A transformation is taking place when it comes to affluent individuals and their spending habits. According to recent
Chana Schoenberger, Editor-in-Chief, American Banker sat down with Mike Cherny, Head of Citizens Wealth Management at Citizens, Bunita Sawhney, Chief Consumer Product Officer at Mastercard, and Doug Villone, Head of Cards and Partnerships at Barclays US Consumer Bank to talk about how banks can cater to this desire to prioritize experience spending and support customers to do more of what they love.
Watch this on-demand video to learn about:
- The motivations behind the shift from image to intentional spending
- How banks are responding and the future product opportunities they have
- The offerings that are resonating the most with these consumers
- What the impact on the customer relationship looks like now and in the future
- How banks should think about wealth transfers and generational differences
Transcription
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Chana Schoenberger (00:21):
Hi, I am Hannah Schoenberger. I'm the editor-in-chief of American Banker, and I have with me here several guests to talk about the state of affluent consumers. I've got Doug Valone, head of cards and partnerships at Barclays. Thank
Doug Villone (00:37):
You.
Chana Schoenberger (00:37):
In the US Consumer Bank, I have Benita Sani, chief Consumer Product Officer at MasterCard, and then Mike Journey, who is the head of Citizens Wealth Management. Welcome.
Mike Cherny (00:47):
Thank you for having us.
Chana Schoenberger (00:48):
Thank you. Yeah,
Mike Cherny (00:49):
Thank you.
Chana Schoenberger (00:49):
So just to kick off here, what sort of factors are we seeing in the growth of wealth among affluent consumers globally?
Doug Villone (00:58):
When I look at our credit card portfolio, and certainly this is supported by data that you, I'm sure see in the news, the affluent consumers driving the economy, a small percentage of consumers are making up nearly half the spending. In America. We see that as well in the amount of spend we see on the credit card portfolios we have, and we issue for airlines and hotels and cruise lines, and so they continue to propel the economy.
Bunita Sawhney (01:26):
I would just chime in to give you that global perspective. We see the affluent segment controlling 3.2 trillion of opportunity, so it's a clear area of focus. We found this segment to be more resilient, particularly in uncertain macroeconomic times and certainly in terms of uncertainty and geopolitical times from a payments perspective. On an average, they're spending more than two times the average consumer. And as you get into the higher echelons of wealth, high net worth and ultra high net worth, it's multiples of that. So they have a very significant buying power for a good reason for us to focus on them.
Mike Cherny (02:04):
And what's interesting to see Hana is how these clients became affluent in high net worth. So if you think about specifically in the wealth space, we've had over the last decade returns of over 180% of the s and p 500. Think about real estate returns over the last decade. Think about just tech and entrepreneurialism in the US that's continuing to thrive and grow the economy. So it's one of those things where, and I know we're going to talk about the great wealth transfer as well. It's one of those things where the way people think about their wealth today and the folks that are going to be inheriting these assets is very different than the way people have thought about wealth in the past.
Chana Schoenberger (02:45):
When you talk about the stock market, I think the statistic is something like 50% of Americans own stocks, right? So 50% of Americans don't own stocks, right?
Bunita Sawhney (02:55):
True,
Mike Cherny (02:56):
Yeah. That's reality. But now you compare that to say Europe and Asia, where in Europe it's 25%, and you think about the Asian population, which by the way is on the heels of the us. In the US we have about seven and a half million millionaires. Asia's right behind us, and the way they think about whether it's banking and investing is very different than Europe and the United States. So interesting the economy there.
Chana Schoenberger (03:21):
Yeah. Regional differences for sure. So North America versus other regions, what is most compelling about the rise of the high net worth and mass affluent markets, and what do you see banks doing to respond to these states
Doug Villone (03:34):
From a consumer payments perspective? One of the things we're seeing in the credit card industry is a proliferation of premier products, products that provide, they tend to have high annual fees, but for the consumer, it's serving probably not all that high, but that unlock very specific and boutique benefits that really cater to those consumers. And so that could be access to inventories of hotels, it could be experiential things that they can unlock certain gifts and accelerators, et cetera. But we're seeing whether it be airline programs, whether it be hotel programs, retail programs, et cetera. I think what you've seen is these products that are, again, catering to this group of consumers we're talking about. And again, I think there's some really, really interesting examples of that across the payment space. And so while it's maybe not allotted consumers that product fits because they do have such exponential spend, it's a great unlock for the banks that provide those products.
