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News Scan Jan 2014

Credit Card News, Economy News, Banking Industry News - Jan 2014
  • Robust household spending and rising exports likely kept the U.S. economy on solid ground in the fourth quarter, but stagnant wages could chip away some of the momentum in early 2014.
  • Gross domestic product probably grew at a 3.2 percent annual rate. While that would be a slowdown from the third-quarter's brisk 4.1 percent pace, it would be a far stronger performance than earlier anticipated.
  • Consumer spending is forecast rising at a pace as fast as 4 percent, which would be the strongest in three years.
  • Consumer spending, which accounts for more than two-thirds of U.S. economic activity, advanced at a 2 percent pace in the third quarter.

Fed holds off on rate increases

Source: creditcards Category: Credit Card News
  • The moderate pace of economic improvement means that interest rate hikes -- the kind that will boost credit card APRs -- remain a considerable way off in the future.
  • As expected, the rate-setting committee voted to leave its current target for the federal funds rate untouched at a range of 0 percent to 0.25 percent.
  • The rate on overnight loans between banks is closely linked to banks' prime rate, the benchmark used for setting APRs on most U.S. credit cards.
  • The Fed has kept the federal funds rate -- its primary tool for influencing the economy -- near zero since 2008 to support recovery.
  • The U.S. Postal Service should consider fixing its massive budget shortfall by offering financial products such as debit cards, remittances and loans to underbanked consumers, according to a paper issued by the agency's Office of the Inspector General.
  • Postal Service could raise approximately $8.9 billion in additional revenue and reach potentially 68 million adults by offering such products, including international money orders and transfers.
  • The move could introduce a hefty player to the banking industry at a time when many bankers are cutting back or increasing costs on certain services largely due to heightened regulation.
  • However, the OIG report says the suggestion is not meant to make the Postal Service a competitor to banks, even suggesting it could partner with institutions.
  • The Postal Service could help financial institutions fill the gaps in their efforts to reach the underserved," the report said.
  • While banks are closing branches all over the country, mostly in low-income areas like rural communities and inner cities, the physical postal network is ubiquitous.
  • Other countries, including Great Britain, Japan, Germany and China already use their post offices to offer savings accounts and other products.
  • If even 10% of what the underserved currently spend on interest and fees instead went to more affordable offerings from the Postal Service, it could lead to $8.9 billion in new revenue per year," the report said.
  • What if you could use near real-time analytics to entice your customers currently in the store? The use of in-store data as a way to increase sales is one of the most cutting-edge fields in analytics.
  • In-store analytics are primarily used to understand the consumer's behavior within the retail store: The order in which they buy products, how much time they spend in the store, their shopping path and other behaviors.
  • This approach has also been used effectively in the online space to design websites and determine ad placement.
  • Retailers may use in-store video to understand the customer's shopping path, such as the order and process of how consumers fill their baskets during a shopping trip.
  • This provides important intelligence about product placement and store layout that optimizes convenience for the customer and drives sales for the retailer.
  • In-store cameras have also been used to determine how to optimize staff allocation and to understand consumer behavior in the check-out lanes, including which items are bought near the counter or how often a customer changes lanes if lines are long.
  • The act of using in-store data analytics to drive sales will be most successful when data from many systems can be shared, integrated and compared.
  • U.S. consumer credit in November increased by the smallest amount in seven months as credit card usage slowed sharply, a sign that households were continuing to work through their debt load.
  • Total consumer credit rose by $12.32 billion to $4.81 trillion. That was the smallest gain since April.
  • October's consumer credit was revised to show a $17.90 billion increase rather than the previously reported $18.19 billion advance.
  • Revolving credit, which mostly measures credit-card use, rose by $457.80 million in November after surging $3.98 billion in October.
  • Nonrevolving credit, which includes auto loans as well as student loans made by the government, increased $11.86 billion in November.
  • That was also the smallest rise since April and followed a $13.91 billion increase in September.
  • Companies added 238,000 jobs last month after an upwardly revised 229,000 in November.
  • It was the largest monthly gain since November 2012 and brought the three-month average of corporate hiring to nearly 225,000 a month, the fastest such pace in 21 months.
  • Applications for U.S. home mortgages rose 2.6 percent in the latest week, rebounding from a 13-year low set at the end of last year.
  • Since the Fed said it would begin to slow the program when certain economic indicators met its targets, some traders had previously taken strong data as a negative because it suggested a faster end to the program.

Mind-Sets that Hold Banks Back

Source: americanbanker Category: Banking Industry News
  • The fact that the industry we find ourselves operating in today is starkly different from the one we worked in just a decade or so ago is ignored.
  • Many Historians also forget that the "good old days" weren't always good. Stress and crises existed then, too. But having survived it, they tend to romanticize the past.
  • Truth be told, we all have some of these traits in us from time to time. And that's not always bad.
  • Appropriate cynicism guards against gullibility. Recalling past mistakes may keep us from repeating them.
  • And there's little doubt that the facilities and technologies of tomorrow's banks will look different than they do today.
  • Banks may be similar but none are identical. The strategies each choose, and the individual investments and divestments they make to get to where they want to be, will assuredly vary.
  • But change is coming to our organizations. It will seem too much, too soon for some of our team members and not enough or fast enough for others.
  • We need our more change-averse team members to realize that to stand still is to fall behind. Conversely, our more impatient peers need to remember that building our future bank shouldn't inadvertently damage our current one.
  • And successful operations have far more to protect than newer and/or more desperate competitors.       
  • Teams that understand what changes their companies are – and are not – making along with why those choices are being made tend to better embrace and execute those changes. Make sure your team is one of them.