No bank branch, no problem

No bank branch, no problem

Several of us here at Tematica have been waiting for the day when banks would recognize that if they embraced our Digital Lifestyle investing theme, the bank branch would one day go the way of the cassette tape – a fond memory of a bygone era. While banks have made strides over the years between direct deposit and ACH payments that have shrunk the need to visit a bank branch, the debut of online-only banks, such as Chase’s Finn, and mobile payment platforms such as Apple Pay and PayPal’s Venmo have eliminated a number of reasons people used to go to the physical bank. We’ve even seen Capital One partner with Peet’s Coffee & Tea as well as other coffee shops and other non-branch locations.

To us, the long-term question is what will these banks and related institutions do with all of the existing bank branches? You may want to see what kinds of properties your REIT investments are holding.

While Bank of America Corp. and JPMorgan Chase & Co. were gobbling up cheap deposits at their thousands of branches around the U.S., Citigroup was shrinking its footprint, focusing on a handful of big cities to right itself after its near-collapse.

Now the bank’s executives are convinced that many U.S. consumers are finally ready to leave the branch behind and fully embrace digital banking. Citigroup added roughly $1 billion in digital deposits in the first quarter, more than all of last year. About two-thirds of that total came from new customers, and a little more than half came from people who don’t live near any of the bank’s roughly 700 branches.

In recent months, the bank has reorganized its consumer unit, knocking down walls between banking and cards. It rolled out a new account through its mobile app aimed at credit-card customers. And it is targeting potential customers with mobile-banking offers tied to the rewards they get for cards.

“For the 21st century, we are glad we never got the ballast of an extra 4,000 branches,” said Stephen Bird, the bank’s chief executive of global consumer banking. “I’m certain it’s going to turn out to be a very fortuitous thing.”

Other big banks are ramping up their digital offerings too, but they are doing it alongside their giant branch networks. Citigroup is wagering that many of those locations—more than 4,000 each for JPMorgan and Bank of America—will become burdensome.

Source: No Branch, No Problem. Citigroup Bets Big on Digital Banking. – WSJ

TransUnion sees more consumer borrowing while delinquencies climb

TransUnion sees more consumer borrowing while delinquencies climb

It’s always somewhat interesting and somewhat perplexing to us here at Tematica when third parties point to rising consumer debt levels as a good thing. When we see modest wage growth mixed with a shrinking average workweek per the November Employment Report mixed with a Personal Savings Rate that has fallen since peaking this year in February, we see confirming signs for our Middle-Class Squeeze investing theme, which is not exactly a reason to get excited about the overall economy.

With TransUnion forecasting consumer credit to grow year over year in 2019, including subprime borrowers having more access to credit, we see very little to get excited about given that it is already forecasting credit card delinquency rates to move higher in 2019.


In TransUnion’s consumer credit forecast report for 2019, the company said an uptick in originations is good news for consumers and lenders. Lenders get to expand their book of business at a time when delinquency rates are low or at normal levels, and lenders have more confidence to take on added risk. For consumers, TransUnion said sub-prime and near-prime borrowers will have access to more credit, providing a mechanism to improve their credit scores. TransUnion noted that it expects the trend of managing risk exposure via loan amount and line management tactics for consumers with lower credit scores to continue next year.

There were a few outliers that TransUnion found pertaining to serious credit card delinquency rates and originations and mortgage originations. TransUnion is forecasting credit card delinquency rates to increase to 2.04 percent in the fourth quarter of 2019 compared to 1.94 percent in the fourth quarter of this year. That will likely be the result of a shift toward non-prime credit card holders, which will impact originations and result in an uptick of serious delinquencies. As for mortgage originations, TransUnion is forecasting a decline driven by an increase in interest rates and a low inventory of homes to purchase.

“Everything is relative in consumer credit, and an increase in sub-prime borrowers should not be worrisome at this time,” said Komos.

Source: Consumer Credit Orgs to See More Growth in 2019 |

Another headache for retailers, US credit card delinquencies on the rise 

Another headache for retailers, US credit card delinquencies on the rise 

We’ve talked a quite a bit about rising consumer debt levels despite stagnant wage growth over the last several months. Now we’re starting to see the fallout when consumers rack up too much debt and they can’t make their monthly payments – rising delinquency rates. In our view, this makes an already challenging situation for Cash-Strapped Consumers even more so and poses an additional risk to already struggling retailers. Keep in mind, we’re already seeing rising sub-prime auto loan defaults. Taken together, this paints an ominous picture for the upcoming holiday shopping season and is a reason to think Deloitte’s retail holiday sales forecast of up 4%-4.5% year over year could be overly optimistic.


According to a news report in The Wall Street Journal, Capital One, Synchrony and Alliance Data Systems have all seen the rate of delinquencies among credit card holders increase as a percentage of their overall loans during the last few months. The three companies, noted the Wall Street Journal, provide credit cards to consumers with less-than-stellar credit histories. Synchrony and Alliance Data are focused on the store-branded, private label credit card market.

