Bond CEO Says Secured Credit Cards Help Consumers Build Strong Credit Profiles
Firms that offer secured credit cards directly to customers will see a boost this year, Bond CEO Roy Ng writes in the new PYMNTS eBook, “2023 Payments New Year’s Resolutions.”
With the uncertain macroeconomic environment lingering, we predict that savvy consumers will choose secured credit cards to build credit, and turn away from traditional credit cards that charge high interest rates. This shift follows a surge in Americans’ credit card balance, which reached $925 billion in Q3 2022, up from $887 billion in Q1 2022.
Over 150 million individuals in the U.S. are considered financially at risk today, according to Experian and U.S. Census data. And many underserved customers are unaware of options that are available to them besides a simple debit card. There are around 700 million unsecured American Express, Discover, Mastercard and Visa cards in circulation, and about 6 million secured credit cards in circulation.
In 2023, we’ll start to see a surge in FinTechs and brands that offer secured credit cards directly to their customers at a time when these customers may need it most. Companies offering secured credit cards will establish a new recurring revenue stream based on interchange fees while establishing deeper connections with customers. We also expect to see greater consumer reliance on buy now, pay later (BNPL) as an alternative to unsecured revolving credit cards.
BNPL Will Get a Regulatory Makeover
Our BNPL prediction from last year — that 2022 would be the year of BNPL reckoning and growing defaults — came to be. Consumers continued to default on their BNPL loans, with 42% making late payments at least once, as inflation soared. Additionally, a recent poll shows that consumers skip paying rent, utilities, and even child support to make BNPL payments. That said, in an inflationary environment, financing options like BNPL, especially for big-ticket items, will continue to be attractive options for consumers.
With the CFPB’s plans to offer guidance as a first step toward regulating this space, BNPL companies will start adopting better consumer guardrails, like spending limits based on a more holistic view of a consumer’s finances.