Data Dive: Debt, Data Breaches And New Spenders

Some news cycles are, by nature, dark and cloudy, and with the passing of Senator John McCain, it seems that this news cycle will be one of them. A lion of the U.S. Senate and a genuine hero, Senator McCain will be deeply missed by all Americans.

While the payment and commerce news of the week fell far short of the tragedy in the national news, there were still some rather dark clouds dotting the horizon.

Banks $88 Billion Bad Debt Concern

The delinquent credit rate is ticking up, and banks are reacting by dialing back new account approvals.

Credit card debt made it over the $1 trillion mark in 2017, making it the third non-mortgage lending category to have surpassed the ten-digit mark in measuring consumer debt. Auto loans made it over the finish line first, followed by student loan debt.

According to the Financial Times, the good news is that delinquent credit card debt, overall, remains low.

The less good news is that those delinquency figures have been slowly but surely ticking up since 2015. Quarterly write-offs of bad credit card debt hit their high at nearly $19 billion in the first quarter of 2010 and fell to $5 billion in 2015. But in the last three years, they have gone up to more than $8 billion.

Last month, the Federal Reserve’s Board of Governors’ annual report of credit card banks’ profitability showed a return on assets falling in 2017 for the fourth year in a row. In fact, at 3.4 percent, it is one-third lower than it was in 2013.

All of this has combined to make banks apparently more careful about their credit card underwriting, as the rate of new card accounts opened has slowed to the low single digits in the last few quarters, and more large U.S. banks are getting stricter with their standards for approval.  Banks, experts note, are being squeezed by costs on both ends, with rising consumer delinquencies on one hand and merchants continually pushing for lower fees on the other.

“The banks are giving more to the merchants,” said Jason Goldberg, an analyst at Barclays.

Layered over those two issues, card issuers are also increasingly under pressure to offer generous rewards to attract new customers, with millennials often switching between cards to get the most out of rewards and interest rates, putting an even greater squeeze on revenue.

And the Credit Card Accountability Responsibility and Disclosure (CARD) act of 2009 has also played a role in lowering revenue, since it prohibits many punitive fees and limits banks’ abilities to raise customers’ rates.

“Issuers lost their ability to dynamically re-price and their ability to generate fee income,” said Brian Riley of Mercator Advisory Group.

Consumer debt itself continues to creep up as a category, hitting $13.29 trillion as of the end of June, having increased for the last 16 consecutive quarters

T-Mobile’s Data Breached

Another day, another data breach.  This time around, it was T-Mobile disclosing on its website that hackers were able to get into the company’s network to steal customer information.

According to a post on the wireless carrier’s website, on August 20 its cybersecurity team discovered and shut down unauthorized access to certain information, and reported the incursion to the authorities.

On the upside, T-Mobile said that the hackers didn’t steal financial information, social security numbers, or passwords in the hack.

Instead, according to the company, some personal information may have been exposed, including names, billing zip codes, phone numbers, email addresses, account numbers and account types.

“Out of an abundance of caution, we wanted to let you know about an incident that we recently handled that may have impacted some of your personal information,” T-Mobile wrote. “We take the security of your information very seriously and have a number of safeguards in place to protect your personal information from unauthorized access. We truly regret that this incident occurred and are so sorry for any inconvenience this has caused you.”

It is still unknown how many customers may have been impacted by the breach, though early estimates put it around 2 million people (out of T-Mobile’s 77 million member customer base).

And finally for some good news.

A New Generation Of Spenders Rising

Move over millennials — there is a new generation of cool kids rising and getting ready to dominate shopping.

Say hello to Generation Z, which USA Today says will dominate 40 percent of all shopping by 2020.

Engagement Labs, a data and analytics company that assists marketers, says the group of people born between 1997 and 2016 are 86 million strong and influence $600 billion of spending by families. This group is also big on conversations — both online and offline — with Engagement Labs finding them to drive 19 percent of purchases.

“You see an advertisement, people know it’s a paid endorsement,” says Brad Fay, Engagement Labs’ chief commercial officer. “It’s only got so much credibility … the most powerful messages are ones that come from someone you know.”

EngagementLabs further found — through conversations with thousands of teenagers — that their favored topics of conversation across a 24-hour period included gadgets, drinks and snack foods. Fay noted that they found Generation Z to be a very social group of people. As a result, digital devices from the likes of Apple and Samsung are going to be popular with this group, as are food and beverage brands.

“Coca-Cola, McDonald’s and Pepsi are all brands you typically consume with other people, face to face, so they, too, could be thought of as social brands,” said Fay. He noted that young people aren’t too keen on unhealthy products like soda. “Both Coke and Pepsi are taking significant declines, and I think that is symptomatic of a shift away from the more sugary types of beverages toward a wider diversity of healthier types of beverages.”

So why does this count as a ray of silver lining in a darkish news week?

Well after a decade of reading pieces scrutinizing the behavior and habits of millennials — right down to the kind of toast they eat — we’re all relieved to finally have a new group of people to speculate about.