PULSE Perspectives - June 2022

Addressing Card-Not-Present Declines
PYMNTS.com, April 2022

PYMNTS reports that card-not-present (CNP) transaction declines are three times higher than declines with card-present transactions. That’s according to Bank of America SVP and Payment Network Executive Sara Walsh, who said better lines of communication between issuers and merchants will heightened data analysis and improve the consumer experience. A recent study found that 44% of falsely declined shoppers stopped or reduced shopping with that retailer.

PULSE Perspective: PULSE is introducing enhanced transaction decline categories in October that issuers transmit to merchants when a transaction is declined. This data will help merchants make better decisions based on the decline reason and reduce excessive reattempts for the same transaction. Additionally, to help issuers enhance decline decision making, PULSE has been gathering issuer input on plans for enhanced data sharing between merchants and issuers.

 

Fed Raises Rates by Another Half a Point
Bloomberg, April 2022

As expected, members of the Federal Open Market Committee (FOMC) increased interest rates by 50 basis points at their May meeting. The action coincides with efforts to shrink their balance sheet at a rate of $95 billion per month. Bloomberg reports the FOMC is acting with greater urgency as inflation continues to surge. U.S. consumer prices rose 8.5% in March from a year earlier, marking the biggest increase since 1981. The median estimate foresees the FOMC raising interest rates 1.9% by the end of 2022 and 2.8% by the end of 2023.

PULSE Perspective: While rising interest rates could boost interest income, they also tend to cool the economy, increasing credit risks for issuers. Debit has historically remained strong as a consumer payment option when compared to credit during challenging economic times. Considering this, issuers should consider launching campaigns to promote the benefits of using debit to help customers manage their money.

 

Financial Institutions and P2P
CNBC, April 2022

CNBC recently explored whether P2P apps might prompt consumers to give up banks. A survey by Nerdwallet found that two-thirds of mobile payment app users keep a balance in their mobile payment app accounts, at an average of $287. This is far lower than the median bank account balance of $5,300, according to the Federal Reserve’s Survey of Consumer Finances. Ted Rossman, senior industry analyst at Bankrate and Creditcards.com, says he considers P2P apps a supplement to a traditional account with an institution, rather than a replacement.

PULSE Perspective: Consumers should be educated about the risks of storing funds with P2P apps, since they typically lack FDIC insurance. Issuers, program managers and sponsor banks can find opportunities to work with P2P and other providers to increase accessibility and security of balances.

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