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Shifting Payment Dynamics

By Prasad Iyer

The U.S. consumer payments landscape is undergoing significant shifts as consumers try to regain their footing following the financial crisis.

Consumers are continuing to control household spending, striving to maximize value through management of liquid assets, and deploying payment methods more effectively. Those who have managed to remain employed, accumulate wealth, and pay down debt are now looking for higher returns on their liquid assets. Those less financially secure remain focused on deleveraging.

Financial institutions have the opportunity to implement new strategies that will enable both types of consumers to achieve their financial goals. Relationship-driven banking—and profitability measurement geared to relationship, rather than product—is the way to move forward.

1. MasterCard estimates based on analysis of data from U.S. Census 2006; Federal Reserve credit and debit owners 2009; MasterCard U.S. Consumer Tracking 2010; Awareness & Usage Study by AB Research, December 2010; FDIC Financial Inclusion Study, January 2010; Nilson Report #965, February 2011; Nilson Report #942, February 2010; MasterCard analysis of Lightspeed Research weekly respondent-level data for 2008, 2009, and Q1-Q3 2010; MasterCard Advisors, Discretionary Freedom Index 2010; MasterCard per card spending data from anonymized database 2010; Target Research Group, Financial Crisis Study, December 2008 and February 2011; U.S. Census Bureau Retail Sales 201;, Energy Information Administration U.S. Gas Prices, February 2010, and MasterCard, Debit’s Gain, Credit’s Decline: Not a Zero-Sum Game, March 2010.

Consumers are Increasingly Using Credit Cards to Manage Cash-flow
Preferred Mode of Payment by Segment

Sources: MasterCard estimates based on analysis of data from Target Research Group, Financial Crisis Study, December 2008 and February 2011, Nilson Report #965, February 2011, and Nilson Report #942, February 2010.