Credit card fee income rose 4.4% year-on-year (YOY) in 2015, topping $94 billion. Fees in every component increased with the exception of penalty fee income with decreased slightly.
R.K. Hammer estimates that the card business saw a fee income increase of $4 billion in 2015 compared to 2014.
New regulations and legislation continue to have some impact, just not to the same extent as a few years back. Post-recession card fees had been fairly flat for the past five years, according to R.K. Hammer, prior to 2014 and 2015. An uptick in the last two years was primarily due to interchange fees, cash advance fees, and rewards card annual fees, the bulk of the most active accounts.
All Consumer Credit Card Fees
2015 $94.3 Billion
2014 $90.3 Billion
2013 $79.9 Billion
2012 $82.5 Billion
2011 $81.2 Billion
2010 $78.4 Billion
2009 $78.9 Billion
Source: R.K. Hammer
The major components of fee income that R.K. Hammer calculates each year are Interchange Income, Cash Advance Fees, Penalty Fees, Annual Fees, and Enhancement Fee Income (i.e., ancillary services, insurance products), in that descending order. Penalty Fees have been down somewhat recently due to far fewer delinquent accounts as the economy has improved, but cash advance fees and annual fees generated from high growth rewards programs have escalated. There are other far smaller fees, but those are not estimated in the R.K. Hammer financial model(s), off the radar screen. While penalty fees were slightly down last year, every other component of fee income showed Y/Y gains in 2015, especially in Interchange income with higher consumer confidence and spending coming back.
Hammer, says “anyone paying attention knows credit unions and banks have had their card interest income business models under siege since 2009. So it no surprise that renewed attention has been turned instead to fee income models, and ways to boost that increasingly important revenue stream.”
While penalty fees garner much attention they have been trending down, and it is actually card system Interchange that is always the largest component of fee income revenue stream, driven by recently renewed consumer spending, and a better economy. Think card fees will go away soon? Sure…just as soon as airline and hotel fees evaporate. It’s just not going to happen. Whatever services you may be getting for free today will be ultimately priced into new products/services tomorrow as add-on’s.
Smart issuers draw a steady bead on what their card members want and will pay for, by consistently measuring their pulse with online polls, web-based surveys and focus groups. Those who do not invest in such information-rich technology tools on a consistent basis will find themselves at a competitive disadvantage to their peers in 2016 and beyond.
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