing instances where the organization failed to adequately address inaccuracies in credit reporting.

Experian, TransUnion, and Equifax are the three main credit reporting agencies in the U.S. responsible for maintaining the files used to gauge a consumer’s creditworthiness. In Experian’s case, the CFPB found instances where the organization only gave a cursory “sham investigation” into customer complaints about inaccuracies in their credit score, and even reinserted false information back into some credit scores.

“Consumers are entitled to accurate credit reports, and lenders need data that accurately represents the quality of borrower payment habits,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “Accurate reporting issues have been around since the Fair Credit Reporting Act was created 55 years ago.”

“What is interesting about the CFPB’s case is that the concern is not about the ongoing issue of pristine reporting, which generated more than half a million complaints, but rather about the failure of one of the three major credit reporting agencies to handle disputes,” he said.

Bad Habits

Two years ago, the CFPB issued a report that examined the credit dispute processes at all three credit bureaus. It found that the bureaus had largely improved their credit dispute protocols, and were taking a more proactive, personalized approach to complaints.

The CFPB’s new action against Experian alleges the firm has reverted to its previous bad habits regarding disputes, and it prohibited the organization from further misconduct. The lawsuit would require Experian to reimburse any affected customers, pay a penalty, and return any funds it received because of unfair practices.

An Isolated Case?

Accurate credit scores are critical, because they could do significant damage to a consumer’s financial position. However, Experian released a statement noting that it had done nothing wrong. The firm said it had attempted to cooperate with the CFPB, but those efforts were ignored.

Experian called the lawsuit “completely without merit,” and noted that it had a strong legal position and that it was confident it would prevail against the CFPB’s action.

“CFPB points to inaccurate logging and resulting in complaint resolution for America’s almost 200 million adults that hold credit cards,” Riley said. “We will have to wait and see if Experian was an isolated case or will suits also follow for their competitors Equifax and TransUnion.”

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The most familiar example of surcharging might be the cash-or-credit pricing at gas stations, but more businesses are following that lead. While it’s becoming common for customers to pay for the right to use a credit card at restaurants and retailers, credit card surcharging hasn’t been a common practice in the healthcare industry. 

In a recent PaymentsJournal podcast, Ali Badawy, Director of Enterprise Healthcare Payments Solutions at U.S. Bank, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed how healthcare providers can leverage credit card surcharging to cut costs significantly while keeping their customers engaged.

Consumer Conditioning

Credit card surcharging has been permitted in most states since 2013, and it allows businesses to offset the credit card processing fees charged by card brands like Visa®, Mastercard®, and Discover®. The fees are instead passed to the customer when they use a credit card at the point of sale.

The surcharge amount is often a percentage of the overall purchase and can range from 1% – 4% and can be applied in any environment where a cardholder makes a payment—in-store, online, and even in text-to-pay. Surcharges are only allowed for credit card transactions, so consumers can avoid them if they pay by debit card, check, ACH, or cash.

“When surcharging was launched, business customers were skeptical, and understandably so,” Badawy said. “However, as it has developed over the years, consumers are more conditioned to it. If a customer’s transaction is in the government space, or with an online retailer or service business, those environments have adopted surcharging to where now consumers expect it.”

The Proliferation of Surcharging

The normalization of surcharging has expanded its use cases, which now covers industries across the spectrum. As businesses have shifted online, surcharging has evolved to become a factor in e-commerce.

The driving force behind the proliferation of surcharging is cost savings. Even though credit card fees of 1% to 4% might seem relatively nominal, the aggregate can quickly become a significant amount. Reducing those costs is what makes surcharging attractive to business owners, especially for enterprise-scale businesses.

“For example, a large healthcare franchise in the ambulatory space was exploring options to help their franchisees reduce their overall costs,” Badawy said. “After they researched surcharging, they found out they could save over $1 million each year based on their volume numbers.”

A Safe Strategy

The main concern about surcharging is that it could alienate customers, but that is rarely the case. Once a business starts a surcharge program, they are highly unlikely to terminate it.

“There are often apprehensions when an organization’s average ticket size is large, ranging from $5,000 to $20,000,” Badawy said. “The business owner might be concerned that if they apply a surcharge, they will lose the customer, but that’s usually the farthest thing from the truth.

Healthcare providers might still be reluctant to surcharge because it isn’t a common practice in the industry yet, but those concerns are likely unfounded.

“Most consumers aren’t shopping for a healthcare provider based on cost,” Apgar said. “They go to a doctor or a dentist because they have a connection with that provider and they’re receiving good care. Especially in industries like healthcare, where there can be substantial inelasticity in pricing, a nominal credit card surcharge isn’t enough to alienate a customer. From a business perspective, it’s an increasingly safe strategy to use.”

Every Endpoint

When researching banks or processors that offer both credit card processing and surcharging, business owners should also look for a processor that specializes in healthcare. In addition, the business owner should understand if the platform allows surcharging at every endpoint where the provider collects payments.

“If the software only allows surcharging in the front office of a healthcare entity, for example, but the majority of its collections are in the back office or online, then that service is not likely to help the business achieve its goal,” Badawy said. “A business that’s considering credit card surcharging will have to evaluate every end point where they’re collecting payments and verify if the process can support their needs.”

Partnering with the right processor before shifting into surcharging is key because there are compliance requirements. Regulations don’t allow surcharges on debit cards, so the card acceptance technology must be able to discern a credit card from a debit card and only apply the surcharge to credit cards. 

A business is also required to advise customers that it will apply a surcharge to credit card transactions. There should be clear signage in the front office, but also everywhere a provider accepts payments, including online check-out. Another best practice is to detail surcharges on billing statements and invoices.

“A business has to apply a surcharge correctly and compliantly, but it should also generate a consistent user experience,” Apgar said. “As the customer does business with the organization across a variety of channels, whether it’s paying in an office or paying on a bill pay site, it’s important to find a process that that can support all those aspects.”

Getting Relief

Surcharging at the point of service will continue to gain momentum. Though some regulators have strived to reduce or eliminate credit card fees, there is no immediate shift on the horizon.

“The $30 billion settlement between Visa and Mastercard and merchants has been tabled, so who knows when businesses will see relief from interchange fees?” Apgar said. “Surcharging is a tool that merchants and healthcare providers can use today to offset some of the costs of credit card acceptance and still keep compliant and customer friendly.”

Particularly in healthcare, where many healthcare entities and systems have had lingering financial difficulties that were exacerbated by the pandemic, surcharging will pick up steam.

“As rewards cards, which often have higher processing fees, become more popular, surcharging is a means to offset those fees and keep business owners’ margins intact,” Badawy said. “Surcharging will grow within all verticals, but especially in healthcare, because it can substantially reduce costs. Healthcare providers can use those resources to serve their patients and scale their businesses.”

The post How Credit Card Surcharging Can Benefit Healthcare Providers appeared first on PaymentsJournal.

The Consumer Financial Protection Bureau (CFPB) has finalized a rule banning medical bills from being considered on credit reports. This decision is expected to remove roughly $49 billion in medical debt from the credit reports of about 15 million Americans—at least for now.

Research conducted by CFPB has found that medical debts have little correlation with a borrower’s ability to repay other types of debt. Moreover, consumers frequently report receiving inaccurate bills or being asked to pay charges that should have been covered by insurance or financial assistance programs.

Credit agencies have been aware of this issue for years and have already cut back on the amount of medical debt included on credit reports. In 2022, Equifax, Experian, and TransUnion said they would remove certain types of medical debt from credit reports, including collections under $500. They also instituted a 365-day waiting period before unpaid medical debts affect a consumer’s credit record. 

The newer credit scoring models, which weighed medical debt less heavily, resulted in an average 25-point increase in FICO scores. Between August 2022 and August 2023, the percentage of consumers with medical debt on their credit reports dropped from 11.6% to 5.0%, according to research from the Urban Institute.

The new rule, which follows a proposal issued last June, would eliminate medical debt from credit reports entirely. The CFPB expects individuals with medical debt to see an average increase of 20 points in their credit scores.

Will It Last?

The next question is whether this rule will survive the incoming administration. Elon Musk, who is heading up the Trump Administration’s Department of Government Efficiency, has proposed eliminating the CFPB altogether. In part due to this threat, the CFPB has introduced several actions in recent weeks, ensuring the new regulations are implemented before the transition.

Many of these regulations have gained Republican approval. For example, the decision to scrutinize digital payment apps like Apple Pay and Venmo in the same way as other lenders has garnered support from an advisor to Vice President-elect Vance. Incoming Secretary of State Marco Rubio co-sponsored a bill in 2022 seeking to impose curbs on data brokers, a version of which has also become a CFPB policy in recent weeks.

Polling has shown that majorities of both Republicans and Democrats support the new rules on medical debt. However, Republicans, who will control both chambers of Congress, have the power to overturn these last-minute rules through the Congressional Review Act.

The post CFPB Eliminates Medical Debt from Credit Reports appeared first on PaymentsJournal.

Consumers accustomed to swiping their Capital One cards during overseas travels could face issues once the credit card giant transitions its network to Discover.

Currently, Capital One’s card payments are processed on networks operated by Visa and Mastercard. After the acquisition of Discover was approved in December by the Office of the Delaware State Bank Commissioner, Capital One said it plans to move its payments processing to Discover’s rails.

This change is unlikely to have a significant impact in the U.S., where Discover’s network is nearly as ubiquitous as Visa, Mastercard, and American Express. However, Discover is far less common outside the U.S, potentially causing  payment processing issues for U.S. travelers using Capital One cards abroad.

Forging Ahead

Despite these hurdles, Capital One is forging ahead with plans to move all its debit cards and some of its credit cards to Discover’s network as early as Q2 2025. The company also hopes to migrate a larger portion of its credit card business to the Discover network in the future.

“In total, across debit and credit, we expect to add over 25 million Capital One cardholders and over $175 billion in Capital One purchase volume by 2027,” said Richard Fairbank, CEO of Capital One, at an investor presentation last year. “This injection and volume in the network will help Discover be competitive with the leading network.”

Pledging Investments

The centralization of financial services among a few major players has been a key driver of opposition to the merger. Capital One’s acquisition of Discover, valued at over $35 billion, will make the combined company the largest card issuer in the U.S. The deal will position Capital One with approximately $250 billion in card balances, reflecting a 22% increase in market share.

In order to mitigate some of the concerns surrounding the highly scrutinized acquisition, Capital One recently pledged $265 billion in lending, philanthropy, and community investments if regulators approved the deal. The company stated that this commitment is twice as large as any other community benefits plan of its kind.

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Record-high credit card balances and delinquency rates did not stop consumers from accumulating even more debt this holiday season. Persistently high interest rates could exacerbate the problem further.

According to data compiled by Lending Tree, more than a third of American shoppers took on additional debt during the holiday season, with less than half of them saying they had planned for it. Those who went into debt borrowed an average of $1,181, up from $1,028 in 2023. Among those incurring debt, 65% charged their purchases to a credit card, 24% used a retailer’s card, and 21% opted for a buy now, pay later loan.

This happened despite entering the holiday season with credit card debt levels already at record highs. Credit card balances increased by $24 billion to reach $1.17 trillion at the end of Q3 2024, according to data from the New York Fed. Total household debt increased by $147 billion to reach $17.94 trillion. At the start of the holiday shopping season, credit card balances were already 8.1% higher than the previous year.

At the same time, delinquency rates also rose from the previous quarter. Credit card lenders wrote off $46 billion in delinquent loan balances in the first three quarters of 2024—a 50% increase from the prior year and the highest level since the Great Recession.

As of November, Capital One reported that its annualized credit card write-off rate reached 6.1%, up from 5.2% a year earlier. By the end of Q3 2024, 3.5% of all outstanding debt was in some stage of delinquency.

Battling with High Rates

These figures could climb even higher, as 42% of consumers surveyed by Lending Tree reported paying interest rates of 20% or more on their credit cards. While the average rate for general-purpose credit cards is about 21%, the average interest rate for retail credit cards has recently hit a record high of 30.45%. Despite these steep rates, Lending Tree revealed that two-thirds of respondents said they had no plans to consolidate their debt.

Interestingly, Lending Tree’s research also highlighted that consumers with the lowest incomes were the least likely to incur additional debt. Just 30% of respondents in this group reported taking on holiday debt—the lowest percentage among all income categories. On the other hand, six-figure earners took out the most debt, spending an average of $1,429 over the holidays.

