Consumer Payment Card News

Coronavirus Disruptions Send Spending to the Abyss

Coronavirus Disruptions

Coronavirus disruptions to everyday life are spreading rapidly as fear and anxiety grip consumers, business-owners and investors. The amplification of misinformation via social media and governments has become a plague unto itself. For Americans the only “silver lining” is mortgage rates dropping to the lowest level since October 2016. The 30-year fixed-rate mortgage is now averaging 3.29% and the 15-year fixed-rate mortgage also dropped four basis points to 2.79%. The longer virus concerns linger and the bigger impact economists and analysts estimate it will have on economic activity the lower we are likely to see rates go.

Global card spending has fallen off the cliff this year, with big hits coming from business and consumer travel. The economy was already showing cracks in 2019. Business spending on travel could fall by more than $500 billion and consumer spending on travel will likely decline by more than a $1 trillion this year. Flight cancellations, grounded planes and bankruptcy are already surfacing globally. Disruption to supply chains will only make matters much worse notes CardFlash.

Coronavirus Disruptions to Conferences

According to PYVNTS, several payment conferences have either been postponed (Money 20/20 Asia) till late summer or cancelled (RISE) till next year, both in the Asia-Pacific region. However, the COVID-19 spread is affecting all business conferences globally. The Global Business Travel Association’s (GBTA) survey of 401 companies found nearly two-thirds reported that they had canceled at least some already scheduled meetings, events or conferences due to concerns about the conferences. Of the respondents, 95% report that their companies have canceled or suspended “most” or “all” business trips to China.

School Closings Likely

Officials at the Centers for Disease Control and Prevention urged the public to prepare for the virus’s “inevitable” spread inside the U.S. — including in schools. Hastened preparations are taking place in elementary, middle and high schools throughout the nation as Americans watch for the arrival of the coronavirus. It could be webcam classes, it could be work students are submitting online, it could even be chat rooms that replicate a class, according to CardBuzz.

Protective Masks Gouging

As the world struggles to contain the COVID-19 coronavirus disease, social media and news sites have been flooded with pictures of people donning protective masks while they go about their daily lives. Mask shortages are now affecting some countries, and suppliers are working overtime to keep up with demand. On Amazon, prices for the devices have sharply increased in recent weeks, and the company has warned sellers not to raise them to exorbitant levels—or risk getting kicked off the site.

2020-2025 Impact

As if the coronavirus where not enough, 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 and profits. The outlook is exclusive of the global COVID-19 pandemic impact and its potential major impact on the global payments in 2020. As a result all of the projections for 2020 and beyond have been tossed out the window says CardWeb.

Senior Analyst Robert McKinley for CardData, PYRPTS and RAM Research says revised forecasting will likely resume around March 15th but will amount to little more than subjective guessing. The three big questions researchers cannot answer: (1) Will a global recession will be triggered by summer? (2) Will COVID-19 reappear in the fall? and (3) What will be the outcome of the U.S. elections?

According to the upcoming U.S. Major Payments Networks & Issuers Market Analysis, Performance & Trends (2015-2025) to be released by RAM Research in late-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. However, these projections were based on pre-COVID-19 data and now under revision, says Robert McKinley.

Mobile Food Apps

If coronavirus forces you indoors and you order food through a delivery app, keep in mind you are paying multiple parties, including the driver and the companies that offer the apps, like Uber Eats and Postmates. In some cases, you pay the restaurants extra fees as well. The markups can be downright egregious. Take Panda Express, the fast-food chain. If you ordered a $39 Family Feast value meal using Uber Eats, your tab would be 49% higher than if you bought the same meal at the restaurant, not including a tip. The markups on the food deliveries were 7% to 91% more than what you would pay if you bought the meal directly from the restaurant.

Fake Accounts & Checks

Wells Fargo has finally inked an agreements with the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) to resolve these agencies’ investigations into the Company’s historical Community Bank sales practices and related disclosures. As part of this resolution, Wells Fargo has agreed to make payments totaling $3 billion. The company allegedly engaged in opening fake accounts without a customer’s permission, according to Bankcenter.

Fake check scams take advantage of what we don’t know about how banks handle check deposits. Scammers do know, and they trick people into sending them money before the bank spots the fake. The FTC’s Consumer Sentinel Network database shows Americans reported more than 27,000 fake check scams in 2019, with reported losses topping $28 million dollars. And the data suggest that fake check scams disproportionately harm young adults – especially people in their twenties.

Zombie Debt Scam

A proposal from the Consumer Financial Protection Bureau could spark a fight about what should happen to consumers’ time-barred old debt. Debt collectors lose the right in many states to sue consumers after their debt reaches its statute of limitations, typically three or more years. But there’s a loophole: If the consumer makes a payment or acknowledges the debt in writing, that can be used to try to revive the life of the debt, creating what some consumer advocates call “zombie debt.” The proposal is an extension of the GOP’s efforts to weaken consumer protections says CardBuzz.

Women’s History Month

Kicking off Women’s History Month, Visa has launched two new partnerships bolstering the company’s commitment to women’s economic empowerment. Hand In Hand and IFundWomen will join Visa to help provide both educational resources and funding for women entrepreneurs around the globe to help them build and grow their businesses. The global rate of female entrepreneurship has been increasing more quickly than that of male entrepreneurs, with more than 250 million women around the world engaged in entrepreneurship.

Best Workplaces

American Express has been ranked ninth on the 2020 Fortune 100 Best Companies to Work For list in the U.S., a recognition of the company’s continuous focus on enhancing the colleague experience. The ranking, which was determined based on feedback from employees, demonstrates our deep commitment to creating a culture of inclusion and diversity, and providing engaging and meaningful experiences that enable all colleagues to reach their full potential.

Artificial Intelligence

Artificial intelligence in financial payments will be explored fully in March by the AI In Financial Services event and the AI In Finance Summit event in March. The AI In Financial Services event is scheduled for March 17th at the America Square Conference Centre in London. The AI in Finance Summit is slated for March 31 to April 1 at the etc Venues, also in London.

The Technova AI In Financial Services event will focus on business transformation to robotic automation, customer innovation to ethical transparency, equipping attendees with the skills and expertise to capitalize on the artificial intelligence revolution, notes Bankcenter and CardBuzz.

Cardworthy Update

The Professor Cardworthy financial education podcast and videocast has been temporarily paused till late March due to coronavirus. The latest Cardworthy episodes include: How to Replenish your Stash? and “Savings King Secrets” were recently posted.

Sources: CardData; RAM Research; CardTrak; CardFlash; Cardworthy; CardWeb; PYRPTS; CardBuzz; Bankcenter; PYVNTS; Ruebud Media; Red3 Media; Robear’s List