We are seeing a surge in new credit card trends across the US. These trends are interesting ways at getting fundable, and it’s time we took a look at them. In this episode, Merrill Chandler looks at these 5 new trends and gives a quick analysis of each. We find out what sectors are most affected by these changes and how they impact your fundability™. Tune in for more information on getting fundable right here.
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5 Credit Trends Every Savvy Borrower Needs to Know
First of all, this episode started out as a news update that we do. If you aren’t aware, join us on our Get Fundable Facebook page on Tuesdays, noon at 12:30 Mountain Time, where we do all these great industry updates of what’s going on with lenders, banks, etc. What we talked about in this episode had such a high impact over the next few years on the trends on where the borrowing is going. There are some crazy things that I talked about.
One of the things we talked about is the trend towards contactless or digital wallets using Apple Pay, Apple Watch, Google Wallet, all those things. The prediction based on the current trend is that by 2025, there will be $10 trillion a year using contactless digital wallet technology where it was $5.5 trillion in 2020. That’s doubling over the course of five years. That is unheard of transformation in the technological modalities that are being implemented in purchasing. Do not miss this episode. We’re going to go through these five major trends. It’s going to shake you to the foundation and it’s cool as hell. I’ll see you on the inside.
Things are moving so fast out there in the marketplace. With all of the sources, trade rags, lender updates, underwriting companies, and the intel that accumulates in my inbox and the seminars that I attend, it’s like several major players every week are announcing something new. There are five major trends that are very cool but if not navigated well, are going to ruin a borrower’s fundability™. I’m going to go through these specifically and cover each one. There’s some cool stuff that’s coming that isn’t going to ruin fundability™. It’s going to enhance it and give people many more opportunities. Let’s hit this.
New Credit Options
Number one, there are new credit options that are coming out. First of all, Apple Pay came out years ago. You just hold your wallet up and there’s what they call token transactions. If you know Apple Pay, Google Pay or any of them, they don’t use your personal credit card. They use a token that translates your sixteen-digit credit card number into a different number that’s recognized in the system and reduces fraud.By 2025, there will be $10 trillion a year using contactless digital wallet technology where it was $5.5 trillion in 2020. Click To Tweet
There are way more of these types of processes, and the banks are onboarding this. One of them that’s entering is JPMorgan Chase. It’s preparing its first new credit option like lending people money to the invisible marketplace. We’ve been talking about now for over a year these 50 million invisible potential borrowers. We talked about how some of the big banks like Wells Fargo, Chase and Bank of America told the administration that they were willing to do this, play this game, and offer up their data to this national credit registry that Biden proposed.
They’re racing to the market because JPMorgan Chase is offering a credit instrument to what are also known as unbanked or underbanked borrowers. These evolving forms of credit that Chase is proposing are going to be worked from payment histories other than credit instruments. We’ve talked about leases, utilities, cell phones, as well as bank balances. If you’ve been to my bootcamp, we talk hugely about the 1247 model. If you don’t know what we’re talking about, we can’t cover it here. Go to the Get Fundable Bootcamp and come and join us because they’re using bank balances to drive new credit instruments.
Chase is first off to the mark here but it’s coming. This 1247 model, it’s worth finding out what that means if you haven’t been to the bootcamp. If you have been to the bootcamp, did we call it? We’ve been talking about this 1247 model for over a year. Now, credit banks and lenders are using these 1247 models to give the unbanked or these invisible borrowers the opportunity to establish credit with the banks.
Number one, new credit options are coming out, both driving the potential borrower marketplace. Fifty million borrowers are going to be coming into the markets. That’s amazing for our economy, retailers, unbankable and invisibles because until now, the only access they have are the high-interest predatory lenders, rent-to-owns and check-cashing places at 36% interest per week. It’s a freaking nightmare out there. Now, the big banks are moving to support this marketplace. It’s just going to be a boom for everybody involved, especially those who have been unbankable until now.
The Rise Of BNPL
The second thing is the rise of Buy Now, Pay Later, BNPL. Traditional credits are buy now, pay later but why is it becoming its own brand? Remember how we talked about credit card processors? Visa, Mastercard, Discover and American Express are all processors. There’s a new group of processors coming on board by the name of Klarna, Affirm and Afterpay. Afterpay is being acquired by Square because it’s becoming fast and furious. These buy now, pay later processors are interest-free.
If you’ve ever gone to a furniture or mattress store and they say, “Buy now, pay later.” That’s where this language is coming from where, “90 or 365 days, same as cash.” Even the terms are getting fuzzy. We call it the credit space, but that’s why they’re calling it buy now, pay later. More and more of these processors like Klarna, Affirm and Afterpay are saying, “We will carry the paper interest-free at traditional retailers, not to furniture and mattress stores.”