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The Consumer Financial Protection Bureau (CFPB) has issued a warning to credit card issuers about deceptive practices in their rewards programs. Card companies may be violating federal law if they devalue rewards points, fail to deliver promised benefits, or hide conditions in the fine print of card agreements.

This warning follows a public hearing hosted by the CFPB and the U.S. Department of Transportation in May, which addressed challenges consumers are experiencing with airline and credit card rewards programs. Consumers have reported difficulties in redeeming rewards or having their valued reduced due to policy changes by program partners.

Three Danger Areas

The new circular highlights three potentially deceptive practices by issuers.

First, it’s currently legal for issuers to change the terms of the points their cardholders have earned. For example, the fine print on JP Morgan Chase’s popular Chase Sapphire Preferred Card states that they are only required to give the cardholder 30 days’ notice before reducing the value of points. The CFPB aims to make this practice illegal. In its circular, CFPB notes that altering the value of a customer’s accrued points after they are earned is unfair and essentially amounts to a bait-and-switch tactic.

Secondly, the CFPB warns against hiding the conditions for earning or keeping rewards.Fine print disclaimers or terms buried in contracts sometimes contradict promotional language used to advertise the rewards consumers can earn. Additionally, companies may unlawfully use fine print to cancel rewards that consumers have already earned.

Finally, companies managing rewards programs will be held accountable for ensuring that consumers can redeem the rewards they have earned, including coordinating with merchant partners and vendors. There have been reports of consumers attempting to make purchases through a travel partner system, like an airline, only to run into technical issues that result in lost points, leaving the user no recourse to recover them. 

“Points are really their own monetary system at this point, negotiated with partner vendors and issuer rewards programs,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “Consumers should be evaluating how points are converted into things like miles and cash back that are described in the terms and conditions upon signup. And as with any credit card, if the consumer is revolving debt, the rewards are not going to be very helpful for their financial situation.”

Pricey Violations

Deceptive practices involving rewards points have been a concern for over a decade. In 2012, American Express was ordered to refund $85 million after misleading consumers who expected a $300 bonus for signing up for its Blue Sky credit card program. More recently, in 2023, the CFPB fined Bank of America more than $100 million for withholding cash and points rewards from certain customers.

“Issuers should always be making sure that their marketing messaging and offers align with the actual offer,” said Danner. “Try to leave as little room for misinterpretation as possible.”

The post CFPB Takes Action Against Deceptive Rewards Points Practices appeared first on PaymentsJournal.

Financial institutions are exploring new ways to attract younger savers, and their payment habits are evolving in turn. Credit cards have now edged out debit cards as the preferred choice, even among younger generations. Additionally, digital wallets and peer-to-peer methods like Venmo and PayPal are gaining significant traction in this demographic.  

Velera’s Eye on Payments study, a comprehensive annual assessment of payment choices among credit union members and other financial institutions, examines how these trends shift over time. Now in its seventh year, the research delves into the factors shaping consumer choices across various payment methods, with a particular focus on how these preferences evolve at different life stages. 

In a recent PaymentsJournal podcast, Velera’s Tom Pierce, Chief Marketing & Communications Officer, and Norm Patrick, Vice President of Velera’s Advisors Plus, discussed the findings from this year’s survey with Brian Riley, Co-Head of Payments for Javelin Strategy & Research. They also explored how credit unions can leverage these insights to better serve their members.

Credit Over Debit

After five years of debit cards dominating payment preferences, Velera’s research reveals a notable shift toward credit. This year, 37% of respondents indicated a preference for using credit at the point of sale, surpassing debit at 35%. Relatedly, 40% of credit union members reported applying for a credit card within the past year.

Source: Velera’s Eye on Payments 2024 report

Among younger demographics, the trend is even more pronounced. Half of both older and younger millennials, as well as Gen Z respondents, stated that they had applied for a credit card in the last 12 months. Velera’s findings show a 40% preference for credit as the primary payment method within these younger age groups.

“That generational flip is really important in the credit union industry because of the aging membership,” said Riley. “Being able to react and have the right offerings in place for the younger generations is something that’s essential for credit unions.”

Other Payment Methods

Mobile wallet usage has seen a significant surge in recent years. The percentage of respondents using a mobile wallet at least a couple of times a month jumped from 27% in 2022 to 34% in 2023, and this year, that figure rose to 50%. Overall, about 60% of credit union members plan to implement mobile wallets within the next six months. Not surprisingly, the lion’s share of this activity is driven by younger consumers.

Source: Velera’s Eye on Payments 2024 report

This demographic also expresses strong concerns about fraud and identity theft, highlighting the importance of engaging with them to build trust and increase their comfort with the fraud prevention tools issuers offer.

Another payment method that has experienced a substantial increase is peer-to-peer (P2P) payments. Just 12% of respondents reported using P2P as a primary payment method in 2023, but that number more than doubled in 2024, rising to 25%.

“As we look at the younger generations, there are a lot more people who are using P2P as a primary method,” said Patrick. “It’s important that they be educated with the ins and outs of using those different solutions. When you have money sitting in your Venmo account, it is outside of the financial institution. It may not be insured, and it may not be a fraud check for losses.

“With the boomer generation, there isn’t a ton of interest in P2P,” he said. “In fact, 62% of those surveyed said they do not use P2P type of methods at all. But that means that there is some that do, and there could be some opportunity to encourage them to do more.”

Design for Living

Card design is also top-of-mind. In fact, more than half of credit union members said that card design influences what type of card they choose to use on a regular basis.

“That was up from 39% last year, and we were pretty amazed with the number last year,” said Pierce. “It seemingly has taken place overnight.”

These design preferences can include various factors, such as the material of the card, its overall design and whether it offers contactless payment capabilities. Is it made from sustainable materials? Is it sleek? Or perhaps an affinity card that showcases their favorite sports team?

Card design is an especially important consideration for younger consumers. Among Gen Z respondents, 82% indicated that the design of the card was a key factor in their decision-making.

“At the end of the day, it’s a billboard for the financial institution,” said Riley. “It’s important to have that card engineered properly with a good-looking design, and have all the features that you’d expect, such as chip and pin and the contactless tie-in.”

Taking a Holistic View

Given the growth in credit card usage, it’s an important time for credit unions to look at their card programs holistically. Credit unions are increasingly targeting younger generations, and more than half of this group said they applied for a credit card in the past 12 months.

“How easy is it at your credit union to apply for a new card?” asked Pierce. “You’ve got to look closely at that and make sure you have a quick and effective origination process. Offering a good reward structure and customizing that card so it appeals to a wide range of age groups is also essential. And certainly, tying back to the younger group is an urgent need across the board.”

For more of these insights and to see the full results of the study, DOWNLOAD THE WHITE PAPER at Velera.com.

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Despite an improving economy, credit card delinquency rates have remained persistently high over the past couple of years. Following the pandemic, delinquency rates initially dropped as the economy recovered, reaching a low of around 1.5% in 2021. However, this figure has since climbed to 3.2%—the highest level since 2012.

Even more worrisome is the disparity between larger and smaller banks. According to the New York Fed, the credit card delinquency rate among the 100 largest banks was 3.11% in Q3 2024. In contrast, smaller banks reported a significantly higher rate of 7.48%. The Fed defines delinquent loans and leases as those past due by 30 days or more and still accruing interest, as well as those in nonaccrual status.

What explains the stark difference? One factor is the ability of larger banks to manage delinquent customers more effectively. The majority of credit cards are issued by these major banks; in fact, among the 7,000 companies that issue credit cards in the U.S., 95% of cards are issued by the top 10 credit card companies.

“The larger banks have a great deal of collection capacity in terms of their call centers and agents,” said Brian Riley, Co-Head of Payments at Javelin Strategy & Research. “They can move through the delinquency process very quickly and efficiently.”

Larger banks also have access to analytics that smaller banks may lack. These tools make their credit card origination process more reliable, helping to screen out higher-risk customers from the start.

Additionally, economies of scale play a crucial role. Larger banks can spread their risk across a much broader pool of borrowers. “At a smaller bank, it just takes a couple of bad loans for them to really hurt the overall numbers,” said Riley.

A Small Bounceback

If there’s a bright side for smaller banks, it’s that their delinquency rates have started to tick down. After peaking at 7.83% in Q2 2024 , there has been a modest decline in recent months. However, the current crest over the past year has put this number higher than it’s been since the Fed started collecting this data in 1991.

“It might seem like a David and Goliath fight,” Riley said. “But small banks need to have a credit card business of some sort so they can protect their market. Every bank should have a play on credit cards. Just like if you don’t have a debit card, you really don’t have a consumer bank.” 

The post Small Banks Still Struggling with Credit Card Delinquencies appeared first on PaymentsJournal.

In an increasingly digital world, the way we manage money is evolving rapidly, and mobile wallets are at the forefront of this transformation. From paying for a morning coffee with a tap of a smartphone to splitting dinner bills effortlessly through an app, mobile wallets have redefined convenience in financial transactions. But beyond the simplicity of use, what drives consumers to adopt these digital payment solutions?8

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Imagining a Cardless U.S. Payments Landscape, Part 1

Consumers’ Top 5 Reasons for Using Mobile Wallets, by Percentage

• 44% – It makes checking out quicker
• 41% – It is safe to use
• 32% – I have all my payment info in one place
• 29% – I don’t have to carry all my cards
• 28% – I like to try new technologies

Source: Javelin Strategy & Research, 2024

About Report

Exploring the possibility of a cardless future in U.S. payments begins with understanding what’s at stake. The focus isn’t on the underlying card network systems, which are expected to remain dominant for the foreseeable future due to their widespread adoption, security, and rewards structures. Instead, the question is whether the physical cards themselves—long a staple of point-of-sale transactions—will endure. The U.S. payments ecosystem is both fragmented and highly innovative, with numerous emerging players vying for even small slices of the market. While no single innovation has yet displaced cards, the cumulative impact of these alternatives may eventually signal a shift.

This report from Javelin Strategy & Research examines the evolving payments landscape, leveraging data on consumer behaviors and attitudes toward emerging payment methods. It also highlights how the fragmented nature of U.S. payments offers a measure of protection for traditional cards, which remain the dominant method of payment despite increasing competition.

The post Why Do Consumers Use Mobile Wallets? appeared first on PaymentsJournal.

American Airlines’ decision to make Citigroup its exclusive credit card partner might be seen as a setback for the partner it’s dropping, Barclays. However, despite Barclays’ ambitions to grow its U.S. presence, the departure from American makes sense for several reasons.

The partnership between American and Barclays traces back to the airline’s 2013 takeover of US Airways, which had been using Barclays to handle its credit card business. Since then, Barclays has consistently played a secondary role to Citi, which has been allied with American for decades. 

For instance, when American renewed both partnerships in 2016, Citi was given the ability to market its cards through online channels, direct mail, and airport lounges. By contrast, Barclays’ marketing options were limited: its cards could only be promoted through in-flight soliciting and were forbidden from being advertised within 100 feet of an American Airlines airport lounge.

Barclays has been expanding in other ways. In October, it took over the General Motors card business from Goldman Sachs. Barclays CEO C.S. Venkatakrishnan has made U.S. credit card expansion a priority, with a focus on co-branded partnerships.

In 2022, Barclays replaced Synchrony as The Gap’s credit card partner, launching a suite of co-branded cards for the retailer and its affilaited brands, Banana Republic, Athleta, and Old Navy. This marked Barclays’ first standalone private-label credit card offering in the U.S. Additionally, Barclays has co-branding deals with JetBlue, Breeze Airways, and XBox.

“A Modest Hit”

American will not begin transitioning its Barclays cardholders to Citi until 2026. While the loss of American may be a mild setback, it’s unlikely to significantly impact Barclays’ overall strategy.

“Barclays will have its hands full integrating the GM card acquisition from Goldman Sachs,” said Brian Riley, Co-Head of Payments at Javelin Strategy & Research. “The loss of the American Airlines co-brand, which Citi has been the primary lender on for more than 40 years, is a modest hit. But if Barclays executes well on GM, there will be a minimal transaction impact.”

Airline credit cards are a cash cow for the industry and its partners. For the 12 months ending September 30, American reported earning $5.6 billion from its co-branded credit cards and other partnerships, with expectations for these payments to grow by 10% annually.

Similarly, Delta CEO Ed Bastian reported that the company generated $6.8 billion in 2023 from its co-branded card partnership with American Express. He noted that spending on Delta cards now accounts for 1% of total U.S. GDP, which would peg it at more than $200 billion annually.

The post Barclays’ Credit Business Remains Strong, Despite Losing American Airlines appeared first on PaymentsJournal.

