The payments forecast between 2020 and 2025 is not pretty. Top-line and bottom-line performance metrics will likely weaken as a global slowdown drives down U.S. payment card purchase dollar volume (PDV) and pre-tax profits. The outlook is exclusive of the global COVID-19 pandemic impact and its potential major impact on the global payments in the first and second quarters of 2020.
Notwithstanding, Robert McKinley, payment analyst for CardData, PYRPTS and RAM Research notes the saturation of credit, maturation of debit, penetration of prepaid U.S. card products creates a new playing field of challenges and opportunities for the next decade.
According to the upcoming U.S. Major Payments Networks & Issuers Market Analysis, Performance & Trends (2015-2025) to be released by RAM Research in mid-March, U.S. payment networks will post purchase volumes (PDV) below an 8% CAGR (Compound Annual Growth Rate) for the next four years; U.S. card issuers will face average delinquency ratios climbing above 3% for the next three years; U.S. top issuers will report eroding average yields of less than 12% for the next five years; and, U.S. consumer Debt Service Ratio will trend upward by 40 bps over the next two year.
Payments Forecast & Emerging Opportunities
Through 344 exhibits including more than 5,000 data points in 405 pages, the new report reveals opportunities abound in the U.S, marketplace with the integration of mobile apps and other financial technology to capture payment volume. Migrating current and future card products to less complex and lower cost rewards programs is inevitable. “Snippet” counter marketing of competitor weaknesses in basic card pricing in late payment, balance transfers, cash advances and foreign transactions will likely emerge.
While risk management will be the key to the mitigation of card metrics during the next few years including credit lines, opportunities exist to market consumer “friendly” debt management through minimum payment waivers and short-term interest rate reductions says CardWeb.
It is imperative for U.S. payment card issuers to thoroughly review the effectiveness of current marketing channels, stem the rising tide of account attrition rates pervasive among major portfolios. Internet marketing has become intrusive over the past five years, diminishing brand value via the aggressiveness of online marketing via third parties.
Payments Forecast Macro U.S. Economy Outlook
Analyst Robert McKinley says in the short-term for the U.S. economy, the central tendency of U.S. PCE and inflation growing from 1.45% in 2019, to 1.85% in 2020, 2.05% in 2021 and 2.10% in 2022, will drive U.S. payment card PDV (purchase dollar volume) on a steady upward trend. The unemployment rate rising to 3.7% in 2021 and 4.2% in 2022 coupled with the 2019 surge in consumer revolving credit, will likely push early stage delinquency rates above 3.00% in 2022, followed by a slow retrenchment through 2025. The sharp decline in U.S. real GDP growth underway since 2018, from 2.93% to 2.32% last year, and likely to drop to 2.20% in 2020 and 2.00% for 2021, may not bottom out till 2024.
The 43 commentary/analysis reports review and recommend actionable plans for: voluntary attrition, involuntary attrition, average tickets, portfolio segmentation by credit score and product type, reward redemption rates, etc. Portfolio segmentation by credit score and product type, reward redemption rates, fee development, demographics, new products and services, mobile apps and emerging payment technology.
Additionally, the report estimates the macro, micro trends and particularity of the U.S. payment card market and the likelihood of merger and acquisition activity through 2025.