Chana Schoenberger (04:43):
We're running out of colors to put on cards, the black card, the platinum
Doug Villone (04:47):
Card, the different metals,
Chana Schoenberger (04:49):
The metal cards that you can't shred when you get a new one. Exactly. What is the highest color? Now we've gone beyond color.
Doug Villone (04:56):
Yes,
Chana Schoenberger (04:57):
We've gone to intention.
Doug Villone (04:58):
Yeah, there's lots of titanium out there today and lots of clink when you drop them. But again, there's definitely a group of consumers who see real value in these products, and they want a product that again, unlocks maybe experiences that you don't normally get through the mainstream products center, the market today, which were at one point premium products. Right? Right.
Bunita Sawhney (05:23):
Yeah, I would build on that. I think that to your point about North America consumers and European affluent consumers, there's some consistencies that I think we've spent time. I think we all spend time really focusing on understanding the segment's needs. And where I think the consistent value creation comes from is in making sure that we're delivering on experiential benefits above and beyond the average commodity. And those are ways in which we can differentiate one value proposition to the other. This consumer is extremely discerning. They understand and value their time. They understand and know the value exchange that they have with their financial institution, and so they have higher expectations that we have the opportunity to meet through superior value propositions. What I think is interesting about them, where these consistencies are as the categories that matter them the most are actually not that different, by the way. Not even from an affluent spectrum perspective to the average consumer. They care about travel experiences, they care about dining, they care about entertainment, but how we deliver those benefits and the way in which we reach them, the channels in which we serve them, I think where we can really, really make sure that we're getting to the personalized experience they expect from us.
Mike Cherny (06:31):
The phrase we use is value versus status, and you're seeing that across the affluent and high net worth spectrum. The reality is if you look at whether it's in the US or in Asia or in Europe that we talked about, it really doesn't matter where you live. The value versus status is, I think across the globe, how we deliver it is very different. So for example, we talked about the US where typical the investor would be a little more aggressive than Europe, 50% in stocks in the us, 25% in stocks in Europe, but also, for example, the way that the affluent client and high net worth client in Europe is tended to IE, they prefer more in person advice where you look at Asia and in the US it's digital first human backed. So the way we approach these clients can be very different, which is an interesting situation to look at.
Chana Schoenberger (07:24):
Yeah, it's a great way to say it because they just don't, Americans just don't feel the need to talk to someone. Fine.
Mike Cherny (07:32):
And I think as you think through the next generation, millennials, gen Xers and Z, they were all born and raised in a digital world. So in order to win in the space, I think it's super critical
Doug Villone (07:44):
To
Mike Cherny (07:45):
Have that mindset of it is an omnichannel approach, but how do you marry all of those channels together, but always leading with digital first.
Chana Schoenberger (07:54):
Right. No, it makes sense. So in terms of what people are spending money on, so we've all read the research about folks are valuing experiences over things. So the actual thing, and yet we all seem to be buying things. When I go to Costco, the line is just as long, what's going on here?
Doug Villone (08:15):
And I'd say I might've answered the question even a little differently a few months ago. We've obviously seen some shift in spend as people have potentially pulled forward certain purchases of durable goods that they may be concerned prices are going up on
Chana Schoenberger (08:27):
Because of the tariffs.
Doug Villone (08:29):
That could be a reason. But to your point about experiences, I mean in a couple of weeks we will be hosting over at Wimbledon to get a ticket to Wimbledon is not an easy thing to do, especially if you want to be in center court. The price of those tickets every year goes up if there's a Formula One event, if there's a particular concert. And so I think what you've seen across generations is the desire to get access to things that are hard to get access to. And so people's willingness to spend large sums to go to once in a while, lifetime events, the Super Bowl, whatever the case may be, does not seem to diminish. And so we definitely do see a significant category spend into experiential categories.
Bunita Sawhney (09:24):
We call it experiential luxury.