Buy now, pay later (BNPL) is a product that got its boom in the pandemic as consumers went online to make their purchases. The product has continued to skyrocket upwards in popularity and has been a widely successful payment method among consumers.

According to data from Javelin Strategy & Research, one quarter of consumers had used the payment method in 2023. Among those consumers, BNPL was most popular with Gen Z and millennials in line with digital payments like app-based wallet payments.

BNPL’s Allure

BNPL isn’t a credit card, but it certainly feels similar. The product offers installment-based financing over a range of typically one to six months generally with no fee. BNPL vendors such as Affirm and Klarna partner with merchants to offer the solution with processing rates around 5% for the typical pay-in-4 model. BNPL costs more to accept than traditional credit cards and certainly more than debit cards, but the vendors promise higher sales conversion rates and average order value increases. But how does this hold up in the market?

In a forthcoming article in the Journal of Marketing, researchers found that BNPL indeed does increase consumer spending. The authors used transaction data from a large retailer pre- and post-implementation of a BNPL service and analyzed the spending patterns of 75,000 consumers who adopted BNPL and 200,000 non-adopters. They found a 9% increase in purchase likelihood and a 10% increase in overall order sizes. Even more interesting—the researchers found that spending increases remained for nearly six months putting to bed falsehoods that BNPL is a ‘one and done’ product.

The researchers also conducted follow up studies that revealed the psychological dimensions of BNPL payments. They found that the ability to divide purchase costs into smaller installments gave consumers “a sense of control” while also making consumers have a perception that the costs were “trivial.” The results remind me of a similar hypothesis reached by researchers at MIT Sloan School of Management that found credit cards reduce the pain of payments and encourage people to spend more. There is something about the immediate gratification of a purchase and paying for it later that credit products tend to satisfy.

The post BNPL Is Boosting Consumer Spending and Fulfilling Vendor Promises appeared first on PaymentsJournal.

Ally Financial is reportedly looking to get out of the credit card business—again.

According to Bloomberg, Ally Financial, formerly known as GMAC, is looking for a buyer for the credit card division it acquired in 2021 from Fair Square Financial. Fair Square’s prime offering was the Ollo Card, “a sub-prime card by every measure,” according to Brian Riley, Co-Head of Payments at Javelin Strategy & Research. Ally has long targeted borrowers with mid-to-low credit scores.

During its Q3 2024 conference call, the bank’s CFO, Russell Hutchinson, said that Ally’s credit card portfolio was in good shape and performing as expected. However, the company noted that the shifting operating environment had created increased uncertainty in the short-term forecast, especially concerning credit costs and profit margins.

“Ally has been struggling with consumer credit as it tried to expand its business from auto financing,” said Riley. “In the recent Dodd-Frank Stress Tests, Ally projected loss rates under severely challenged economic situations of more than 40%. Meanwhile, the bulk of the industry fell between 16% to 20%.”

Third Time Is Not the Charm

Ally Financial is a storied U.S. company with a history dating back to its founding in 1919 as General Motors Acceptance Corporation. In 2006, General Motors sold a majority interest to private equity firm Cerberus. The company was rebranded as Ally Financial in 2010.

The anticipated sale would mark the third time in the past five years that Ally has exited the credit card business—this time, potentially for good.

The initial step was the launch of the Ally CashBack credit card in a partnership with TD Bank in 2016. However, three years later, faced with consistent losses, Ally stopped onboarding new customers. In 2020, the card was rebranded as the TD Bank Cash Credit Card.

That same year, Ally announced a deal to acquire subprime credit card lender CardWorks for $2.65 billion, but the agreement was mutually terminated after the onset of the pandemic.

Finally, in December 2021, Ally Financial spent $750 million to purchase Fair Square Financial, a digital-first credit card company. At the time, Fair Square had roughly 693,000 cardholders and $816 million in loan balances.

“We’ve been trying to figure this out for years and years,” Ally’s then-CFO, Jennifer LeClair said at the time. That statement remains true today.

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Given the proliferation of credit cards, it stands to reason that the best card for any individual user will depend on their habits and needs. One of the most significant factors is generational: a consumer’s age can influence not just the benefits they seek from a card but also their personal spending habits. 

With that in mind, Javelin Strategy & Research’s 2024 Mass-Market Credit Cards Scorecard highlights the best cards by age group in addition to the overall winners. “If you are a card issuer, you’re going to want to develop certain product lines for certain segments,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research and author of the scorecard. “Your whole card product portfolio doesn’t have to—and shouldn’t—target a mass-market audience.”

The scorecard evaluates general-purpose credit card products from 10 major issuers. It considered 53 credit card products, supported by consumer survey research findings, to spotlight both cards with and without an annual fee. The top selections balance rates, terms, and fees, with a rewards package designed to appeal to the general mass-market customer.

And the Winners Are…

Javelin’s top pick with an annual fee was the TD First Class Visa Signature Card, while the U.S. Bank Altitude Connect Visa Signature Card won best overall card with no annual fee. TD First Class Visa stood out with its ultra-low purchase APR rate, while the recently enhanced U.S. Bank Altitude Connect Visa offered a strong rewards package in high-value everyday spending categories such as dining, grocery, and travel.

“We were looking for a mass-market card that is going to be the best product for the general consumer,” said Danner. “The average consumer is going to look at things like the rates, terms and fees, as well as the rewards. But the TD First Class Visa had such a low rate, at just 18.4%, that it really stood out above the rest. That’s a very low rate for a rewards card.”

In second place among the annual fee cards was the City Strata Premier. It boasts a very strong introductory offer and a solid rewards package, which is typical of cards with an annual fee.

Among cards with no annual fee, the top selection was the U.S. Bank Altitude Connect Visa signature. It stood out for its strong rewards and the absence of  foreign transaction fees. U.S. Bank enhanced its Altitude products this year, most notably by removing the annual fee from the Altitude Connect card. “Taking the annual fee away and still having a card with such a strong reward feature set really made it shoot to the top,” said Danner.

The Bank of America Travel Rewards card finished second in the no-annual-fee category. The same card also ranked first for the best cards for Gen Z.

Inclusion Criteria

The scorecard includes general-purpose bank card with no annual fee and those with a yearly fee of up to $120. It did not include co-branded cards, such as the Apple Card, and private label cards, like the Amazon Store Card.

Data from Javelin’s 2023 North American PaymentsInsights consumer survey was used to develop the weighting for this analysis. Consumers were asked which factors were most important when deciding which credit card to apply for. Unsuprisingly, many prioritized rewards programs, with the annual fee also being a key consideration.

Javelin applied some of its own analysis to the rewards programs. Its research has shown that some of the most touted benefits may not be universally applicable.

“When you’re evaluating the rewards earning potential on some of these card products, things like grocery and dining are high value categories for consumers,” said Danner. “Cards that maximize these categories with rewards benefits are going to earn a lot more points and be a success with consumers. Whereas some of these cards add on things like a 2% gas benefit or something. Well, you know, for someone like me that works from home, a 2% rebate on gas isn’t going to help them much.”

A Focus on Generations

Finally, the scorecard is segmented by generational weighting, as age groups have different purchasing habits, and special offers and rewards hold different value for different buyers. For instance, Gen Z spends more on shopping and dining, while boomers spend more on fuel and hotel lodging. Card plans that reward specific categories will appeal to different demographic segments.

“There are generational shifts that we thought were relevant and important,” said Danner. “This is supported by our own primary data, which shows different preferences by age. Younger generations are going to be more rate conscious. The Gen Z customer is going to be looking for something with a lower purchase APR and better rates and terms.”

“Those customers would have a higher likelihood of carrying revolving debt, whereas some of your older customers are going to be a little bit more financially stable, less likely to be revolving, and are just focused on maximizing their rewards to the fullest extent,” he said.

There are expenditure differences too. The Bureau of Labor Statistics segments consumer spending patterns, and these factors strongly impact rewards preferences. Younger customers in college likely won’t travel much, so they may not benefit from the rewards features of some cards. However, a millennial or Gen X customer with a full-time job and career might want to travel once a year and could benefit from a card like the Chase Sapphire, which allows them to build up travel points.

“Make sure you have a card that is answering the basic needs of the category,” Danner said. “Take all this into account when you’re trying to develop a card product that’s aimed towards your mass-market general audience. But also take into consideration the targets for these card products based on demographic information. The more data that you have when you’re designing these things, the better.”

The post Credit Card Scorecard Highlights the Necessity of Targeting by Age appeared first on PaymentsJournal.

At the end of last year, service members in the U.S. military were financially better off than they were before the pandemic.

Despite inflationary pressure and high interest rates, service members managed to grow their savings and maintain higher balances in their checking accounts over the past five years, according to the first-ever Military Financial Wellbeing Index released by USAA Federal Savings Bank.

During this period, service members increased their savings account balances by 19% and their checking account balances by nearly a quarter. In contrast, the average checking and savings balances among civilians have decreased by 12% and 10%, respectively, over the past two years.

A Stark Contrast

There is a stark contrast between military members and the average consumer regarding credit card debt. U.S. consumer credit card debt hit a record-high of $1.17 trillion in Q3, a 8.1% increase from the previous quarter.

Over the past five years, the average daily credit card balance among U. S. military members has declined by nearly a quarter. Roughly half of service members paid their credit card bills in full and on time last year, compared to 40% the year before. Additionally, the number of military members carrying a revolving balance has declined.

The USAA report also examined the differences in financial stability among younger populations. Gen Z service members have grown their savings and checking account balances by double digits over the past five years, while millennials have experienced more modest increases. However, millennial service members had credit card balances that were roughly a quarter lower than pre-pandemic, while Gen Z had balances that were only 11% lower over the same time.

One potential reason for the generational differences could be housing costs. Millennials are older and are more likely to be homebuyers, while Gen Z service members who are just beginning their military careers are more likely to live on base.

Eclipsing Counterparts

While there may be generational variations, younger service members have fared much better than their civilian counterparts. Gen Z service members had a 21% higher average checking account balance and 8% higher savings account balance than the average Gen Z consumer. This trend was similar with millennial service members, who eclipsed their civilian counterparts by double digits when it came to the average checking and savings account balances.

There are multiple reasons why the military community has improved its financial wellbeing, including steady employment throughout the pandemic, as well as pay and benefit increases.

Within the military, there is also more financial education, something that isn’t always available to Gen Z consumers, and a growing emphasis on financial readiness. Younger service members, especially those that are officers, are generally earning more than their civilian peers who are at the same point in their careers.

“This Index goes beyond sentiment to put a real number behind the optimism and the challenges that our military members share with us on a daily basis,” says Michael Moran, President (Interim), USAA Federal Savings Bank. “While it’s great to see service members in a better place than they were pre-pandemic, we can’t ignore the reversal in trends. With inflation continuing to pressure military households, we encourage service members to be vigilant with their personal finances and preserve some of these hard-earned gains.”

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The average interest rate for retail credit cards has reached a record high of 30.45%—well above the average rate for general-purpose credit cards, which is about 21%.

The priciest cards now top out at a 36.99% interest rate, according to a survey from Bankrate. Among the cards in this range are those from Big Lots, Burlington, Good Sam, Michaels, and Petco. However, some retailers are still offering more reasonable rates, such as Costco at 20.49%, Bass Pro Shops at 21.12%, and IKEA at 21.99%.

Retail credit cards have traditionally been products with softer underwriting standards. It’s common to make a purchase at a department store and be encouraged to apply for a credit card, as if shopping at the retailer alone were enough to qualify.

A True Profit Center

To offset the risk of anticipated cardholder defaults, retailers charge higher interest rates. While issuers have to deal with higher delinquency rates, credit card programs also represent a major profit opportunity for retailers. For example, Macy’s has reported that nearly half of its operating profits are derived from its credit card business.

“Cardholders won’t pay an annual fee for a store card and the retailers that offer the cards want the highest possible approval rates,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “Maximizing approval rates means taking customers that a bank might decline for a Visa or Mastercard. As you reach down the FICO score band to than next tier of customers, higher charge-offs come along with that territory.

“This is also why you always see a store card offered with a promotion—open a Home Depot card and take 10% off your first purchase, or they’ll offer no interest for the first 12 months,” he said. “The added benefits are there to attract creditworthy customers to apply. If the only people who apply are the ones that need credit, either because their other cards are maxed out or because nobody else will approve them, the card portfolio ‘deselects’ and losses soar.”

Tracking the Spread

The rates on retail credit cards tend to follow the trends of general purpose credit card rates. While the spread is now about ten percentage points, that difference can vary based on factors such as the minimum FICO score required for approval, the average purchase size, and the percentage of cardholders who carry a revolving balance.  

