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of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged. It was popularised in the 1960s with the release of Letraset sheets containing Lorem Ipsum passages, and more recently with desktop publishing software like Aldus PageMaker including versions of Lorem Ipsum
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Gift card fraud Gift cards have risen in popularity over the last few years— National Retail Federation anticipated more than $31B in gift card sales during the 2014 holiday season alone. Gift cards are the most requested gift item, and they have been for eight years in a row. Total gift card sales for 2014 were anticipated to top $100 Billion. Gift cards are a practical gift – the purchaser can let the recipient pick exactly what they want, eliminating the worry of picking something that doesn’t fit right, that is a duplicate, or something that the recipient just might not want. They are also incredibly convenient, quick, and easy to purchase. The stigma behind gift cards is starting to fade, and it no longer seems as though they are an impersonal gifting option. Additionally, the type of gift cards available has expanded greatly in the last few years. If you are of the procrastinating nature, there are eGift Cards or eCertificates, which can be emailed in a matter of minutes to the recipient. If you are truly unsure what to purchase altogether, you can give an open-loop card, which are usually branded by Visa, MasterCard, and American Express, and can be used anywhere their logo appears. It also seems like a quick win for merchants to carry gift cards. The overhead cost to store them is extremely low because a small box of gift cards takes up very little space. When customers come in to redeem their GC, they usually spend more than the original value of the card itself, thus allowing for additional revenue capture. Something else that merchants have started doing in this big data world we live in is tying gift cards to consumer loyalty programs. Reloadable cards are now linked to a specific customer, who can also tie their credit card to the account, which is automatically charged once their account is below a pre-defined threshold. These new consumer loyalty accounts can be used to track spending history, tailor offers to the specific customer, and continue to expand on the immersive brand experience. Recently, a certain Mexican-themed fast food establishment launched their new mobile app; in the app, you could pre-order food, send and redeem eGCs, and find the nearest location. I don’t even eat at this establishment, but the innovation of their app was so enticing that I installed it the morning it came out, purchased an eGC for my husband, and pre-ordered breakfast. It was extremely easy and convenient, and I got a free taco! Now they have my soul. Okay, maybe not my soul, but they have my credit card data, purchasing preferences, device information, and location, which is almost the same thing at this point. After the experience I found myself asking why other merchants haven’t already done this or why it hasn’t taken off yet. This is a great example of how gift cards and emerging technology are being used as a marketing tool to entice consumers to build up a customer base. In the rare instance that a gift recipient does not actually find value in their gift card (the horror!) there’s a multitude of options for trading them in or redeeming for cash. Some well-known websites for trade-in are Giftcard Granny, Card Hub, and raise.com; it’s also incredibly common to find discounted GCs for sale on eBay, Craigslist, and Facebook groups. A couple familiar names that have recently entered into the mix are Wal-Mart and CoinStar. You can now exchange your physical gift card for cash at a specific CoinStar machines, and if you don’t feel like leaving your home, you can exchange your card online with Wal-Mart, and they will provide you with a Wal-Mart gift card that can be redeemed online or in stores. It’s such common practice that you can find articles on this topic on local, national, and 24-hour news websites. This tremendous revenue booster does not come free of risk, however. We know that fraudsters are clever and opportunistic. They will penetrate every weakness possible and take advantage of programs that are being used to enhance the consumer experience. But are they really stealing all these gift cards for personal gain and taking all of their friends out to their favorite local coffee shop for free drinks? Stay tuned for the second part of this blog that talks more about the fraud risks associated with gift cards and what you can do to mitigate them. Please note: *The use of GC/eGC is used interchangeably.