(09:26):
And I can just share a little bit about, well, what makes up experiential luxury? Because to your point, they're still spending, they're still buying something, whether that's buying access to the experience or whether that's buying their favorite handbag, but there's an experience that goes with that, and that is what differentiates it. So from our perspective that there's sort of four things that make up an experiential luxury personalization rarity. To your point, the things that money can't buy, something that's really hard to reach, right? Immersion and immersive experience. And lastly, something that's memory making and making sure that we're connecting an emotional connection to that outcome. When you have that Wimbledon opportunity or when you get to go to a McLaren race, those are unforgettable experiences and they don't even have to be in person necessarily. They can be delivered digitally. There's wonderful ways now through technology to reach consumers in an emotional way and in a scalable way with digital technology.
Mike Cherny (10:22):
So first of Doug, keep me in mind for Wimbledon. You opened that conversation, now
Doug Villone (10:29):
It's July 4th weekend we're going over, but other than
Mike Cherny (10:33):
Count me in, yes, but what I would say is in Citizens Wealth Management, when we talk to our affluent and high net with clients, we always start with a financial plan. What's interesting to see the trend is historically we talk about value versus status. Somebody's goal could have been in that financial plan to buy a boat as an example. Now you're seeing more of instead of buying a boat, how do I take my family of 12
Bunita Sawhney (11:04):
On
Mike Cherny (11:04):
A vacation around the world? So that experimental and that experience versus physical assets is becoming more and more important to these clients. And you're seeing it in the many conversations that we have throughout the day with our affluent on high net worth clients.
Chana Schoenberger (11:22):
So do they still want to own the boat or they now want to
Mike Cherny (11:25):
Book trip? At least they're not putting it as their forefront as their primary goal. It becomes more secondary and later on, but it's more experiences now than ever before.
Chana Schoenberger (11:35):
When we talk about a once in a lifetime experience, I'm assuming that the more wealth a person would have or a family would have, the more often they can do these once in a lifetime things, right?
Bunita Sawhney (11:50):
Yeah. Although again, I think that we can create these emotional connections on a day-to-day basis, and then those once in a lifetime things, I think the pandemic probably opened up a new awareness for all of us that we can't necessarily assume we'll get to see each other as often as we hope. I think that's coming through very clearly in family planning and life planning. I think that's coming through in how we think about car design and payment experiences and making sure that we're actually, if we're designing a benefit for a cardholder, the individual is not enough. They have to be able to bring the people who matter to them the most, their loved ones along with them for that concert or for that tennis match or on that boat. But being able to really thread that needle consistently, whether that's in an everyday dining experience or whether that's in a once a lifetime experience.
Chana Schoenberger (12:35):
And there's been this whole move towards lounges. Can we talk about the lounge trend for a second? What is that about? Yeah, what do you think? I mean,
Doug Villone (12:44):
I'll start, well, the loop on this one, again, I think whether, and to kind of add on to that is the amount of first class seats or better seats that are being put in planes and the upgraded rooms and upgraded cabins. If you're thinking about cruises, it's all about comfort and experience. And let's face it, travel has not gotten generally easier. Lines get longer. Parking is harder, delays are more frequent, unfortunately,
Chana Schoenberger (13:20):
Real IDs,
Doug Villone (13:21):
Real IDs and lots of things that are just reality of life in a busier, more congested world. As a result, people are putting more and more premium on the things that are going to make that experience better. And so if my seat's four inches wider, if I get a cocktail on the plane, if I get on a little earlier, if I get off a little earlier, if I always have a place for my bag, these are things that we've seen through surveys and study have high perceived value. And so when we're building products, those are things that when we talk about a successful credit card program, the one thing we talk about even outside the airline industry is what's your free bag benefit? Or what's your first class upgrade benefit? But that's because, and we just use that to say, a consumer's looking for that thing that's going to give them a better experience than the rest of what would be the normal experience. And so it is something that does have a very, very high perceived value among all consumers, but certainly our affluent consumers,
Bunita Sawhney (14:28):
I think travel as a category, it's 64% of the cardholders expect that we have over-indexed in giving them something that takes them above the average experience, whether that's a lounge, whether that's a fast track lane, for example, and being able to, I mean, obviously in the United States, TSA precheck or Clear are more common in other parts of the world. You look to your card to actually help get you access to fast track lanes, for example. But again, it comes back to I really value my time and if you can help me move faster to get to the experience that mattered to me the most, so I can spend my time on the experience itself, that would be great. I think when it comes to lounges, to your point, we have a little bit of a watch out because we want to make sure that we don't have consumers waiting in lines and that we really hone in on, well, what about that lounge experience was critical? I really want to have a nice quality meal. I really want to be able to charge my phone. I really need to be able to have a clean restroom and be able to get onto my flight so that I can join my cocktail. Exactly. But we can't ignore it. I do think it's a critical need. I think there's ways we can continue to work on improving and elevating the experience.