Apgar estimates that around half of all store cardholders carry a balance from month to month, compared to 40% of general-purpose cardholders.

Other interest rates are also inching higher as well. This week, the average rate on a 30-year mortgage in the U.S. rose to 6.84%, its highest level since July.

The post Why Store Credit Card Rates Are Staying So Stubbornly High appeared first on PaymentsJournal.

Co-branded credit cards have become a powerful tool in the financial and retail industries, offering a blend of targeted rewards, brand loyalty incentives, and exclusive perks that appeal to a broad range of consumers. These cards, created through partnerships between financial institutions and retail, travel, or lifestyle brands, attract applicants by aligning their benefits with specific consumer interests. What attracts applicants to co-branded cards?

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Co-Branded Credit Cards 2024:Top Issuer Market Review

Top 4 Most Important Factors for Co-Branded Card Applicants

• 73% – An attractive points/rewards program
• 72% – No annual fee
• 66% – The card had strong fraud protection features
• 60% – Low APR (interest rate)

Source: Javelin Strategy & Research, North American PaymentsInsights, 2023

About Report

Co-branded credit cards represent a significant and growing share of the U.S. consumer credit market, highlighting their importance to both consumers and businesses. These cards are key tools for fostering stronger connections between customers and partner merchants, offering tailored benefits and rewards that drive engagement. Research into the portfolios of 12 major issuers reveals that co-branded cards account for an impressive 62% of consumer credit card offerings, underscoring their strategic appeal to both issuers and merchants, while enticing consumers with attractive reward structures.

This Javelin Strategy & Research report provides an in-depth exploration of this dynamic market segment. It delves into the mutual advantages for issuers and merchants, analyzes market positioning strategies, identifies the consumer demographics most drawn to these programs, and examines the regulatory considerations shaping their development.

The post What Attracts Co-Branded Credit Card Applicants? appeared first on PaymentsJournal.

Visa is betting that the world needs a single card that covers debit, credit, buy now, pay later services, and potentially cross-border payments, and it’s bringing this concept—already thriving in Asia—to the U.S.

The new Flexible Credential card isn’t issued by a bank but through a partnership with BNPL giant Affirm. Cardholders have the flexibility to pay immediately or use the Affirm app to pay over time. By customizing their preferences, users can set specific rules—for example, using a debit card for purchases below a certain amount, or using credit for purchases at certain stores. They can also toggle between payment methods, choosing from debit, credit, BNPL, or redeeming rewards.

Launched in Asia earlier this year, the card is gaining traction. According to Visa, cardholders tend to use debit for everyday items, with about 70% switching to credit for big-ticket purchases. Visa plans to expand to Europe in the coming months.

“The card is reminiscent of the cartão múltiplo [multi card] in Brazil, which allows customers to choose between a debit or a credit transaction at the point of sale,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “Further enabling consumers with a choice to pay immediately or pay using a pay-over-time function gives consumers more flexibility at the point of sale, a strong value proposition for Affirm.”

Cross-Border Options

Visa also rolled out a version in the United Arab Emirateswith digital bank Liv, enabling cross-border payments. The process works by automatically routing transactions in the appropriate transaction currency, whether the purchase is made online or in-store.

Through the mobile app, cardholders can transfer funds between local and foreign currency accounts, ensuring they have the funds to make a purchase. Liv cards support five major currencies, including the U.S. dollar, euro, British pound, Canadian dollar, and Australian dollar.

Visa says that UAE’s cross-border outbound volumes are among the fastest-growing categories in its major cross-border markets. At this time, there are no plans to introduce these capabilities for U.S. users, a Visa spokesperson told PaymentsJournal.

The post Visa’s All-in-One Card Comes to the U.S. appeared first on PaymentsJournal.

Over two-thirds of U.S. retirees had outstanding credit card debt this year, marking a substantial increase from previous years, according to data from the Employee Benefit Research Institute (EBRI).

This increased dependence on credit cards is an alarming trend given the fixed budgets many seniors live on. According to the survey, roughly 83% of retirees were collecting Social Security, which, on average, accounted for about half of their income.

After pandemic-fueled inflation, costs have not cooled significantly this year. Many retirees are still struggling with higher rent payments and the rising cost of everyday essentials. While Social Security payments have included cost-of-living increases, in many cases these adjustments haven’t been enough to keep up rising expenses.

To bridge the gap between their Social Security income and living costs, retirees have increasingly relied on credit cards. Just a few years ago, only 40% of retirees carried credit card debt, according to EBRI.

Covering Budget Shortfalls

The increased reliance on credit cards to cover budget shortfalls isn’t limited to retirees. Separate research from the Federal Reserve found that consumer credit card debt skyrocketed above $1 trillion, with delinquencies also on the rise.

As consumers age, many carry this debt into retirement. According to CNBC, U.S. retirees that are just reaching retirement are more likely to have debt—and at higher levels—compared to past generations.

A Pressing Concern

In addition to inflation, consumers of all ages are facing high interest rates. As rates have risen, so have credit card annual percentage rates, making credit cards an expensive way to borrow.

The combination of inflation and high interest rates has put immense pressure on consumers and could have repercussions for financial institutions. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, major financial institutions are required to undergo stress tests to assess how they would respond in the event of an economic catastrophe like the financial crisis.

This year’s stress tests revealed that consumer credit card losses would amount to $175 billion, the highest among all lending segments. Since there is still uncertainty about the trajectory of the U.S. economy, this continued reliance on credit cards among consumers should be a pressing concern for banks.

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Small credit card issuers are facing a significant challenge in today’s economic environment as charge-off rates rise across the industry. Unlike larger, well-capitalized institutions, smaller issuers often have less flexibility in managing credit risk, which can make even a slight uptick in charge-offs more impactful to their bottom lines. As charge-offs continue to climb, understanding these dynamics is crucial for smaller players aiming to stay competitive in a turbulent market.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Issuance by Small Issuers: Strategies, Risks, and Options

Credit Card Charge-offs as a Percentage of Receivables for Small Issuers

• Q4 2020 – 5.68%
• Q4 2021 – 4.51%
• Q4 2022 – 6.95%
• Q4 2023 – 9.5%

Source: Federal Reserve Bank, Javelin Strategy & Research estimates, 2024

About Report

In today’s financial landscape, payment cards have become essential for banks, credit unions, and financial institutions of all sizes to remain competitive. With nearly 600 million credit cards circulating in the U.S. and over 230 million adults using them, credit cards are a primary method of household lending. However, smaller banks and credit unions face substantial competition from major institutions that dominate the credit market. To bridge this gap, some smaller financial entities are turning to agent bank partnerships, which allow them to offer credit programs without bearing the full operational load.

This report by Javelin Strategy & Research provides an in-depth analysis of the credit card market, segmented by institution size, assets, and deposit levels. It also highlights the performance disparities among institutions and examines the agent bank model as a strategic option to support credit offerings for smaller banks and credit unions.

The post How Many Charge-Offs Are There for Small Credit Card Issuers? appeared first on PaymentsJournal.

The Federal Trade Commission is sending more than $2.5 million to consumers who were manipulated by false credit card offers on Credit Karma’s platform.

The payments are the fruition of an action the FTC brought against the fintech two years ago, after it discovered “dark digital patterns.” The agency alleged that Credit Karma presented users with card offers that they were “pre-approved” for, or had “90% odds” of acquiring, when in reality they did not qualify.

“The credit card industry is tightly regulated, and consumers are generally protected against unfair, deceptive marketing practices,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “This reiterates to industry participants that deceptive advertising campaigns will not be tolerated in the credit space.”

Accumulating Data

Credit Karma might be best known for its credit score and credit reporting tools, but to access those services consumers must provide their personal data. The FTC reported that Credit Karma accumulated more than 2,500 data points on its users, including credit and income information. The company then leveraged that data to send personalized ads and credit card offers.

Once a customer clicked on a “pre-approved” credit offer, the platform initiated a hard pull of the user’s credit report, which had the potential to damage the customer’s credit score if the card was denied.

According to the FTC, Credit Karma was aware that its pre-approved card offers created false hope for consumers. In training materials for its customer service personnel, Credit Karma expressly mentioned that denial of a pre-approved offer was a common customer complaint.

Almost a third of Credit Karma’s “pre-approved” customers were denied after making applications. Though the fintech mentioned that denial was possible, that information was often buried in legal disclaimers.

Coming to a Head

Regulators have become increasingly concerned about the role fintechs play in the banking-as-a-service model. Though most financial technology companies are heavily involved with consumer financial data, they aren’t subject to the same regulations that financial institutions must follow.

Those issues came to a head after the Synapse failure, by which the fintech’s lax accounting practices cost its customers millions. There was widespread speculation that the severity of that collapse could lead to a reset of the BaaS model, and the FDIC has recently rolled out new rules designed to hold fintechs accountable to the same rules as banks.

The post FTC to Return Millions to Consumers Over Credit Karma Misrepresentations appeared first on PaymentsJournal.

Credit card users are showing less and less loyalty to their current brands, even as the trend of carrying just one card increases.

It’s not even about satisfaction with consumers’ current cards. The new State of Credit Report from Marqeta found that 72%of global users who are satisfied with their credit cards still plan to apply for a new card. The percentage of consumers considering a new card who are unsatisfied with their current card is just a little bit higher, 77%.

Even 70% of those consumers with no plans to shop around for a new issuer say they could be swayed to apply for a new card by the right reward or feature. This is even truer for U.S. consumers ages 18 to 43, with 80% saying they would do so.

As more cards offer these attractive special features, they are compensating by raising interest rates. Data from Bankrate released last month found that the average APR for retail credit cards has hit a record high of 30.45%. As Marqeta’s survey found, this is a big reason consumers are restless with their existing cards.

Settling on One Card

More than half of all global consumers still have more than one credit card, but there is a definite top-of-wallet effect going on. The vast majority of the respondents said they use one card more than the others. Nearly half said they use their favorite card for more than half of their purchases.

Now that most people have a favorite card, many consumers are building on that idea and carrying just that one card. Between 2022 and 2024, the number of U.S. credit card holders with more than one card dropped from 73% to 63%. Younger people especially have grown up with the idea that they need only one card. In the United States and the United Kingdom, nearly half of all people 18 to 43 report that they have only one credit card.

These trends suggest that there are many abandoned credit cards out there. A third of global consumers say they stopped using a particular card in the past 12 months.

When consumers were asked why they had set aside cards they had once used regularly, the most common response was that the interest rate was too high. Other popular responses were that a new card that better fit their needs or that they needed a higher credit limit.

The post What Makes Credit Card Users So Fickle? appeared first on PaymentsJournal.

The Consumer Financial Protection Bureau’s $89 million fine of Goldman Sachs and Apple for mismanagement of the Apple Card was a development many industry insiders could have seen coming. As Goldman continues its retreat from consumer lending, the CFPB now says, in addition to the massive fine, the investment bank is banned from offering new credit cards “unless it can demonstrate that it can actually follow the law.”

The core of the CFPB’s complaint is Goldman’s handling of consumer disputes. “Apple and Goldman launched Apple Card despite third-party warnings to Goldman that the Apple Card disputes system was not ready due to technological issues,” the CFPB said in its announcement of the fine. “These failures meant that consumers faced long waits to get money back for disputed charges, and some had incorrect negative information added to their credit reports.”

The CFPB also said that Apple and Goldman Sachs misled consumers about interest-free payment plans for purchases of Apple devices. Many customers expected their payments to be interest-free if they bought Apple devices with their Apple Card, but that proved not to be the case.

Poisoned Apple

The partnership between Goldman and Apple, first struck in 2018, has been poisoned for some time. In late 2023, Apple sent a term sheet to Goldman indicating a first step toward severing the contract. 

The fines being incurred throughout this messy exit highlight the extent to which Goldman appears to have been unprepared to enter this business. Goldman’s loss rate on its credit card loans was the worst among big U.S. card issuers and “well above subprime lenders” at 2.93%, according to a 2022 note issued by JPMorgan.

Goldman apparently overlooked the fact that although many people may want to own an Apple device, not all of them qualify for a credit card. At one point, more than a quarter of Goldman’s card loans went to customers with FICO scores below 660, according to company filings. The profile of Goldman’s card customers resembles that of issuers known for subprime offerings.

Goldman also recently exited its partnership with General Motors, with Barclays taking over that business. The Wall Street Journal has reported that Goldman Sachs could face even bigger losses from the Apple partnership than the losses from the GM sale to Barclays. Apple Card credit balances currently total $17 billion. 