By: Mike Horrocks Experian has announced a new agreement with Finagraph, a best-in-class automated financial intelligence tool provider, to provide the banking industry with software to evaluate small business financials faster. Loan automation is key in pulling together data in a meaningful manner and this bank offering will provide consistent formatted financials for easier lending assessment. Finagraph’s automated financial intelligence tool delivers advanced analytics and data verification that presents small business financial information in a consistent format, making it easier for lenders to understand the commercial customer’s business. Experian’s portfolio risk management platform addresses the overall risks and opportunities within a loan portfolio. The company’s relationship lending platform provides a framework to automate, integrate and streamline commercial lending processes, including small and medium-sized enterprise and commercial lending. Both data-driven systems are designed to accommodate and integrate existing bank processes saving time which results in improved client engagement “Finagraph connects bankers and businesses in a data-driven way that leads to better insights that strengthens customer relationships,” said John Watts, Experian Decision Analytics director of product management. “Together we are helping our banking clients deliver the trusted advisor experience their business customers desire in a new industry-leading way.” “The lending landscape is rapidly changing. With new competitors entering the space, banks need innovative tools that allow them to maintain an advantage,” said James Walter, CEO and President of Finagraph. “We are excited about the way that our collaboration with Experian’s Baker Hill Advisor gives banks an edge by enabling them to connect with their clients in a meaningful way. Together we are hoping to empower a new generation of trusted advisors.” Learn more about our portfolio risk management and lending solutions and for more information on Finagraph please visit www.finagraph.com.
Deposit accounts for everyone Over the last several years, the Consumer Financial Protection Bureau (CFPB) has, not so quietly, been actively pushing for changes in how banks decision applicants for new checking accounts. Recent activity by the CFPB is accelerating the pace of this change for those managing deposits-gathering activities within regulated financial institutions. It is imperative banks begin adopting modern technology and product strategies that are designed for a digital age instead of an age before the internet even existed. In October 2014, the CFPB hosted the Forum On Access To Checking Accounts to push for more transparent account opening procedures, suggesting that bank’s use of “blacklists” that effectively “exclude” applicants from opening a transaction account are too opaque. Current regulatory trends are increasingly signaling the need for banks to bring checking account originations strategies into the 21st century as I indicated in Banking in the 21st Century. The operations and technology implications for banks must include modernizing the approach to account opening that goes beyond using different decision data to do “the same old thing” that only partially addresses broader concerns from consumers and regulators. Product features attached to check accounts, such as overdraft shadow limits, can be offered to consumers where this liquidity feature matches what the customer can afford. Banking innovation calls for deposit gatherers to find more ways to approve a basic transaction account, such as a checking account, that considers the consumer’s ability to repay and limit approving overdraft features for some checking accounts even if the consumer opts in. This doesn’t mean banks cannot use risk management principles in assessing which customers get that added liquidity management functionality attached to a checking account. It just means that overdraft should be one part of the total customer level exposure the bank considers in the risk assessment process. The looming regulatory impacts to overdraft fees, seemingly predictable, will further reduce bank revenue in an industry that has been hit hard over the last decade. Prudent financial institutions should begin managing the impact of additional lost fee revenue now and do it in a way that customers and regulators will appreciate. The CFPB has been signaling other looming changes for check account regulations, likely to accelerate throughout 2015, and portend further large impacts to bank overdraft revenue. Foreshadowing this change are the 2013 overdraft study by the CFPB and the proposed rules for prepaid cards published for commentary in December 2014 where prepaid account overdraft is “subject to rules governing credit cards under TILA, EFTA, and their implementing regulations”. That’s right, the CFPB has concluded overdraft for prepaid cards are the same as a loan falling under Reg Z. If the interpretation is applied to checking account debit card overdraft rules, it would effectively turn overdraft fees into finance charges and eliminate a huge portion of remaining profitability for banks from those fees. The good news for banks is that the solution for the new deposits paradigm is accomplished by bringing retail banking platforms into the 21st century that leverage the ability to set exposure for customers at the client level and apportioned to products or features such as overdraft. Proactively managing regulatory change, that is predictable and sure to come, includes banks considering the affordability of consumers and offering products that match the consumer’s needs and ability to repay. The risk decision is not different for unsecured lending in credit cards or for overdraft limits attached to a checking account. Banks becoming more innovative by offering checking accounts enabling consumers more flexible and transparent liquidity management functionality at a reasonable price will differentiate themselves in the market place and with regulatory bodies such as the CFPB. Conducting a capabilities assessment, or business review, to assess product innovation options like combining digital lines of credit with check accounts, will inform your business what you should do to maintain customer profitability. I recommend three steps to begin the change process and proactively manage through the deposit industry regulatory changes that lay ahead: First, assess the impacts of potential lost fees if current overdraft fees are further limited or eliminated and quantify what that means to your product profitability. Second, begin designing alternative pricing strategies, product offerings and underwriting strategies that allow you to set total exposure at a client level and apportion this exposure across lending products that includes overdraft lines and is done in a way that it is transparent to your customers and aligns to what they can afford. Third, but can be done in parallel with steps one and two, begin capability assessments of your financial institution’s core bank decision platform that is used to open and manage customer accounts to ensure your technology is prepared to handle future mandatory regulatory requirements without driving all your customers to your competitors. It is a given that change is inevitable. Deposit organizations are well served to manage this current shift in regulatory policy related to checking account acquisitions in a way consistent with guaranteeing your bank’s competitive advantage. Banks can stay out front of competitors by offering transparent and relevant financial products consumers will be drawn to buy and can’t afford to live without! Thank you for following my blog and insights in DDA best practices. Please accept my invitation to participate in a short market study. Click here to participate. Participants in this 5 minute survey will receive a copy of the results as a token of appreciation.