Mike Cherny (15:28):
Experience. And I think, Doug, you said perceived value. That is so mission critical in everything that we do. We know that clients look at points as a monetary value versus for example, cash. And they value that whole experience. And the more that you talk to back to Gen Xers, zeros and millennials, that perceived value gets more and more important, obviously with that population in general. So I think that if you think about the evolution of the affluent client and the high net worth client, that perceived value is going to be more and more important as we continue on this continuum of growth.
Chana Schoenberger (16:08):
Okay. No, it makes sense. Other than travel, what other experiences are people looking for? One thing that I would love to talk about is the whole influencer economy because I feel like especially with the younger millennials and definitely the Gen Zs and the Alphas, there's a lot of what do I need to do to present myself on social media? Where in the world do I need to be standing when I make this video, and what should I be wearing and who should be next to me?
Mike Cherny (16:39):
Yeah, I'll tell you, we're going to focus on our Gen Z. Yeah, no, from an overall experience perspective, if you think about all the studies that were done, and when we talk to our clients specifically as well, you think of things like curated private experiences, IE invitations to art shows. Doug talked about the Super Bowl and having that center seat at the Super Bowl restaurants, specifically here where we sit in New York City, are very hard to come by some of the best restaurants when it comes to reservations. So these little things that make a huge difference and are real differentiator, we talk to the Zers, the Xers and the Alphas are super, super critical.
Bunita Sawhney (17:25):
Yeah, I would say the fact that, again, when we think about the affluent spectrum and we have a generational set of consumers, their needs aren't exactly the same. And yet again, while the category may be the same dining as a category, I need access to a great restaurant. For some that means I want a Michelin star restaurant. For others, that means I just want the hottest restaurant that it's hard to get a reservation at. And so we have to be able to supply the access to the spectrum of those categories because I might be influenced by seeing that hottest category from an influencer in social media, and do we have the ability to provide that access, right? So we think about that as we curate all the restaurants that partner in the MasterCard collection, for example, because we want to make sure we're reaching that full spectrum of the affluent consumer. I think that digital experience though is not to be underestimated. Not only because, again, every one of us are influenced by the best digital experience we've had, whether it's a banking experience or a non-banking experience, that expectation is now being set by the best, most recent digital experience we have. And
Chana Schoenberger (18:23):
Usually it's not a banking
Bunita Sawhney (18:24):
Experience and often it's not a banking experience. But I think we're contending. I do think that the reality though of the Gen Z, the gen alpha consumer, being digitally native, being born with these devices in their hands, living in social media channels means how we reach them and making sure that we're present appropriately, authentically in those channels is a critical way forward for us.
Doug Villone (18:48):
I don't have much to add. I think they said so well, I'll say things like the white loaders and other things like that
Bunita Sawhney (18:54):
Cause
Doug Villone (18:54):
Everybody to want to get
Bunita Sawhney (18:55):
Thailand or Hawaii. Exactly. The Taylor Swift effect, the Taylor Swift effect,
Doug Villone (18:59):
These things are real and we see it in spend Data people tend to go where they see others going. And I mean, I think that's always been true to some degree. I think it's happening much more rapidly than it's ever happened.
Bunita Sawhney (19:16):
It's also interesting just the concept of community versus individual behaviors. Something as simple as personal shopping. We know from our retail partners that when you have a personal shopping experience, you spend 60% more than if you shopped individually. And so sometimes it is just about having this human interaction and the opportunity for someone to give you their view and calibrate your view. And so whether that's in a social media channel or in a personal shopping experience, it can influence the way in which you spend.
Mike Cherny (19:45):
But I also think that if you think about the traditional banking industry and the wealth management industry, I think the banks that win in the future are the ones that don't just help with the traditional banking needs of a client. They become almost like lifestyle partners,
Chana Schoenberger (20:02):
Like a concierge,
Mike Cherny (20:03):
Like a concierge, like a lifestyle partner, to get these cohorts of clients to where they want be when they want to be, how they want to be treated in a much different way than we've done in the past.