The post Why Goldman’s Exit from the Apple Card Got $89 Million Messier appeared first on PaymentsJournal.

In 2021, the Government of Canada passed the Retail Payments Activities Act, which required the Bank of Canada, the nation’s central bank, to begin overseeing payment service providers (PSPs). Under the legislation, Canadian PSPs—along with any entities involved in the electronic transfer or storage of funds—must register between November 1 and 15.

In preparation of these new regulations, Ron Morrow, Executive Director of Payments, Supervision and Oversight at the Bank of Canada, spoke with Brian Riley, Co-Head of Payments at Javelin Strategy & Research in a recent PaymentsJournal podcast. They discussed how and why PSPs should ensure they are ready to comply with the upcoming requirements.

Embracing the Regime

After the legislation was passed, the Bank of Canada worked with the Department of Finance to develop regulations for supervising PSPs. The focus is primarily on two key requirements for PSPs. First, they need to establish an operational risk framework to effectively manage business continuity, cyber threats, and other related operational risks. Second, if they hold funds on behalf of end users, they must ensure those funds are adequately safeguarded. In the event that a PSP holding client funds goes out of business, those funds would be considered bankruptcy-remote and could be returned to the end users.

“Many of the PSPs we’ve talked to actually embraced the regime,” Morrow said. “PSPs are largely unregulated in Canada, but coming into the regulatory fold will help their interactions with other regulated financial sector entities like banks and credit unions.”

Once payment service providers come under the supervision of the Bank of Canada, they will be eligible to become members of Payments Canada after the government passes some necessary legal amendments. This will enable PSPs who meet eligibility requirements to directly connect to Canada’s national payments infrastructure. As a result, eligible PSPs will be able to participate directly in Canada’s real-time payment system, which is currently being developed by Payments Canada and other payment infrastructure providers.

“The PSP, one way or another, is going to be dealing with regulated entities,” said Riley. “If they are not compliant with this, they’re going to have some downstream issues. If they are compliant, it sets the stage for being able to move into other markets and going deeper within Canada.”

Worldwide Standards

When it was building out the regime, the Bank of Canada examined the approaches taken by other jurisdictions regarding payment regulation.

“Wherever possible, we align our standards with what is already out there in the world,” said Morrow. “If there was a standard that was becoming common practice or best practice, and it made sense for Canada, we incorporated it into our own rules.”

This should help PSPs in two key ways. First, domestic PSPs will be well positioned to conduct business in other jurisdictions due to the consistency of the rules with those implemented elsewhere. Second, it will alleviate the burden on PSPs that already operate in multiple jurisdictions, as the requirements from the Bank of Canada will align broadly with regulations in other parts of the world.

Inside the Process

Every year, PSPs will be required to submit a standardized template of information to the Bank of Canada, including details about the volume and value of payments. They will also need to report any significant risk events that occurred throughout the year. Additionally, each year, the Bank of Canada will select a group of PSPs for a deep dive into their operational risk frameworks.  

“We’ll be digging into the details about how they’re complying with the act, with a view toward whether or not there any gaps with the approach the PSPs are taking,” Morrow said. “If there are no gaps, great. If there are gaps, then we’ll have a conversation with the PSP around whether or not they agree. If there’s disagreement on the gaps or the PSP doesn’t feel they need to take action, we might move the issue to our enforcement division, but our enforcement is really based around ensuring compliance. We want people to comply with the act. We don’t want to be punitive or punish people.”

The Bank of Canada has identified over 3,000 entities that are expected to fall under the scope of the Act. Once the registration window closes, they will follow up with those they believe are PSPs but did not register, informing them that failure to register will result in enforcement actions. 

For More Information

The Bank of Canda’s website outlines the scope of the regime and the organizations to which it applies. If a PSP is performing one of five payment functions outlined on the site, they are potentially subject to being overseen by the regime.

The website offers guidance on both the safeguarding of end user funds and what PSPs need to take into account as they’re developing their operational risk framework.

“We have a number of scenarios on our website that highlight particular use cases or business models to help them help people get their heads around whether or not the regime applies to them,’” Morrow said. “If you’re in the business of moving people’s money electronically or holding their money electronically, and you’re not already prudentially regulated like a bank, it’s very likely that you’re subject to this regime.”

The post Bank of Canada Takes Oversight of Payment Service Providers appeared first on PaymentsJournal.

Barclays’ takeover of the General Motors line of credit cards is another coup for the American subsidiary of the UK-based bank. Barclays is assuming the card business from Goldman Sachs.

Earlier this year, Barclays CEO C.S. Venkatakrishnan made U.S. credit card expansion a priority, with a focus on co-branded partnerships. Starting next summer, Barclays will become the exclusive card issuer of the GM Rewards Mastercard and the GM Business Mastercard.

This partnership will expand Barclays’ credit card footprint in the U.S., which already includes other prominent brands such as American Airlines and Gap. Gap cards were particularly significant, as they marked the first time Barclays offered consumers a standalone private-label credit card that does not operate on an open-loop network like Visa or Mastercard.

Goldman had been managing the GM credit card program since 2022, allowing customers to earn points toward purchasing or leasing GM cars. Barclays had bid on the GM credit card program in 2020, but lost out to Goldman, which reportedly paid $2.5 billion to acquire the business from Capital One.

“The significance is that Barclays is buying the receivable from Goldman Sachs, which is unraveling their card business,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “Meanwhile, Barclays is holding strong in the space.”

Headaches for Goldman

Goldman has reportedly been looking to offload its Apple Card business as well, with JP Morgan as the leading bidder. The partnership was established back in 2019, but “the Apple Card will be next to go,” said Riley.

According to Morningstar, Goldman’s Platform Solutions unit, which operated the GM credit card program, among other services, lost roughly $6 billion on a pretax basis from the beginning of 2020 through Q1 2024. In early 2023, Goldman scrapped plans for a direct-to-consumer card branded with its own name.

Last October, Goldman appeared to be exiting consumer lending for good. The bank sold off most of its personal loan portfolio and unloaded a BNPL lending business at a loss, just a year after acquiring it. Goldman also announced a buyer for its personal finance unit catering to the mass affluent, along with the sale of specialty lender GreenSky to Sixth Street Partners and a consortium of other firms.

The post Barclays Moves Into the GM Card Business, Pushing Goldman Aside appeared first on PaymentsJournal.

One idea floated in the current presidential race is temporarily imposing price controls on credit card rates, limiting them to 10%. While this may seem appealing to consumers living in a world where the average credit card interest rate is 22.76%, such price controls could have a potentially adverse—and possibly catastrophic—impact on the U.S. credit card market. This move would likely disrupt capital markets as well, with investors losing confidence in the revenue stability of lending contracts.

In a recent Impact Note, Brian Riley, Director of Credit at Javelin Strategy & Research, examined how such a move would affect the credit card industry. His conclusion: Market-driven, risk-based lending benefits both card issuers and cardholders.

Slashing Revenue Sources

Credit card issuers derive their income from two channels: interest and non-interest. Interest income is revenue earned by lending money, while non-interest income is generated through fees and interchange. The interest side of the equation currently represents about three-quarters of credit card revenue. What would happen if that revenue were slashed to the bone?

With rates capped at 10%, interest revenue would plummet. A conservative lender might seek out accounts classified as exceptional, which represents about 21.2% of the U.S. consumer base. As a result, most households could not rely on credit as a budgeting tool or as emergency relief after unexpected financial events.

Without some form of relief, such as a federally driven subsidy to lenders for under-market rates, issuers’ interest income would immediately erode. The provision for loan losses would increase, and collections would become less effective as credit lines are closed. There would be an immediate impact on the return on assets in both cases, shifting from an optimistic estimate for 2024 of 2.30% to a negative position of more than 600 basis points.

Currently, low-risk customers receive rates below 20%, which is equivalent to the prime rate plus a margin of 11.24% for purchases. Riskier customers who qualify for a credit card pay closer to 30%, with rates around prime plus 21.24%. The cardholder’s credit profile drives the determination of a risk-based price.

“Risk-based pricing says, ‘This guy’s an old baby boomer, and he’s got a house and a job and an established life,’” Riley said. “’I’m going to price him differently than the new kid on the block that has no credit, right?’ That’s how the model works. When you start playing with that dial that says I used to lend between 19% and 29%, but now I have to do it for 10%—it’s illogical.

“If you take all my profit out of that line, I can’t run a business,” he said. “If I need 8% to cover my operational costs, that 10% maximum interest level doesn’t even cover my risks. The only thing I’ll end up doing is lending to the top 20% of the cardholders. That’s it.”

Building a Customer Portfolio

Card issuers want a broad spectrum of incomes among their cardholders. Wealthier, more-established customers are the most reliable and creditworthy, but they are also the group most likely to pay off their balances every month, depriving issuers of that income revenue. Younger, less creditworthy customers are more likely to carry a balance on their cards.

“You want people to ebb and flow,” Riley said. “They run their bills up at Christmas. When they get their tax refund, they pay it down. They run it up on vacation, and then they get back and the kids are in school, so they pay it down a little more. Before the Great Recession they used to call it perma-debt, because people get into this whole cycle.”

Limiting rates to 10% would likely cut that family completely from the credit card business. They may not be stable and reliable enough to merit a 10% rate, even though they make an effort to pay off their balances when they can.

Collateral Damage

If such a mandate were to proceed, the change would likely require an act of Congress rather than a presidential order. But that’s not the only roadblock for this proposal.

Capping credit card interest rates would also trigger a wave of ramifications for other areas of the economy. If credit card contracts could be nullified, the expectation would be that auto loan contracts, personal loans, and mortgages could also be vulnerable. Simple transactions like renting a car, which usually requires presentation of a credit card, could be seriously curtailed. Restaurant businesses would suffer as people would no longer be able to pay for their meals with credit.

Riley suggests that the political promise wouldn’t survive the fact-checking process.

“Prudent regulators stick to things like checking liquidity and checking performance,” Riley said. “But once politicians start telling lenders that they have to lend into money-losing propositions, it doesn’t make any sense.”

The post The Folly of Capping Credit Card Interest Rates appeared first on PaymentsJournal.

Retail credit cards are a common way for retailers to attract and retain customers, but the skyrocketing APRs on many of these retail cards can quickly negate their incentives.

Data from Bankrate found that the average APR for retail credit cards has hit a record-high 30.45%, far above the average consumer credit card rate of 21%. The report was based on a survey of 108 store cards from leading retailers.

“The typical retail credit card has always been a product with easier underwriting standards, however, the tradeoff is higher rates on the consumer side and higher delinquency rates on the issuer side,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “With rates on private label retail cards reaching above 30%, consumers that revolve are really going to feel the pain.”

Paying in the Long Run

Although many retailers offer incentives like a 20% discount on the initial purchase, if the customer carries a balance and only makes minimum payments, they end up paying far more in the long run. This is especially true at retailers like Big Lots, Michaels, and Petco, where retail cards carry APRs of 35.99%, the highest among the retailers surveyed.

Another common offer is 0% interest for a set number of months. However, if a consumer doesn’t pay off their balance by the end of the promotional period, they may be charged interest retroactively for every month within that timeframe.

Other Options

For disciplined customers, retail credit cards can be a powerful tool to cut costs. However, the risks tied to high interest rates have driven many consumers toward other options like buy now, pay later loans or debit cards. Still, there is the possibility that the current surge in credit card APRs may be a short-lived phenomenon.

“According to data from Javelin Card Bench, retail cards have some of the highest rates among co-branded credit cards as well,” Danner said. “Those APRs are tied to the prime rate, which continues to remain elevated at 8.5%. We are expecting rate cuts to begin soon, and interest rates will begin to decrease accordingly.”

The post Retail Credit Cards Offer Introductory Perks and Soaring APRs appeared first on PaymentsJournal.

Inflation, high interest rates, and rising unemployment have put considerable pressure on consumers, which has created challenges for Ally Financial.

At a New York financial conference, the bank’s Chief Financial Officer Russell Hutchinson told investors that the economic picture has forced consumers to hold off on taking out loans. Borrowers are also more likely to default, especially on car loans—delinquencies and net charge-offs rose over the past two months in Ally’s auto-loan business.

Hutchinson said Ally will continue to underperform based on the number of borrowers that are now delinquent beyond 60 days. The company expects that number to expand given the state of the U.S. economy.

Shoring Up Lending

Despite its auto-loan issues, Hutchinson said Ally’s credit card portfolio was in good shape and performing as expected, but that was only after the bank noticed elevated net charge-off rates last year and made moves to shore up its credit card lending.

