Leading personal finance comparison site, MoneySmart, has consumer insights that indicate the potential for financial institutions to redesign credit card reward schemes to fit expenditure and lifestyle patterns of the "new normal". Its recently concluded survey involving over 2,000 participants in Singapore, has led to recommendations of tweaking cashback and points redemption schemes to index higher on online expenditure benefits. COVID-19 restrictions have seen a shift to more online category spending, and air miles accumulation is no longer a priority at present. MoneySmart believes this informs a redesign that helps banks offer credit card products that are relevant to how customer habits have evolved amidst the global pandemic.
SINGAPORE, June 24, 2020 /PRNewswire/ -- In light of the global COVID-19 pandemic, Singapore's government rolled out measured restrictions commensurate with the rate of infection within the country. These steps began in the 1st quarter of 2020 and escalated to a period called "Circuit Breaker" which saw the temporary closure of businesses, retail shops, F&B outlets, and schools till 19th June 2020.
Even now as the country begins to re-emerge and open, spending habits of consumers have evolved towards online expenditure where possible. Businesses have responded to this, by strengthening online presence and service offerings to meet demand and circumstance. Many F&B outlets continue to offer delivery options despite dine-in restrictions being lifted, and retail stores will still have to rely on their online platforms to move sales as crowd restrictions remain enforced.
Survey results saw a shift in category spending
MoneySmart's annual credit card survey involving over 2,000 respondents, with an additional smaller study done to track the evolving situation, has concluded that credit card users still deem card usage benefits as a key aspect of why they use credit cards during this time. Card usage on the "necessities" categories such as groceries and food delivery have become much more frequent, whilst categories like travel and retail have greatly decreased.
Some highlights from the analysis include:
- Cashback credit cards remain the most popular type of card amongst Singaporeans during this time
- Air miles credit cards have seen a decline in usage/subscription as travel activities and expenditure are limited due to the pandemic
- Rewards credit cards with redemption schemes have risen to become the 2nd most popular card type used since the pandemic began
- Groceries, online shopping, and dining are the categories that see the highest credit card expenditure by consumers during this period
- Note: F&B outlets were mostly closed during the survey duration, which implies the use of credit cards for food delivery services
- Retail spending in physical stores not possible (or restricted) during this period, implying a major shift to expenditure online
- The largest majority (33% of respondents) expressed that the motivation to sign up for a credit card was influenced by the sign-up promotion or incentive offered
- 22% of respondents also indicated that they applied for a credit card when they were confident of meeting the card's criteria for rewards / cashback / bonus interest based on their spending habits
How can banks redesign cashback and reward points schemes to better cater to consumer spending?
Fine-tune rewards/cashback for popular categories
Given that groceries, online shopping and dining (via food delivery platforms) are the categories that saw the highest credit card expenditure by consumers during the period of restriction, financial institutions can consider placing greater emphasis on rewards or cashback accrual in these categories. This would be better aligned with customers' motivations around card usage and place emphasis on where the market's expenditure is focused on at present. The expectation is that these trends will persist for an extended period as governments encourage cautious lifting of COVID-19 restrictions.
E-redemptions to meet the current trend
Rewards schemes that offer redemption of points for popular choices such as shopping vouchers and dining vouchers could pivot to allowing for equivalent redemptions of online promo codes or e-vouchers at those same merchants. Such a shift could facilitate continued expenditure in the online shopping space or food delivery via online platforms such as Grab and Foodpanda as the trend indicates.
Redesign bonus interest multipliers
Bonus interest multipliers on savings accounts with credit card tie-ins can also be redesigned with the "new normal" expenditure trends in mind. Bill payments, which can increasingly be done online, also featured high on respondents' lists of present card usage and are a major factor in most bonus interest criteria. These bonuses can shift more in favour of online expenditure patterns we now see as the norm moving forward.
Online comparison sites continue to be the main channel for card applications
Following on-trend patterns seen in 2018 and 2019, online comparison sites such as MoneySmart continue to be the primary channel by which customers are applying for new credit cards. 47% of respondents indicated this preference, coming in nearly double that of the next most popular option -- going directly to bank websites. Both these top 2 channels in the survey support the shift in consumer behaviour towards online banking and application of financial products, made all the more relevant in a pandemic.
In light of this, MoneySmart continues to aggregate the best credit cards in Singapore, and strives to provide the most informative listings, tools and calculators for its users. By simplifying the decision-making process, MoneySmart allows customers to apply for the right credit card that maximises their spending habits, without them needing to leave the safety of their own homes.
Insights cited in this document are taken from the MoneySmart Credit Card Surveys 2020, unless otherwise stated:
- In response to the global COVID-19 pandemic, Singapore's government implemented restrictions in a period known as the "Circuit Breaker" that started on 7th Apr 2020 and lasted till 1st June 2020.
- These restrictions mandated Work From Home for all non-essential services in Singapore, which included F&B outlets, retail stores, fitness centres and entertainment spots amongst others.
- During these period, Singapore residents turned online for essentials - food delivery, groceries and online shopping for most items
- 70.24% of respondents from MoneySmart's consumer research chose "Cashback" credit cards as their preferred type of credit card
- 22.59% of respondents chose "Airmiles" credit cards as their preferred type of credit card during the Jan to Mar portion of data collection, however since then "Airmiles" credit card applications have seen decline in light of travel restrictions imposed globally.
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