Chana Schoenberger (20:18):
I mean, the late lamented First Republic was famous for anytime you walk into one of their branches as a customer, they give you an umbrella. And so there were people walking around
Mike Cherny (20:28):
And cookies
Chana Schoenberger (20:28):
And the cookies were fine, but the umbrella was key because it rains and you, and what that meant was that there was always advertising for the bank walking around the city as people are carrying these umbrellas.
Doug Villone (20:39):
It's
Chana Schoenberger (20:39):
Kind of a brilliant move. Someone should copy that. Chase has not picked that up. Yeah.
Mike Cherny (20:43):
Well, the good news is Citizens has,
Chana Schoenberger (20:47):
I'm coming to your branch, I think for my citizens umbrella. That's exactly right.
Mike Cherny (20:50):
So with us obviously having a couple hundred bankers from First Republic, it's one of those things where we're continuing to implement that model and making sure that we provide that white glove service to our clients and kind of fit that missing need for that affluent, high net worth client that First Republic
Chana Schoenberger (21:07):
Had the strategy for the umbrellas. Okay, so Benita, you had mentioned just now discussing things that are personalized, a journey to create the thing which is almost a behavioral finance way to turn a thing into an experience. Jeans that are crafted just for me in a Japanese atelier or some sort of thing when really I'm buying a pair of jeans, I wear the jeans, but then I'll have a
Bunita Sawhney (21:32):
Story about the jeans.
Chana Schoenberger (21:33):
Indeed. What's the sort of behavioral psychology behind all this?
Bunita Sawhney (21:37):
Yeah, I mean, I do think one, people love stories. They love hearing them and they love being able to tell them. And so to the extent that we have the opportunity to have an experience where I can then retell that story, whether that's because there was a special chef involved and I got to hear from the chef how they created that recipe, that it was something so delicious, or whether that's because I had the opportunity to co-create and design my luxury bag, for example. All of those lead to memories and the ability to share those stories, which comes back to this view that we've moved from individualism to more care for the community that we are with and the people that we love. And so I think that all is what brings together this notion of experiential benefit because we want the opportunity to hear about them and we want the opportunity to tell about them.
Chana Schoenberger (22:25):
Yeah, I feel like the classic example of this is the second home, it's a thing, but since the pandemic upper end consumers have been buying second homes so they can gather their family and friends, which is an experience that is indeed right. When you think about marketing approaches, how are banks approaching these customers and getting them to understand, I feel like I get a million email newsletters with, here's your benefits from this card.
Doug Villone (23:00):
I mean, I can start, there was a point that was just made. I mean, when I think about consumer payments, people have, like you said, their mailboxes are full, their email are full, their wallets are full. Virtual wallets, physical wallets. Most people have a dozen or more products. So you do have to try to differentiate. I do think there's a proliferation of loyalty programs and currency and high net worth individuals probably have plenty of airline miles or hotel points, et cetera, which is why I think you've seen the evolution of products to potentially have new benefits. There was a mention about getting into an exclusive restaurant, does my card come with a concierge? Does that concierge have very unique access? And I know we're hitting on some of the same themes, but I think as you're seeing these products, these premier products evolve. There's things being added that haven't traditionally because I think for a long time it was I get one time earned, two time earn, three time earn, four timer earn. Now it's more about this product comes with this concierge, which comes with this unique set of access and benefits, which I think is what's potentially causing it to break out of the pack because I think otherwise it's kind of cluttered with maybe what's considered very commoditized currency at this point.
Chana Schoenberger (24:25):
Cashback is cashback. Exactly.
Mike Cherny (24:27):
And to Doug's point, like he mentioned concierge, what we see in wealth management is when we talk to affluent and high net worth clients, they want a dedicated team. They don't want an individual. They want a dedicated team to look at both sides of their balance sheets, banking, lending, wealth, so that way we can give a robust solution on anything that they need or goals that they're trying to achieve for. So I think that the marketing of the dedicated team actually having a dedicated team, and then most importantly delivering with a dedicated team is super, super critical when we market to these people and this specific population of how we treat them.
Chana Schoenberger (25:04):
And that works for succession too, because it enables younger advisor to take over for older advisors.