Earlier this year, the company sold its point-of-sale financing portfolio to Synchrony, which includes installment loans similar to buy now, pay later. That deal included loan receivables worth $2.2 billion.

Stress Tests

Ally’s struggles were presaged by this year’s Dodd-Frank Stress Tests, also called DFAST assessments. Every year, the largest banks undergo evaluations to determine how they would respond to a significant economic event, like the pandemic, the 2008 Financial Crisis, or skyrocketing unemployment.

Ally Bank passed this year’s evaluation, but the company’s consumer-centric lending portfolio put it in jeopardy—the bank was the lowest performer in the assessment. In the event of a severe economic downturn, Ally could lose over 40% of its portfolio. Unfortunately, declining economic conditions have made the DFAST scenarios less hypothetical.

“All the economic indicators point to a tough year next year,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, in a previous conversation with PaymentsJournal. “Inflation is still high, and even though interest rates are likely to decrease somewhat, they won’t drop back to where they were a few years ago. Salaries haven’t gone up as quickly as prices have, and all those factors are weighing on consumers. The takeaway is all the banks passed the stress tests this year, but next year it could get ugly.”

The post Tough Economic Environment Is Causing Credit Challenges at Ally Financial appeared first on PaymentsJournal.

Full Disclosure: I love my iPhone. It is a paid-in-full iPhone XS Max that is six years old and works like a champ. Sooner or later, Apple will stop updating the device, but until then, my investment is on the right side of the power curve. I also have an Apple credit card. It has never had more than $80 posted in a month. I used the physical card only once and never paid any interest. 

The Sour Apple Card

When it re-vamped its credit card co-brand, initially with Barclaycard, and then moved to Goldman Sachs, it promised it was a “new kind of credit card created by Apple and designed to help customers lead a healthier financial life.” 

However, for Apple’s partner, Goldman Sachs, the credit card was a new kind of business line, but it became a less-than-healthy financial investment for Goldman. The WSJ covers the latest turmoil, as Goldman Sachs offloads their failed GM credit card and wonders what to do with its $17 billion Apple card receivable.

The title sets the stage, as the WSJ frames the story: “Goldman’s Credit-Card Exit Hampered by Lax Lending Standards” subtitled “The bank lent loosely on some credit cards, contributing to a big loss as it tries to sell the General Motors card business.”

First, Get the GM Mess Out of the Way

Ouch. More than 2x the current chargeoff trend, says the WSJ. Things did not look this way when Capital One owned the GM co-brand.

• Average charge-offs on the Goldman-originated accounts, which make up roughly one-third of the GM portfolio, surpass 10%, the people said. 
• In contrast, the annualized credit-card charge-off rate for commercial banks in the U.S. was about 4.5% in the second quarter of the year, according to Federal Reserve data. 
• The partnership has roughly $2 billion in balances.

The Apple Portfolio is Nine Times Larger Than the GM Portfolio

• The far more challenging deal to offload will be the Apple partnership, where credit-card balances total around $17 billion. Apple sent Goldman a proposal late last year to exit from the contract within 12 to 15 months, the Journal reported, which called for an end to the credit-card partnership the companies launched in 2019 and the savings account they rolled out in 2023. 
• Goldman could be facing a bigger loss when it sells this credit-card program to a new issuer than what it is now expecting to incur with the GM sale.

Where This is Going

Call me old-school, but credit quality matters. It has to be earned through the blood, sweat, and tears of rigorous standards and discipline. Goldman Sachs has a mess on its hands, and we think the worst is yet to come.

But for me, I’ll take my 6-year old, paid in full iPhone anytime. And, I will keep my 800 FICO Score, too.

As to breakups in co-brands, read our latest here: Disbanded Co-Brands: When Credit Card Joint Ventures Fail | Javelin (javelinstrategy.com)

The post Everyone Can Use an iPhone, But an Apple Card Isn’t for Everyone appeared first on PaymentsJournal.

Credit reporting agencies play a critical role in determining consumers’ financial health, but they are not without controversy. Consumers often encounter issues related to inaccuracies, delayed updates, and miscommunications in their credit reports, leading to significant frustration. These problems can result in denied loans, increased interest rates, or other financial challenges, making the stakes particularly high. How many complaints do the credit reporting agencies receive?

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Scoring: A Cornerstone to Credit Extension and Management

Complaint Volume for Credit Reporting Agencies over Last 5 Years

• 2023 – 1,309,800
• 2022 – 978,900
• 2021 – 710,300
• 2020 – 319,300
• 2019 – 154,500

Source: CFPB, “Consumer Response Annual Report,” 2019-2024

About Report

Credit scoring methods that have been in use for years are widely recognized for their accuracy and reliability in evaluating consumer creditworthiness. FICO Score 8, the most widely used credit score in the U.S., is a key tool for lenders due to its effectiveness in predicting consumer behavior and credit performance. While traditional models remain essential, advancements are ongoing, and the integration of alternative data is helping lenders reach consumers with limited or no credit history.

This report from Javelin Strategy & Research explores the landscape of credit scoring, analyzing the evolution of traditional models, the rise of alternative scoring techniques, innovative products in the field, and how lenders can utilize these tools to better meet customer needs.

The post How Many Complaints do the Credit Reporting Agencies Receive? appeared first on PaymentsJournal.

The Department of Transportation’s investigation into the rewards programs of the four largest U.S. airlines may turn out to be more of a fishing expedition than anything else. The probe is intended to ensure consumers are not subjected to unfair or deceptive practices, but there’s little evidence suggesting they are.

A hearing earlier this year on airline points aimed to examine whether consumers are being treated fairly by airlines offerings rewards. However, much of the discussion shifted towards whether smaller airlines can compete in the current points-driven environment.

In the end, the hearing emphasized that airline rewards are not just ubiquitous but also very popular. That’s all the more reason for DOT’s probe to tread lightly, according to Ben Danner, Senior Analyst, Credit and Commercial, at Javelin Strategy & Research.

“Points systems are a critical part of credit cards rewards programs and are a major selling point for card issuers,” Danner said. “The card rewards economy has spawned an entire culture of rewards point maximizers that play between the rewards programs to maximize value and those that view it as a part of their overall financial savings. Any legislation arising from this investigation into points reward programs will affect millions of cardholders.”

During the earlier DOT hearing in May, Scott D’Angelo, Chief Marketing Officer at Allegiant Airlines cited a passenger survey showing that 95% of respondents were interested in participating in a frequent flier program. Additionally, a separate December 2023 survey from Airlines for America found that 81% of respondents considered earning bonus reward points for travel through their credit or charge card to be very important.

The Focus of the Probe

In the new investigation, Transportation Secretary Pete Buttigieg has asked American, Delta, United, and Southwest to submit records about their rewards programs and policies. The inquiry seeks information on the devaluation of rewards, hidden and dynamic pricing, and extra fees. Airline rewards generally charge higher processing fees than other credit cards. DOT is also examining whether airline mergers have reduced competition and limited consumer choice.

“Points systems like frequent flyer miles and credit card rewards have become such a meaningful part of our economy that many Americans view their rewards points balances as part of their savings,” Buttigieg said in a statement. “These programs bring real value to consumers, with families often counting on airline rewards to fund a vacation or to pay for a trip to visit loved ones. But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value.”

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Every year, the top U.S. banks undergo thorough stress tests of their lending portfolios to identify potential risks under stressful economic conditions. These DFAST evaluations are required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed to mitigate financial crises like the Great Recession.

The stress tests measure how each financial institution would respond to a hypothetical set of economic events. Although all the banks passed this year’s evaluation, the results highlighted that rising credit debt is becoming an alarming risk for banks, especially given that economic conditions are expected to worsen before they improve.

In his report, DFAST in Credit Cards: No Stress Now; Next Year Maybe, Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, analyzed the results of the DFAST assessments and detailed the actions banks can take to prepare for the challenges to come.

The Risk Item

Under the adverse conditions of the DFAST tests, banks would face total credit losses of roughly $684 billion. Consumer credit card losses would amount to $175 billion, the highest among all lending segments. Excluding trading losses, credit cards would account for almost a third of all losses in the simulated economic downturn.

Some of the stressed conditions impacting consumers include housing prices and gross domestic product (GDP). For instance, the stress tests simulated a scenario where housing prices fell over 30%, similar to the decline experienced during the 2008 financial crisis. While GDP also effects consumers, it’s not the central factor in this context.

“In the world of consumer credit, unemployment is the big driver,” Riley said. “When unemployment goes above 10%, as it did in the pandemic and the financial crisis, credit card charge-offs skyrocket. During COVID, some of the best-run banks lost $1 billion per month, and there was nothing they could do. That’s why the stress tests used 10% unemployment as a yardstick, because it represents a realistic worst-case scenario.”

The Top Performer

Not every bank faced the same outcome in the simulation. American Express emerged as the top performer in the credit card industry, exhibiting the lowest charge-off rate under the stressed conditions of the DFAST assessments.

In the simulation, American Express experienced a 10.1% loss of its portfolio, compared to a median loss of 18.6% among its competitors. At the other end of the spectrum was Ally Bank, which would incur a loss of over 40% of its portfolio.

“Credit card charge-offs are the most significant factor in Dodd-Frank stress tests,” Riley said. “Financial institutions must understand the effects of an economic downturn, tighten lending standards, and prepare their operations for delinquency volume before trouble surfaces. It’s essential for banks to spend substantial time in this area operationally. You must have highly trained staff that can negotiate with your customers before charge-offs occur.”

Lending Into a Storm

The DFAST stress tests are built to identify weaknesses in a bank’s lending portfolio and assess their impact on the bank’s liquidity. As last year’s failure of Silicon Valley bank showed, these factors should be top of mind for financial institutions. From operations staff to credit card strategists, every team member should understand three key areas: underwriting, portfolio management, and account controls.

“Credit quality begins at the front end, so the key is underwriting,” Riley said. “This is not the time in the history of the world to start being aggressive with your lending. It must taper down as the economy starts getting worse. You don’t want to lend into a storm unless you can do it strategically, because these issues are lasting longer and going deeper.”

Focusing on underwriting means prioritizing quality over quantity, which includes engaging cardholders with attractive offers while tightening lending criteria to match FICO scores more closely.

Consumers are going to feel stress from economic conditions, which is why it’s critical for banks to build strong customer relationships. However, financial institutions must manage their portfolios more actively in light of rising delinquency volume, which means they must scrutinize new accounts and keep tabs on both active and inactive accounts.

If issues are uncovered, the financial institution should accelerate the collection process to flush out losses sooner.

Getting Ugly

While all the financial institutions passed the DFAST tests this year, the worsening economic environment suggests that the simulated conditions of the stress tests could soon become a reality.

“All the economic indicators point to a tough year next year,” Riley said. “Inflation is still high, and even though interest rates are likely to decrease somewhat, they won’t drop back to where they were a few years ago. Salaries haven’t gone up as quickly as prices have, and all those factors are weighing on consumers. The takeaway is all the banks passed the stress tests this year, but next year it could get ugly.”

The post Dodd-Frank Stress Tests: Good News for Now, Watch for a Rugged 2025 appeared first on PaymentsJournal.

Over the past five years, the available balance on credit cards in the U.S. has shown significant fluctuations, reflecting the changing economic landscape and consumer behavior. As consumers navigated through periods of economic growth, recession, and the aftermath of the pandemic, credit card balances became a critical indicator of financial health and spending habits.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: High-Yield Savings Accounts: An Efficient Way to Fund Credit Card Loans

Credit Card Line Utilization Rates 2020 – 2023

• 2019 – 24%
• 2020 – 21%
• 2021 – 21%
• 2022 – 22%
• 2023 – 24%

Source: New York Federal Reserve Bank, Household Debt and Credit Report (2024)

About Report

Banks involved in credit card lending face unique challenges as they navigate the current financial landscape, with the prime rate at its highest point in decades. As they anticipate possible rate decreases in late 2024 and 2025, banks may need to optimize their loan funding strategies. One effective approach is offering high-yield savings accounts to attract deposits specifically for their credit card programs. This strategy enhances liquidity, reduces dependency on external funding sources, and contributes to a more streamlined business model.

This report from Javelin Strategy & Research highlights the complexities of implementing high-yield savings offerings, noting that these initiatives require careful planning across multiple areas within a bank. The structure of the organization may influence whether the strategy impacts various departments or is managed within the retail banking division. Key decisions include market entry, deposit attraction methods, and whether to manage deposits within the existing core system or through a separate platform.