Be on the lookout. We’ll be talking about this over the next months and years. Watch for these other processors because you may be able to pay for things without interest. That buy now, pay later is growing. Even Visa as a processor is opening up an interest-free payment installment plan. It’s like straight out of the old days. I’ve been shaming the buy now, pay later group because they put it on a revolving account.
In buy now, pay later, some of these are revolving. Some of them are terms. Notice where it says, “Interest-free payment installment plan.” That still falls within our fundability™ model but if the buy now, pay later model is revolving, then it’s going to be a tier-four junk card. Don’t do it. We still got to operate by the rules of fundability™. The higher the tier, the better the offering, but this offering from Visa is an interest-free payment as an installment loan. We love it. We’ll sign off on that one.
New Types Of Rewards
Number three of the five, new types of rewards. This is awesome. First of all, the Apple Card broke new ground. Apple Card said, “You can have the Apple Card on your phone. If you wave it past the little insignia that looks like radar and pay for it, Apple is delivering custom rewards back to the app on the purchase daily.” The second you do a purchase, they are delivering 1% back, 2% back, free miles or whatever it is for in-app use on the same day. Apple has innovated that but it’s going way beyond that.Are you a savvy borrower or business borrower? There are two different optimization paths for each one of those. Click To Tweet
Crypto rewards are starting to grow. We’ve been talking about crypto for a while. There are certain rewards that are being done in crypto. Interestingly enough, people are moving more and more to gamification. They’re incentivizing the purchase for you to hit custom rewards. If you want to go to Hawaii on a flight on Southwest or Delta, they’re data mining to see who is doing what and where. Let’s use this as an example. I have a Southwest business card. Every time I purchase a plane ticket on Southwest, I get my points. I get all these benefits and offerings. They are gamifying it for me and say, “Pick a destination that you want to go to.” It keeps reminding me, “You’re only 1, 400 p0ints or 2,600 points from your Hawaii trip.” They’re starting to offer customized perks based on your data mining.
When it comes to fundability™, all of that is good news as long as I’m using my Southwest business card, which doesn’t report to my personal profile, rather than to use a lower value personal card. If you’re a savvy borrower instead of a business borrower, then there’s a whole different strategy. We’ll have more on that in later updates. Just know that they’re offering all kinds of customer-focused, borrower-customized rewards, incentives and gamification to get you there. It’s awesome. It’s like the gold rush. Everybody is screaming into the space.
I started talking a little bit about tokens. They’re using tokens now. They’re using the app and/or the Apple Watch or other devices that are going to allow you to purchase using the token. You don’t even have to pull out your damn credit card anymore. Some people already use this but they don’t want the credit card and the sixteen digits in play. Lenders are pushing heavily on how to use that little radar token that has Apple Pay, Google Pay, etc. and use your watch for your purchases using those tokens. I have a number here. Visa transaction data said tokens reduce fraud by 26% compared to regular online transactions when you use your traditional sixteen-digit number from your credit card. That’s another 26% reduction in fraud just by using tokens.
Here’s the last one, number five. The research is calling it creative segmentation. It’s like they’re customizing and gamifying bonuses for you based on your borrower behaviors. They are also giving you a choice of how they are customizing rewards for groups you associate with. A perfect example. Daylight is catering to the LGBTQ+ community, offering cashback rewards for going to LGBTQ+ allied businesses. There are target groups, students, immigrants with individual featured and rewards based on that. There are what I like to call vanity instruments. There’s one for a luxury card that glows in the dark. The luxury card is being issued on a Titanium Mastercard that’s promoting how heavy it is. Since everybody is going to this, sometimes you want to pull out a chunk of metal instead of a plastic card.
They are customizing everything. Google Wallet, Apple Pay, everybody is customizing to the borrower. We’ve been talking about borrower behaviors for years. The rest of the world hasn’t been talking about borrower behaviors. Now that we have a decade’s worth of borrower behaviors and trended data, everybody is using this trended data to start making customized offerings to you.
First of all, we have to know, “Are we a savvy borrower or business borrower?” There are two different optimization paths for each one of those. If you’re a business borrower, then that’s what the bootcamp second day is all about. If you’re a savvy borrower, then we want the highest possible rewards and lowest possible interest costs. Both of those, you can find here.
It has been my pleasure to give you this update. This stuff is so much fun to stay up with. You get it here on Tuesdays, noon at 12:30, Mountain Time. I’m your guide to the Get Fundable universe. Please like, comment and share. This is cool stuff. Make sure that you’re giving this to your friends, family, associates, and people who need to know. Stay in tune with what’s going on out there. I love you, guys. I will see you at the same fundable time and channel next episode on Tuesday, noon at 12:30, Mountain.
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