Mike Cherny (25:10):
And also not to interrupt, also, you mentioned on the second home where we could have more family gatherings. It's super critical. What we found was when we do estate plans for clients, one of the most important things that we talk about is starting early, being very transparent with the next beneficiary where the assets are going to flow. And part of doing that is we talk about having a family meeting. It doesn't happen in a vacuum, it doesn't happen with the person who actually owns the assets, but how do we do it in the most constructive tax efficient way? And that all starts with that family meeting.
Bunita Sawhney (25:45):
Yeah, I was just going to add that your example with the team, ultimately what the team is delivering on is a personalized experience because they're listening, they're listening so acutely to the needs of the customer, and they're making sure that they're capturing that, they're sharing that, and they're formulating the best and right plan. I think data is a particularly critical way in which we improve our marketing and that it comes to making sure we're personalizing effectively and not in a big brother or a creepy way, that we're leveraging the right channel and we're putting the right message for it at the right moment. Because you could be overloaded with all kinds of messages, but if you receive the right message at the right moment, it's very, very powerful. So using data and harnessing it in a way, and then effectively making a personalized message improves the efficacy of all of our marketing together. Right?
Chana Schoenberger (26:32):
Yeah, no, definitely. It's interesting too because there's, of course, in society as a whole right now, there's this tension between people and bots, right? Everything is moving to ai, and over the last few weeks I've been asking bankers, how are you using AI in your daily lives? And I get a lot of really interesting answers, but the way in which they get these things personalized really matters. The bot has to be talking to you. It has to be, has to know who you are, your context. Otherwise it's just Google that anyone can use.
Bunita Sawhney (27:08):
Yeah, that's a great point. And I think that means for all of us, right? Making sure that the way in which we're utilizing AI and the way in which we're helping the consumer understand the use of AI comes with trust. I mean, I think my esteemed colleagues here are extremely trusted brands. It's why consumers come to you and to us because they know that we're going to handle their data with care. But when you do handle that data with care, you can affect it So clearly, obviously in the payments industry, I know we're thinking about agentic commerce at this point, which is going to be a shift for us if we do it well, and we have to ensure we do it with transparency and trust because consumers more and more, whether they're telling their human concierge or whether they're telling their agent, they're informing their perspective with their preferences and then actions are being taken on their behalf, whether that's to serve information for the purpose of making a purchase decision or even making the purchase for them. All of this is being fueled by consumers preferences and their data and then being able to affect that in their daily life.
Chana Schoenberger (28:05):
Right? Yeah. Okay, so we mentioned the great wealth transfer. So this is something that's ongoing and it's going to happen for the next several decades, and how is that going to affect these trends?
Mike Cherny (28:19):
So I can start, HANA. So this is, if you think about just putting it into concept, the numbers over the next 20 plus years, we're going to have over $140 trillion that are going to be transferred to. We talked about millennials, Xers, Xers, alphas. What's going to happen right before, to your point, is typically women outlive men by seven years. So before it goes to the next generation, there's going to be an spousal asset wealth transfer, and the way women think about wealth is very different than the way men think about wealth. So the banks of the future, the wealth management organization of the future that are going to win are starting now to think about what do they need to do within the four walls to figure out how to gain that asset, share, retain it, and continue to grow it with those clients. So mission critical.
Bunita Sawhney (29:19):
Are there any Yeah, I mean, I think you made the point, the fact that the recipient of the data is different than the person who created the wealth or at least the starting point, understanding how they want to utilize that wealth and how they think about their risk management appetite and how they want to affect their next generation. I think all of those things are important considerations in how we create the right products to support them, the right solutions to support them. But I do think understanding where the wealth is transferring to both in terms of the intergenerational change, millennials being the highest recipients upcoming, but certainly Gen Z very shortly thereafter, and that paradigm shift from men to women and the fact that they have the different risk appetite and the way they think about affecting how they hold and save and how they transfer, all important for us in how we design product for them.
Doug Villone (30:07):
The only thing I'd add is just what was already mentioned about the younger generations, much more digital to other generation, still likes a lot of the person live contact. And so as we serve these consumers, just making sure a, you have all those channels available, especially when there's a problem. Even a person who's heavily digital will still want to have a human at the other end, particularly with things like fraud and identity theft and disputes and things like that, but making sure that we continue to invest in the best in class digital products and services as newer consumers expect that, and that's what they've grown up on.