The post Is Credit Card Line Utilization Increasing? appeared first on PaymentsJournal.

Two European trade associations have issued a letter raising objections to the UK’s proposed interchange fee cap for payments originating from European issuers, saying that the proposal could harm the EU’s financial systems.

UK legislators proposed the new rules after a review found that UK businesses paid an additional £150 million to £200 million in interchange fees to EU credit card companies in 2022. These fees are incurred when consumers use an EU-issued debit or credit card to make online purchases from UK businesses.

In response, UK regulators proposed a temporary credit interchange cap of 0.3% and a debit cap of 0.2% on EU cards, and lawmakers will determine permanent caps after further analysis.

“While we appreciate the rationale for taking action to boost competition and innovation in payments domestically, and cross-border, we see the proposed measure as potentially discriminatory, a risk to the integrity of national payments and retail banking markets in the EU and counterproductive,” the European Banking Association and Payments Europe wrote in a letter.

Points of Contention

The two groups also noted that EU financial institutions “will lose money on each transaction.” Fintechs and digital-first banks could be particularly affected, as they don’t offer widespread lending and are much more reliant on payment fees.  

Another point of contention was that the proposed UK regulation did not address the other side of the coin—where UK consumers use their cards for transactions in the EU.

Heated Debates

According to the Financial Times, UK regulators were spurred into action after Visa and Mastercard raised their fees in 2022, given that roughly 99% of UK debit and credit card payments are processed by these two companies.

U.S. merchants have echoed similar concerns, having agreed to a $30 billion settlement with Visa and Mastercard over high interchange fees. However, this settlement was ultimately rejected because merchant groups, like the National Retail Federation (NRF), argued that the deal was far less than merchants were owed, and a NY judge agreed.

While debates over credit card interchange fees are likely to continue, many overlook the role credit card companies play in worldwide payments infrastructure. Dramatic changes in interchange fees could have immediate implications for consumers.

“The NRF’s position is card payments should be free to the retailer,” Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, told PaymentsJournal in June. “The challenge is card issuers have two income streams: fees from merchants and fees and interest from cardholders.”

“If merchant fees are removed, every card could have a $199 annual fee, no rewards, and a 29.99% APR,” he said. “Granted, there’s room to improve card pricing and structure, but rarely does progress happen when one side pushes relentlessly in court to get everything for free.”
 

The post UK’s Proposed Cross-Border Interchange Fee Cap Sees EU Pushback appeared first on PaymentsJournal.

Recent record highs in credit card balances may be attributed to various factors, but research reveals an explanation that hasn’t been extensively explored: ignorance.

Nearly a quarter of Americans surveyed by the LendingClub admit they don’t know their total credit card debt, and almost half are unaware of the current APR on their cards.

Even among those who do know their APR, a third don’t realize that their rate is directly tied to the prime interest rate. This leaves many people unclear about how and why their interest rates change.

Nearly half of respondents surveyed were unaware that their credit card APR rose by over 5 percentage points due to Fed rate hikes between March 2022 and July 2023. More than a third don’t recognize that credit card APRs can fluctuate over time, independent of payment history or credit status.

Read the Schumer Box

Credit card companies are not required to proactively notify consumers of rate changes beyond including the information in statements. As a result, over a quarter of Americans surveyed said they don’t know where to find their interest rate and were unaware that their rates increase after a promotional period ends.

Card issuers, on the other hand, are required to disclose cardholders’ rates.

“Credit card issuers have a responsibility to ensure there is clarity in their disclosures,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “The Schumer Box, named after the New York senator, makes it easy and clear to see both interest rates and fees for any card. It is written at about a fifth grade reading level and is hard to miss.”

“If almost half of customers do not know their rates, that indicates more about poor household planning than anything else,” he said. “Borrowers should not fall back by saying they could not find it.  Credit card statements disclose the rates, and fully document charges. Customer service call centers are ready to answer questions on rates and are trained to explain them.”  

The post Too Many Americans Don’t Know Their Credit Card Rates appeared first on PaymentsJournal.

A recent analysis of debit trends found that active cardholders made an average of 34.6 debit transactions per month last year. The study highlighted a 4% year-over-year increase in both the number of debit transactions and the dollar volume associated with them.

According to the report from Discover-owned PULSE, the majority of debit payments occurred at the point of sale. On average, consumers conducted 30.7 point-of-sale transactions, two account-to-account transfers, and nearly two ATM transactions per month in 2023.

Consumers are also spending more, with the average debit purchase increasing to $46.89, up 3.4% year-over-year. The adoption of digital debit cards is rising, as card-not-present transactions accounted for 36% of debit transactions in 2023. Additionally, Both debit payments initiated by mobile devices and the number of debit cards linked to digital wallets rose last year.

Debit Industry Trends

One of the key trends in the debit industry is digital issuance, where a financial institution delivers a user’s debit card credentials to a digital wallet before a physical card is issued. Digital issuance provides consumers with a debit card they can use immediately, and cuts costs for financial institutions.

Though the debit industry is growing, Discover highlighted three trends that could impact debit issuers. These include the pending reduction in debit interchange fees for issuers with over $10 billion in assets, increased competition from both traditional financial institutions and digital-first upstarts, and the growth of instant payments systems like FedNow and RTP.

Steering Toward Debit

These trends are unlikely to slow the shift toward debit card payments in the short term. With fewer customers carry cash, merchants have begun to steer customers toward debit card payments as an alternative to credit cards, which often come with high interchange fees. Many retailers prefer debit card payments over cash because consumers tend to spend more in card transactions.

As a result, some retailers have begun to offer customers discounts if they use debit cards at the point of sale. That trend has been echoed by cellphone carriers like Verizon and T-Mobile who have steered their customers toward autopay using a debit card or bank account.

While efforts from retailers likely play a part, the most compelling drivers for the increase in debit payments could be the soaring APRs and increasing potential for delinquency that comes with credit cards.

“The PULSE report has intriguing data, but it leaves out the consumer sentiment,” said Sophia Gonzalez, Debit Payments Analyst at Javelin Strategy & Research. “Debit payments could be gaining popularity because consumers would rather use their liquid funds than accrue debt on credit cards.”

“It’s a given that merchants will look for ways to reduce their overhead expenses, including any interchange fees, but it’s not a given why consumers are opting for debit over credit,” she said. “It’s quite likely that the tough economy is deterring consumers from racking up debt, but more research is needed.”

The post As Credit Card Debt Skyrockets, More Consumers Use Debit appeared first on PaymentsJournal.

The Federal Reserve Bank of New York released its Q2 2024 consumer debt report, revealing a $111 billion increase in credit card debt compared to last year.

Researchers from the NY Fed told CNBC that credit card delinquencies have also risen, particularly among adults ages 18 to 39. The Federal Reserve attributed this increase to the pandemic, which forced many younger adults to overextend themselves financially.

“When you look at three credit card metrics, it is easy to see that consumer households feel the pain of continued stress from interest rates and inflation,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “The latest NY Fed study indicates credit card debt climbed $27 billion from Q1 to Q2 2024, up 5.8%.  That increase is concerning unto itself, but when you add in rising delinquencies, the number becomes more revealing.”

Seriously Overdue

The NY Fed’s researchers noted that delinquent borrowers are often renters with shorter credit histories and lower credit limits, which increases their chance of missing a credit card payment. Those who missed a payment most cited job loss or reduced income as contributing factors.

“On a year-over-year basis, the number of accounts in serious delinquency, defined as those 90+ days past due, surged from 5.08% of receivables to a worrying 7.18%, representing a substantial 41.3% increase,” Riley said. “This means that a significant portion of credit card debt, 7 out of every 100, is seriously overdue.”

Looming Credit Risk

Intensifying these issues are credit card annual percentage rates nearing all-time highs and inaccuracies in credit scoring, which have allowed some consumers to obtain credit products they aren’t qualified for.

“The more concerning issue is that credit card lenders keep increasing credit lines at a time when credit risk is looming,” Riley said. “Consumer credit card holders have access to a whopping $4.9 trillion in credit lines. Of that number, $1.14 trillion is in use and revolving, and another $3.78 trillion is available.”

“In the last two years, between Q2 2022 and Q2 2024, issuers increased credit lines from $4.2 trillion to $4.9 trillion, which is $700 billion,” said Riley. “Consumers continue to need access to credit to maintain their budgets and they are falling back on credit card debt. That will exacerbate credit card risk, particularly in 2025.”

The post Rising Credit Lines Pose Risk as U.S. Credit Card Debt Hits $1.14 Trillion appeared first on PaymentsJournal.

Cards made from paper and other sustainable materials continue to gain in popularity. In addition to being ecofriendly, paper cards are more cost-effective and perfect for single-use purposes, such as gift cards.

To explore the future of sustainable cards, Peggy O’Leary, EVP, Prepaid and Digital Solutions for CPI, spoke with Elisa Tavilla, Director of Debit Payments for Javelin Strategy & Research, on a recent PaymentsJournal podcast. They discussed the flexibility available to consumers and providers with sustainable cards and looked at where the industry might be headed.

Paper Power

Sustainable cards are being made from a variety of materials, including paper, wood, recycled PVC and other substrates, as well as recycled plastic. All of these are much easier on the environment than traditional plastic cards.

“We’re seeing a greater effort toward fostering sustainability and protecting the environment across all industries,” Tavilla said. “For example, in the retail industry, there’s been greater attention and efforts toward things like consignment, thrifting, upcycling, focused on zero waste. In the payments industry and financial services, we’ve seen efforts to improve sustainability and help the environment, too.”

Single-use type prepaid cards (that is, not reloadable) are ideal for paper. Visa, Mastercard, and American Express gift products have increasingly moved toward paper cards. They are more environmentally friendly than traditional cards, and they don’t need to be as durable as credit or debit cards that people use more frequently. Paper cards are also more cost-effective for manufacturers than plastic cards.

Sourcing Matters

The market has been pushing for assurances that paper products—and even the packaging around the paper products—come from responsibly sourced materials. 

“At CPI, we’re heavily investing in ensuring our materials are FSC-certified,” O’Leary said, referring to the Forest Stewardship Council, a group whose mission is to promote economically viable management of forests. “We’re making sure that our products have a trackable chain of custody and that our paper products come from responsibly managed forests. Not only are we creating something from a natural product that can break down after use, but the source itself is coming from a more ecofriendly supply chain as well.” 

Financial institutions have seen plenty of new investment around environmental, social, and governance (ESG) initiatives, indicating a desire by consumers to minimize their impact on the environment. Many of these customers may not even realize that the plastic cards in their wallet could be replaced by something more ecofriendly. The effort extends to finding partners to ensure that the types of materials used are responsibly sourced as well. That is an important part of CPI’s manufacturing process.

“From the ESG perspective, CPI’s approach and strategy are very thorough and well-rounded, whether it’s from the cards and the products that they’re producing or the sourcing and the supply chain of the material,” Tavilla said. “Consumers are increasingly environmentally conscious of the products that they’re using and the providers that they buy from. A Javelin survey asked the key factors that users consider when they apply for a new credit card, and 26% said that having the card being made of sustainable material is an important factor.”

Expanding Possibilities

Sustainable card manufacturing allows for more than just environmentally friendly transactions. It opens up a new world of design for the cards as well.  

“We have come up with innovative ideas such as gift packages that would have lights that lit up or scratch-and-sniff options for the holidays where you could definitely smell the peppermint,” O’Leary said. “When you think about what it takes to be able to deliver that kind of innovation, you need an extensive network of suppliers, partners, and innovators behind the scenes that help you bring that all together.” 

It’s a misconception that an ecofriendly production means giving up uniqueness or special designs. CPI has developed hundreds of designs suitable for all kinds of occasions and personality types. Indeed, moving beyond simple plastic can give cards a variety of distinctive tactile feels. Special embellishment and designs focus on strong tactile experiences, which consumers love when they’re shopping for gift cards. 

Similar developments can be expected in gift and retail cards. Even though these cards tend to be single use or limited use, consumers sometimes want them to have a certain degree of durability. Some people might leave a gift card in their wallet or in a drawer for months before they redeem it. Cards with a larger amount of funds attached may be used multiple times. 

There are other reasons to look toward more sustainable products. California, for example, has introduced legislation limiting single-use plastics, which could have ramifications across the country. Obviously, it would not be efficient for card manufacturers to produce one card to meet the standards of one state and different cards for other areas. The result is likely to be a standard based on the most restrictive state laws.

For card providers and their customers, these trends are likely here to stay.  