The Wall Street Journal stated that Capital One is seeing loans that are more than 30 days delinquent increase to 4 percent of overall loans in August. In April, that rate was at 3.5 percent, noted the report. For Synchrony, the rate increased to 4.5 percent from 4.1 percent in the same time period and 5.3 percent from 4.7 percent for Alliance Data. The Wall Street Journal said the levels are among the highest the credit card market has seen in some years. For Alliance Data, the rate is at the highest since Feb. 2011.

Source: US Credit Card Delinquencies On The Rise |

Uh-oh! Subprime credit card growth leading to more missed payments

Uh-oh! Subprime credit card growth leading to more missed payments

We’ve seen this before, and it tends not to end well. This time around it happening not so much in housing, but in auto loans and credit cards… and just like last time, it’s not likely to end well. What it does mean is there will be more Cash-Strapped Consumer that aren’t able to tap those credit cards to eek on by each month. It also probably means problems ahead for auto companies like Ford Motor, General Motors and Fiat Chrysler that are already using incentives to entice buyers.


According to a report by The Wall Street Journal, which cited the TransUnion data, missed payments on credit cards that credit card companies issued more recently are at a higher rate than older credit cards. What’s more, close to 3 percent of outstanding balances on credit cards that were issued last year are at least 90 days behind on payments six months after the purchases were charged. In 2014, the paper noted the rate was 2.2 percent for credit cards issued in 2014 and 1.5 percent for credit cards issued in 2013.

The increased miss payments on the credit cards that were issued in 2015 moved the 90-day-or-more delinquency rate for the entire credit card industry to 1.53 percent in the third quarter, which WSJ said is the highest level since 2012.

The big culprit for the missed payments? Lenders increased the amount of lending it did to subprime customers starting in 2014 and continued to do so more recently. Citing Equifax, WSJ pointed out that, in 2015, credit card companies issued slightly more than 20 million credit cards to subprime borrowers, up 20 percent from 2014 and up 56 percent from 2013.

Source: Credit Card Companies’ Focus On Subprime Increases Rate Of Missed Payments – Credit Card Missed Payments Increasing |

Mastercard Data Show Chip Cards Are Worth the Wait When it Comes to Card Fraud

Mastercard Data Show Chip Cards Are Worth the Wait When it Comes to Card Fraud


While we may not be enthused with the longer check out times associated with the move to chip cards, data from MasterCard shows a few more minutes is making all the difference when it comes to credit card fraud.

Credit card fraud is down by more than 60% at Mastercard’s top five EMV-enabled merchants since chip cards were introduced late last year, according to the company.

Mastercard reports that 8 out of 10 of its U.S. cardholders have chips and counts 1.7 million chip-active merchants on its network — about 30% of total U.S. retailers. During a similar appraisal in May, Visa estimated 1.2 million stores were chip enabled.

Source: Mastercard: Chip cards cut fraud by 60% | Chain Store Age

Findings from Gallup confirm our Cashless Consumption investing theme remains on track

Findings from Gallup confirm our Cashless Consumption investing theme remains on track

Findings from a new Gallup poll confirm the continued shift in consumer payment preferences that sit at the core of our Cashless Consumption investing theme, particularly among younger respondents. No surprise as the “younger” generation tends to adapt far more readily to new technologies like those fueling mobile payments.  Gallup’s poll found that fewer Americans are paying for “all” or “most” of their purchases with cash compared to just five short years ago. More specifically, in 2016 just 10 percent of respondents paid for all of their purchases with cash, down from 19 percent in 2011, a nearly 50 percent decline! From a demographic perspective, respondents between the ages of 23-34 now use cash in just over 20 percent of their transactions, down from 39 percent five years ago.

Fewer Americans say they are making “all” or “most” of their purchases with cash, compared to what they say they did five years ago — a sign of a shift toward electronic payment methods as well as mobile payment apps. While few indicate they have given up cash altogether, more Americans say they are making merely “some” of their purchases with cash.

Twenty-one percent of young Americans — aged 23-34 — say they make all or most of their purchases with cash, down 18 percentage points from the 39% who say they used cash to that extent five years ago. While the economy has absorbed noncash payments for goods and services, among all age groups younger Americans have shown the most striking drop in using cash.

Source: Americans Using Cash Less Compared With Five Years Ago

China opens its markets to foreign bank card companies 

China opens its markets to foreign bank card companies 

Poised to be the largest population by 2020, Cashless Consumption is poised to get a big boost as global payment processing firms tap the China market. Analyzing how this impacts consumption and debt levels will factor into our Rise & Fall of the Middle class thinking.

China will allow foreign payment card companies to operate in the country under rules issued on Tuesday, potentially giving groups like Visa Inc (V.N) and MasterCard (MA.N) access to its 55-trillion-yuan ($8.4 trillion) card payment market.Visa and MasterCard, the world’s two largest credit and debit card companies, have been lobbying for more than a decade for direct access to China’s cards market, which is projected to become the world’s biggest by 2020.Bank card consumer transactions reached 55 trillion yuan in 2015, accounting for 48 percent of total social consumption, the People’s Bank of China said in a statement. The market is dominated by state-run China UnionPay Co Ltd.

Source: China opens its markets to foreign bank card companies | Reuters