Bunita Sawhney (30:45):
Yeah. Can I just chime in? One of the things that our data tells us is the Gen Z consumer. I feel like people, it's almost counterintuitive. They're digital native and they're in social channels and they're learning in different ways. They may not be learning from their parent, they're probably learning from their peer, but they disproportionately, 73% of 'em are seeking financial education. They're a responsible population. They really want to make sure that they understand how to have a healthy financial life. They don't want to make the mistakes of previous generations that they might've lived or seen in terms of how we operate and think about our use of credit, but they want to build great and healthy credit habits. And so the fact that they're digital native, but yet they are education seeking means we just have to help get the information to them in those channels, but they will use the tools if we provide them.
Chana Schoenberger (31:32):
Yeah, there's a ton of research on the fact that especially the younger consumers are getting their financial advice online. They're getting it from social media, they're getting it from the internet, and in a lot of cases they're getting the wrong advice because that's not really the best
Bunita Sawhney (31:49):
Cash. Stashing was a social trend
Chana Schoenberger (31:52):
Girl. Math is my favorite absolute nonsense trend, right? Girls can do math, we do math quite well, but how do financial institutions play into this? Because we want younger consumers to understand how to spend their money, how to save their money, how to invest it, what to do about philanthropy in a way that TikTok may not be the best venue.
Doug Villone (32:16):
Yeah, I mean a lot of banks, not just ours, do provide financial management tools as part of their full suite of products. Where you spending, how you're spending, what's the trend on your spending, how to avoid interest in fees. Everybody has a free credit score product everybody's getting, so there's a lot of things we offer today about how to do a no credit bureau to see if you qualify. So you don't actually hit your bureau unless you're going to be approved. There's a lot of things out there, but I would say just at the core base, it's just providing consumers those tools to really help them understand their spending and how to improve their credit score and what are the things that go into a credit score. And I think those fundamentals are incredibly important to being able to do exactly what you said.
Bunita Sawhney (33:11):
Yeah. We have put forward something that we call MasterCard one credential, and the whole concept behind it is actually allowing the consumer to preset their preferences because we want to help them exercise control in advance of making their purchase decisions, for example, because we know that if I know what tools are available to me, what funding sources are available to me, I'll make the best and right choice upfront versus under duress at the moment of truth where I feel like, oh, should I put it on this credit card or should I put it on this debit card or should I put it on? I will really set my preferences upfront because I understand my cash flow and I understand my money management needs, and I know that for this particular type of purchase, a larger discretionary purpose, I might want it to install and have a buy now pay later option. Whereas for my day-to-day lunch and my coffee, I really want that to go to my debit card because I know it's part of my daily budget, but the digitally savvy consumer is aware of this, they know this. We just need to help put the planning tools available to them and the channels that they're used to so that they can be in control of their purchases going forward.
Chana Schoenberger (34:07):
We did an interesting story. I think the stat was something about buy now pay later is when lower income customers use it, they're using it for necessities, so they're really using it as a credit product, whereas higher income customers who don't really need it are using it as a great way to get the merchant to finance a big purchase for free. So if you're buying a Sub-Zero fridge,
Bunita Sawhney (34:30):
For instance. Yeah, I mean, I think affluent consumers understand the value of their money, and so they understand that being able to choose an installment solution where they understand the repayment and they're not necessarily having to pay an a PR or a fee is a really great money decision for them.
Mike Cherny (34:45):
So what's interesting to see is if you think about the traditional bank and how it's evolving to really catch up to the needs of the next generation, you're seeing that we're moving away from transaction centers to advice centers.
(35:03):
And when you look at the next generation, the millennials and the X-rays and the Zs, they get their information online, but they still value advice. And what we're seeing also is historically, if you think about the baby boomer population where they had assets, call it in one bank, their wealth management solutions in another bank, the need to consolidate that is growing more and more. So one of the things that we're working on is to make sure that we are that bank where you're able to consolidate your entire wealth banking lending solutions in one organization, but have back to our conversations around dedicated team that'll be able to provide that experience to you in every aspect of your financial life, throughout your life as well.
Chana Schoenberger (36:00):
Okay. So there's other research that's showing that this idea we've been talking about, consumers want experiences, they want things that are curated. They seem to care more about that than they do about their image. So I want a Birkin bag because people will think I'm rich, I want a Birkin bag because a Birkin represents the quality and the craftsmanship of the atelier and all this stuff. What are you seeing in this area?