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With the National Automobile Dealers Association (NADA) Show set to kickoff later this week, it seemed fitting to explore how the shifting dynamics of the used vehicle market might impact dealers and buyers over the coming year. Shedding light on some of the registration and finance trends, as well as purchasing behaviors, can help dealers and manufacturers stay ahead of the curve. And just like that, the Special Report: Automotive Consumer Trends Report was born. As I was sifting through the data, one of the trends that stood out to me was the neck-and-neck race between Millennials and Gen X for supremacy in the used vehicle market. Five years ago, in 2019, Millennials were responsible for 33.3% of used retail registrations, followed by Gen X (29.5%) and Baby Boomers (26.8%). Since then, Baby Boomers have gradually fallen off, and Gen X continues to close the already minuscule gap. Through October 2024, Millennials accounted for 31.6%, while Gen X accounted for 30.4%. But trends can turn on a dime if the last year offers any indication. Over the last rolling 12 months (October 2023-October 2024), Gen X (31.4%) accounted for the majority of used vehicle registrations compared to Millennials (30.9%). Of course, the data is still close, and what 2025 holds is anyone’s guess, but understanding even the smallest changes in market share and consumer purchasing behaviors can help dealers and manufacturers adapt and navigate the road ahead. Although there are similarities between Millennials and Gen X, there are drastic differences, including motivations and preferences. Dealers and manufacturers should engage them on a generational level. What are they buying? Some of the data might not come as a surprise but it’s a good reminder that consumers are in different phases of life, meaning priorities change. Over the last rolling 12 months, Millennials over-indexed on used vans, accounting for more than one-third of registrations. Meanwhile, Gen X over-indexed on used trucks, making up nearly one-third of registrations, and Gen Z over-indexed on cars (accounting for 17.1% of used car registrations compared to 14.6% of overall used vehicle registrations). This isn’t surprising. Many Millennials have young families and may need extra space and functionality, while Gen Xers might prefer the versatility of the pickup truck—the ability to use it for work and personal use. On the other hand, Gen Zers are still early in their careers and gravitate towards the affordability and efficiency of smaller cars. Interestingly, although used electric vehicles only make up a small portion of used retail registrations (less than 1%), Millennials made up nearly 40% over the last rolling 12 months, followed by Gen X (32.2%) and Baby Boomers (15.8%). The market at a bird’s eye view Pulling back a bit on the used vehicle landscape, over the last rolling 12 months, CUVs/SUVs (38.9%) and cars (36.6%) accounted for the majority of used retail registrations. And nearly nine-in-ten used registrations were non-luxury vehicles. What’s more, ICE vehicles made up 88.5% of used retail registrations over the same period, while alternative-fuel vehicles (not including BEVs) made up 10.7% and electric vehicles made up 0.8%. At the finance level, we’re seeing the market shift ever so slightly. Since the beginning of the pandemic, one of the constant narratives in the industry has been the rising cost of owning a vehicle, both new and used. And while the average loan amount for a used non-luxury vehicle has gone up over the past five years, we’re seeing a gradual decline since 2022. In 2019, the average loan amount was $22,636 and spiked $29,983 in 2022. In 2024, the average loan amount reached $28,895. Much of the decline in average loan amounts can be attributed to the resurgence of new vehicle inventory, which has resulted in lower used values. With new leasing climbing over the past several quarters, we may see more late-model used inventory hit the market in the next few years, which will most certainly impact used financing. The used market moving forward Relying on historical data and trends can help dealers and manufacturers prepare and navigate the road ahead. Used vehicles will always fit the need for shoppers looking for their next vehicle; understanding some market trends will help ensure dealers and manufacturers can be at the forefront of helping those shoppers. For more information on the Special Report: Automotive Consumer Trends Report, visit Experian booth #627 at the NADA Show in New Orleans, January 23-26.
