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News Scan Mar 2014

Credit Card News, Economy News, Banking Industry News - Mar 2014

Fed holds course toward higher interest rates

Source: creditcards Category: Credit Card News
  • Interest rates will stay put for now to boost the still-recovering economy, but are likely to rise next year.
  • As expected, the rate-setting Federal Open Market Committee voted to keep its target federal funds rate the lever that controls variable rate credit card APRs and other short-term lending rates-- at its current level between 0 percent and 0.25 percent.
  • In projections released with the announcement,  a majority of the committee said that the rate target should rise in 2015, and should gain a full percentage point or more by the end of 2016.
  • The March statement deleted the reference to the unemployment threshold, shifting the focus to inflation, which remains well below the stated target.
  • The Fed's hopes for a healthier labor market increased, despite the less optimistic language about the winter slowdown in economic activity.
  • The majority of committee members predicted the jobless rate will be between 6.1 percent and 6.3 percent at year end, compared to a predicted range of 6.3 percent to 6.6 percent at the December meeting.
  • U.S. housing starts fell for a third straight month in February, but a rebound in building permits offered some hope for the housing market as it struggles to emerge from a soft patch.
  • Groundbreaking slipped 0.2 percent to a seasonally adjusted annual rate of 907,000 units.
  • Groundbreaking plunged 37.5 percent in the Northeast last month, indicating unusually cold temperatures continued to dampen housing activity.
  • Starts also fell 5.5 percent in the West, which was unaffected by severe weather. The weather explanation for the weak housing data is challenged by a 7.3 percent rise in starts in the South and a 34.5 percent jump in the Midwest.
  • While mortgage rates have dropped a bit and the weather is starting to warm up, housing will probably take a while to regain strength as high prices and a shortage of homes on the market keep out potential buyers.
  • Homebuilders were a bit optimistic in March but downbeat about sales over the next six months. Builders were also worried about shortages of lots and skilled labor, and rising prices for materials.
  • Groundbreaking for single-family homes, the largest segment of the market, rose 0.3 percent to a 583,000-unit pace last month. Starts for the volatile multi-family homes segment fell 1.2 percent to a 324,000-unit rate.
  • Permits to build homes increased 7.7 percent in February to a 1.02 million-unit pace. Permits for single-family homes fell 1.8 percent. Multifamily sector permits surged 24.3 percent.

Banks Wage 'Hand-to-Hand Combat' for Tech Talent

Source: americanbanker Category: Banking Industry News
  • Big banks know they're losing the war for talent, as many of their prospective new employees flee to startups and other technology firms.
  • Now some senior bank executives are responding by doubling down on old-school recruiting tactics.
  • That's not to mention the reputational hit that banks have taken since the financial crisis, the generally slow and conservative approach to innovation within the industry, or the regulations affecting banks' traditional profitability and allocation of resources.
  • Banks do not have a technology brand, banks needs to become better known for their technology efforts, especially in the minds of prospective employees.
  • The number of Americans filing new claims for unemployment benefits unexpectedly fell and hit a fresh three-month low last week, suggesting a strengthening in labor market conditions.
  • Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 315,000.
  • The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell 6,250 to 330,500.
  • Nonfarm payrolls increased 175,000 in February. They had risen 129,000 in January and gained 84,000 in December.
  • The claims report showed the number of people still receiving benefits after an initial week of aid fell 48,000 to 2.86 million in the week ended March 1. That was the lowest level since December.

Lack of Trust Threatens the Mobile Channel

Source: americanbanker Category: Banking Industry News
  • Bankers may gush all day about the mobile channel, but they have yet to offer the mobile product that has captured the love and loyalty of their customers.
  • Bankers who suggest that customers load personal financial information into a mobile wallet are finding near zero market acceptance.
  • The overwhelming majority of bank customers simply don't trust mobile wallet or personal financial management applications to keep their information safe.
  • Banks have an opportunity here to help their customers improve their management of mobile risk.
  • Banks can insist on passwords, installing software updates and other best practices. Banks can also conduct training classes to instill best practices in mobile security.
  • At the same time, banks can show their customers how to set up the new mobile finance tools.
  • Even the tech savvy Gens X and Y hardly know which parameters will help one customer save for college and another for a house.
  • Classes like these can help cement a deep and rewarding relationship between the increasingly mobile customer and his/her bank.
  • The irony in all this is that the channel most frequently regarded as a branch-busting replacement for face-to-face relationships might become the avenue for closer ties and more meaningful in-branch interactions between customers and bankers.
  • Consumer survey results show that the percentage of consumers using co-branded/affinity credit cards has fallen from 55% to 43% from 2009 to 2013.
  • But while hundreds of smaller and less profitable co-brand programs have been eliminated, more than 120 significant co-brand credit card partnerships remain.
  • In the U.S., they now compete against formidable own-branded credit card platforms catering to a wider audience, as well as a resurgent private label card segment.
  • Targeting the affluent is now the name of the game, but the supply of U.S. affluent households is not limitless, and opportunities exist to target an increasingly healthy middle class, experimenting further with rewards incentives and soft card benefits.
  • Trending of branded credit card and co-branded credit card usage over time by card association and demographic, and current co-brand/affinity card usage by 11 card types. - Via proprietary consumer research, analysis of the degree of importance co-branded credit card users give to features and benefits when signing up for a co-branded credit card.
  • Market sizing for U.S. general purpose credit cards and co-branded credit cards, as well as a market driver analysis including credit loan volume, delinquency, loans outstanding trending.
  • As shopping moves online and chip-and-PIN technology is being created to make card-present fraud schemes less successful, card-not-present fraud has not seen a slowdown.
  • SecureBuy and FICO have partnered to develop a solution that protects merchant customers from potential card-not-present fraud.
  • The solution uses cloud-based analytics from FICO that score transactions for fraud risk, technology that is currently used in FICO Falcon Fraud Manager.
  • The new product will be hosted within SecureBuy datacenters and offered to credit and debit issuing banks, ISOs and enterprise merchants.
  • It wasn't all that long ago (in bank years) in which banks were being heavily criticized for trying to offload basic teller functions to ATMs.
  • The financial aspects made sense, but the experience for a sizable portion of customers was less satisfactory than the (more- expensive-for-us) alternative.
  • That dynamic has changed before our eyes. For one, the user experience and functionality of today's ATMs are immensely better than they were only a decade or so ago.
  • That, along with ever-improving and ubiquitous mobile technology, has allowed a shift in many teller functions from our employees to our customers.
  • The kicker this time around is that customers actually like it, and increasingly, prefer it.
  • Does that mean branch employees will become unessential? I would argue, no. But the future value of our branch teams will not (and cannot) be in providing services that technology provides faster, cheaper, and more conveniently.
  • Our team members' future is being the "human interface" of increasingly online operations.
  • No technology yet is as effective at initiating and/or strengthening real relationships as smiles, personal conversations and consultations are.
  • U.S. auto sales in February finished even with the year-earlier period as hefty incentives to lure customers into dealerships.
  • February's sales fell less than 300 vehicles from last year's 1,193,872 light cars and trucks.
  • The annualized sales rate for the month finished at 15.34 million vehicles. It was the third month in a row that U.S. auto industry sales were weaker than expected.
  • However, late February's high customer incentives, the discounts to encourage buyers to visit showrooms, will carry over into March.