“From a cardholder perspective, it is ensuring that you’re meeting the new requirements that are coming more broadly from your market,” O’Leary said. “From a business perspective, businesses are taking steps to improve their impact on the environment. Overall, you can drive a really positive business outcome, not only from an investment perspective but also to win in the market.” 

The post Paper or Plastic: Sustainable Cards Are the Wave of the Future appeared first on PaymentsJournal.

Getting a college credit card was easy back in the day. Issuers flocked to the segment, which in 1990 represented a block of 14 million people and is currently north of 20 million. I recollect that well-intended parents allowed credit cards to facilitate money movement, meals, and bookstore purchases. Still, the attractive nuisance of a credit card often resulted in free spending and extracurricular purchasing.

In short, the college cardholder was off on their own, and card spending commitments frequently fell prey to help fund beer, pizza, and other delights.

Credit card issuers loved the market. These customers were at a unique stage in life: they are of age but not necessarily grown-up. The cardholder will be off on their own in less than four years and will never forget their first credit card. Hopefully, as their life develops, the new consumer will likely need auto loans, mortgages, personal loans, deposit products, 401k, and wealth management products, making the first lender an essential starting point. The initial relationship with a lender is as sticky as a first boyfriend—you never forget them.

In many cases, parents could keep their kids out of non-payment trouble, which would tarnish their credit bureau file until they were 27 or 28 years old. A few bucks to bail the student out and a stern lecture always seemed to do the trick—at least until the next semester started.

What a deal! I’ve been there, done that, and got the T-shirt. The temptation and potential pitfalls are just a swipe away. That’s why I’m here to share my insights and advice.

The CARD Act of 2008 Changed All This

This CARD Act significantly altered the landscape for college students seeking credit cards. It introduced new requirements, such as an Ability to Repay standard or a parental (or guardian) endorsement, making it more challenging for students to obtain credit cards.

Prudential regulators and consumer protection agencies like the CFPB and FTC are critical to banking. I agree with almost everything prudential regulators say because safety and soundness are essential for the economy. I don’t always agree with consumer protection agencies, but if you think back, they earned their stripes with proper strategies on complaints, product design, and fairness standards.

However, the CARD Act brought a sense of security. It mandated that college students pass an Ability to Repay standard or have a parental (or guardian) endorsement. This parental involvement was a welcome change, ensuring the student’s financial safety and securing a more responsible financial future.

How the Credit Card Right of Passage Changed

In today’s Market & Finance section in the WSJ, the author discusses card changes and explains how old-school college marketing, with tables, balloons, Frisbees, and freebies, went away. Students probably do not miss out on pizza and beer but no longer have access to easy credit cards. However, the card is still essential in establishing a credit line, ultimately leading to a cherished FICO score.

Do What I Did. It is Simpler and Safer, and You Will Sleep Better

Forget about sending a student to college with a credit card in hand or co-signing. Instead, limit risk and load up a debit or prepaid card for them. Living within a budget is an essential life skill.

If you want your child to establish credit, add them as an authorized user on one of your cards early in life. This starts their credit file, and if you limit their access to the card and don’t let them take it off to college, everyone will be better off. It won’t let them get pizza and beer, but it will help them start with a referenceable credit line.

Let them experience a credit card in a controlled situation, build their credit score, and then lock the card in the family safe.

The post College Credit Cards: Getting Pizza & Beer Isn’t Like it Used to Be appeared first on PaymentsJournal.

Not every consumer warrants an Amex Gold Card, a Chase Sapphire, or a Citi Custom Cash Card. With consumer credit so aligned with household budgets, you can be confident that every consumer won’t hold a FICO score of 760 or better. With more than 100 million households having a credit card as a spending option, a good credit manager expects that a portion of the portfolio will face challenges such as unemployment, household discord, indebtedness, and turmoil.

Maybe 5% of the portfolio will experience those pains in good years. However, one of the risks in consumer credit is that a bad year can be highly disruptive. Think about the Great Recession, not quite two decades ago. Top U.S. banks, arguably the world’s most experienced and best-run card businesses, faced billion-dollar losses with charge-offs north of 10%.

But there is a way out, and many credit card issuers have a strong solution to help people re-establish their credit: enter the Secured Credit Card

Secured Credit Cards Help Consumers Re-Establish Their Credit

Before the Card Act of 2008, predatory lenders dominated the market with complex money lending options that often took advantage of people trying to reestablish their credit to rent cars, stay in hotels, or have some transacting capability. Those horrific models were outlawed, and many mainstream lenders entered the market in 2009. Today, various programs exist. Javelin respects this niche and publishes a deep dive every three years. The latest report can be found here.

Chase does not offer a secured card, but they have a version with a unique product called the Chase Freedom Rise card. While it may not be much help for those in credit recovery, it does help those trying to obtain first-time credit. However, you will see secured card offers from Bank of America, Citi, Capital One, Discover, Synchrony, and U.S. Bank.

Looking Out for Exciting Innovations

The secured card market is projected to have 5.8 million cards by 2026, with an addressable market of 20 million consumers. While the credit quality may be low when these accounts are originated, most of the risk is mitigated by having cash as collateral squirreled in a bank account in the event of default.

There has been some exciting development in the space. In other PaymentsJournal articles, we’ve noted that Bank of America offers a small business secured card, and Amazon and Synchrony offer the first-ever private label secured card.

Loud and Proud

In 2019, we noticed that KeyBank had an exciting strategy in place, which it has continued to follow since then. KeyBank tracks and publishes numbers on consumers who started with secured cards and earned their way to full-featured, unsecured programs. KeyBank reported:

• Secured Credit Card customers are graduating this month after less than one year of using the tool, and two-thirds (65%) of those graduates are Millennials (those born between 1982 and 2000), as many in this generation struggle to find their financial footing and are turning to secured credit cards to establish good credit.
• “Millennials, many of whom came of age during the 2008 recession, are saddled with debt and looking for ways out of it. Our Secured Credit Card helps them overcome the barriers they face to establishing a strong credit history that makes financial achievements, like renting their apartment, a reality.”

In its latest announcement, Yahoo News reported that more than 30,900 KeyBank customers graduated from their secured card program, with more than 2,800 in the current “Spring 2024 Graduating Class.”

Sure, there may be more found at Bank of America, Citi, Capital One, Discover, Synchrony, and U.S. Bank. Still, KeyBank takes pride in helping their consumers, and it is an excellent way to acknowledge the program’s success.

The post Best Practices in Secured Credit Cards: KeyBank Still Nails It appeared first on PaymentsJournal.

The American Express Gold Card has new rewards benefits in travel and dining—both popular categories favored by Millennials and Gen Z. These changes follow a June study from the company, which found that 76% of Millennial and Gen Z respondents dined out at least two to three times per month, and 70% were interested in a credit card that offered hotel benefits.

Two Added Statement Credits and Travel Enhancement

• The Gold Card will now feature a $100 dining credit at Resy restaurants, and $84 Dunkin’ credit, and an updated $120 dining credit that now includes Five Guys in addition to Grubhub, The Cheesecake Factory, Wine.com and Goldbelly.
• The Gold Card is also enhancing its travel benefits with more properties and destinations added to “The Hotel Collection” program.

New membership offers

• 100,000 Membership Rewards points after spending $6,000 on eligible purchases within the first 6 months
• 20% back in statement credits made at restaurants worldwide within the first 6 months of membership
• New option for White Gold card design

With the added rewards and enhancements, the Gold Card fee will increase from $250 to $325 (a 30% rise) starting in October. For cardmembers worried about the value of the card with the new annual fee, the $75 increase will be offset by added statement credits, as long as they are used. The Gold Card is great for those that spend heavily on groceries or dining, and even better for those who take advantage of the statement credits.

As noted by the WSJ, the Gen Z and Millennial customer base typically has higher income and credit scores than average. Building a relationship with this customer base increases the likelihood of cross-selling other services like online checking and savings accounts and personal loans. The Gold Card can also be seen as a steppingstone product on the way to a Platinum Card—seen by many as the pinnacle consumer card from American Express.

The company also appears to be further leveraging its acquisition of Resy (acquired in 2019) to be used for card rewards. The first statement credits from Resy appeared on the Delta SkyMiles Platinum and Reserve Card, and are now included on the Gold Card. I expect we will see a Resy statement credit on the Platinum Card at some point in the future as it already includes Global Dining Access by Resy. 

The post Millennials and Gen Z Will Love the Amex Gold Card as Much as Their Parents appeared first on PaymentsJournal.

The amount of credit card debt U.S. consumers have accrued is now $1.3 trillion and rising, but some states have more debt than others.

Consumers in Alaska have the highest credit card debt, according to data from WalletHub, with a median amount of $3,859 per person. Given the state’s average monthly credit card payment of $259, it would take over a year and a half for the average person in Alaska to pay off their bill. They would also incur $635 in interest along the way.

While a state’s median credit card debt can be an indicator of its residents’ financial health compared to other states, it’s not the only metric to consider.

“It’s also important to look at how much residents put toward paying their debts off each month,” noted Cassandra Happe, Analyst at WalletHub in a post. “Low average payments lead to long payoff timelines, which in turn lead to high amounts of interest accrued. For example, Vermont’s median credit card debt is relatively low, but it ranks as the state with the third-biggest debt problem due to low average monthly payments.”

Alarming Delinquency

Along with Alaska and Vermont, the District of Columbia, Connecticut, and Georgia rounded out the top five states by median credit card debt. One notable data point from the study is that even in the states with the least credit card debt, it would still take consumers more than 11 months to pay their debt in full if they just make the average payment.

“High median credit card debts in certain regions can be attributed to a combination of several key factors,” Happe said. “Firstly, areas with high living costs often see residents relying more on credit cards to cover everyday expenses, leading to increased debt. Despite having relatively high median incomes, residents in these regions may still face financial pressure due to the expensive cost of living, which encourages higher spending and, consequently, larger credit card balances.”

Lingering inflation and high interest rates have been responsible for an increase in credit card delinquency as consumers increasingly depend on credit cards to pay for everyday items. U.S. credit scores for lower-income cardholders have dropped to their lowest point since 2020.

“Moreover, the average monthly payments toward credit card debt in these areas tend to be low,” Happe said. “This slow repayment rate means that debt remains outstanding for longer periods, accumulating substantial interest over time. Additionally, individuals in these regions often hold multiple credit cards, which can lead to higher overall debt as spending is distributed across various accounts.”

Financial Insecurity

The tough macroeconomic environment can have a lasting impact on consumers’ mental health, according to a separate report by WalletHub. The study found that 64% of Americans feel insecure about their finances, and 41% believe their finances determine their self-worth.

“Financial literacy plays a crucial role,” Happe said. “Lower levels of financial literacy can result in poorer financial management, further exacerbating debt issues. Lastly, economic conditions, including job availability and wage levels, influence credit card debt. Economic disparities and high living costs drive increased reliance on credit cards, making it challenging for residents to manage and pay off their debts efficiently. These intertwined factors create an environment where managing credit card debt becomes a significant challenge for many individuals.”

The post Credit Card Debt Isn’t Equally Distributed Among U.S. States appeared first on PaymentsJournal.

In the ever-evolving landscape of retail, understanding consumer preferences for payment methods at physical locations has become crucial for businesses aiming to enhance the shopping experience and increase customer satisfaction. As digital wallets, contactless cards, and mobile payment solutions continue to gain traction, traditional cash and card payments remain significant.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: A New Era of Chargeback Management

Preferred Payment Methods at Physical Locations

• 39% – Major credit card
• 31% – Major debit card
• 15% – Cash
• 3% – Contactless at the POS
• 2% – Store-specific card

About Report

The chargeback—a forced refund to a cardholder’s account that is initiated by the issuing bank—turns 50 years old later this year. The maneuver, legislated into existence to foster trust in card payments at a time when few consumers were using them, has aged into a management headache for merchants. In an age of proliferating card usage and ongoing growth of e-commerce channels, chargebacks are easy to initiate and easy for consumers to win. Merchants, meanwhile, need help with the complex process of challenging chargebacks, heading them off in the first place, and avoiding the escalating consequences of a high chargeback rate. It’s an endurance test most merchants are not equipped to navigate alone. 

This Javelin Strategy & Research report looks at where chargebacks started out and how they have evolved into a present-day challenge for all kinds of merchants. It lays out the stakes for harboring an unchecked high chargeback rate, denotes strategies for communicating with consumers to reduce instances of so-called “friendly” fraud, and examines the value of dedicated service providers versed in representment and building strategies to stem the chargeback tide.

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