The automotive industry is constantly changing. Shifting consumer demands and preferences, as well as dynamic economic factors, make the need for data-driven insights more important than ever. As we head into the National Automobile Dealers Association (NADA) Show this week, we wanted to explore some of the trends in the used vehicle market in our Special Report: State of the Automotive Finance Market Report. Packed with valuable insights and the latest trends, we’ll take a deep dive into the multi-faceted used vehicle market and better understand how consumers are financing used vehicles. 9+ model years grow Although late-model vehicles tend to represent much of the used vehicle finance market, we were surprised by the gradual growth of 9+ model year (MY) vehicles. In 2019, 9+MY vehicles accounted for 26.6% of the used vehicle sales. Since then, we’ve seen year-over-year growth, culminating with 9+MY vehicles making up a little more than 30% of used vehicle sales in 2024. Perhaps more interesting though, is who is financing these vehicles. Five years ago, prime and super prime borrowers represented 42.5% of 9+MY vehicles, however, in 2024, those consumers accounted for nearly 54% of 9+MY originations. Among the more popular 9+MY segments, CUVs and SUVs comprised 36.9% of sales in 2024, up from 35.2% in 2023, while cars went from 44.3% to 42.9% year-over-year and pickup trucks decreased from 15.9% to 15.6%. 2024 highlights by used vehicle age group To get a better sense of the overall used market, the segments were broken down into three age groups—9+MY, 4-8MY, and current +3MY—and to no surprise, the finance attributes vary widely. While we’ve seen the return of new vehicle inventory drive used vehicle values lower, it could be a sign that consumers are continuing to seek out affordable options that fit their lifestyle. In fact, the average loan amount for a 9+MY vehicle was $19,376 in 2024, compared to $24,198 for a vehicle between 4-8 years old and $32,381 for +3MY vehicle. Plus, more than 55% of 9+MY vehicles have monthly payments under $400. That’s not an insignificant number for people shopping with the monthly payment in mind. In 2024, the average monthly payment for a used vehicle that falls under current+3MY was $608. Meanwhile, 4-8MY vehicles came in at an average monthly payment of $498, and 9+MY vehicles had a $431 monthly payment. Taking a deeper dive into average loan amounts based on specific vehicle types—as of 2024, current +3MY cars came in at $28,721, followed by CUVs/SUVs ($31,589) and pickup trucks ($40,618). As for 4-8MY vehicles, cars came in with a loan amount of $22,013, CUVs/SUVs were at $23,133, and pickup trucks at $31,114. Used 9+MY cars had a loan amount of $19,506, CUVs/SUVs came in at $17,350, and pickup trucks at $22,369. With interest rates remaining top of mind for most consumers as we’ve seen them increase in recent years, understanding the growth from 2019-2024 can give a holistic picture of how the market has shifted over time. For instance, the average interest rate for a used current+3MY vehicle was 8.0% in 2019 and grew to 10.2% in 2024, the average rate for a 4-8MY vehicle went from 10.3% to 12.9%, and the average rate for a 9+MY vehicle increased from 11.4% to 13.8% in the same time frame. Looking ahead to the used vehicle market It’s important for automotive professionals to understand and leverage the data of the used market as it can provide valuable insights into trending consumer behavior and pricing patterns. While we don’t exactly know where the market will stand in a few years—adapting strategies based on historical data and anticipating shifts can help professionals better prepare for both challenges and opportunities in the future. As used vehicles remain a staple piece of the automotive industry, making informed decisions and optimizing inventory management will ensure agility as the market continues to shift. For more information, visit us at the Experian booth (#627) during the NADA Show in New Orleans from January 23-26.
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