Bunita Sawhney (36:27):
Yeah, I mean, I do think we have seen this paradigm shift from image to intention and that intentionality is about whether it's understanding the history of something and the arts manship or the craftsmanship that went into it, or whether that's about making sure that what I achieve, I achieve it together with the people that matter the most. It's not about the commodity, it's not about the item anymore. And we talk about metal cards, and I certainly think metal cards will be here for some time, and yet it's not just about throwing the card on the table anymore. It's about actually the fact that that card can unlock those things that matter to me the most and that I can share them with others. And so I think that that is the difference of we know that the affluent consumer expects that value exchange and therefore expects us to recognize the status that they've earned, but they also want to be able to make sure that that is shared with others and that comes through the way the experience comes forward, not just in the look and feel of it, but in the way they can operate.
Doug Villone (37:28):
I'm good as well.
Chana Schoenberger (37:30):
Okay. What do you see as coming next in this trend? Right. The youngest consumers are getting older. The generation that's being born now is fully digital. The iPhone's now been around for almost 20 years. What's next?
Doug Villone (37:49):
I mean, one of the things I'm seeing in my space is it used to be our parents would've had a given co-branded card that they were loyal to that gave them a given currency and so on. What I've seen is more creation of ecosystems where you can leverage your currency in a variety of ways. It creates various unlocks. And so I think what you're seeing is airline miles can become cash back, can become exchangeable, can unlock this and unlock that. You're seeing a lot more cross where a given brand has relationships and status match with other brands. So I'm just seeing a much more connected loyalty space where you have flexibility, reciprocality, whatever the right words would be. And so it gives people more freedom that as their needs change, as their spending changes, as their lifestyle changes, and frankly as their life changes, as they go through parenting years, et cetera, they continue to have lots of utility with whatever it is that they're using as their financial services instrument. That's what I'm seeing, and I'm seeing that becoming a greater and greater trend that maybe I'm traveling a lot for business today and I want airline miles, but maybe at some point I don't, and how do I have that flexibility without having to switch products? And so for us, it's really becoming around ease of use and flexibility.
Chana Schoenberger (39:14):
Right. Later on, you're going to want a gas card because you bought that boat and you put gas in the
Mike Cherny (39:19):
Boat. Exactly. But I think the whole, Doug, what you're referring to is like the Amity buss approach and the organizations that create an omnibus approach of what we call having clients bank, when, where, and how they want and meet them where they want to be versus having them come in, for example, into a retail branch to do any transaction. Those are the organizations.
Chana Schoenberger (39:39):
What's a retail branch?
Mike Cherny (39:40):
Exactly. Right. So those are the organizations that are going to win. So organizations that focus on being very client centric, providing them the best client experience they can possibly have, and that means to bank them where, when and how they want.
Bunita Sawhney (39:56):
I think the notion of being able to have an account that grows with you that can adapt to your changing life needs based on life stage or otherwise is a common theme for us. Making sure that we're with the consumer from the beginning all the way to their next milestone and their next change. And I think what's changing for us in the world of payments is we're less because of technological changes and steps forward, both with digital and otherwise, we don't have to have the historical confined constraints of your credential is your single funding source. You don't have to just think about one credential that's only for debit or only for credit, or only for buy pay. Later you can have one that can help you move along those funding sources and move along your life needs. I think that then also allows us to grow with the consumer. Interestingly enough, while again in the United States, we know that the consumer has more cards than average than in other markets, for example. But actually when you talk to them and you ask them, they would prefer a main financial institution who can really meet all of their needs, and so it's about making sure that we have the right capabilities and right product sets that grow with them over time.
Chana Schoenberger (40:58):
So they picked several cards because each one does a different thing for them. Correct. But they really want somebody to give them a super app.
Doug Villone (41:06):
Correct.
Chana Schoenberger (41:07):
It's interesting because super apps are an idea. We've written about this as well that we're really supposed to take off and have in other geographies, but so far in the US they really haven't. Right. We all have our things that we use that we've always used.
Bunita Sawhney (41:23):
I think things like AI and magenta commerce are going to see an accelerated shift in those types of behaviors because more and more decisioning is happening behind the scenes. We want to make sure that consumers are coming to their main financial institution and spending time in their mobile banking application, but that means we have to create value of content in that destination, whether that's consumer controls and being able to determine where my subscriptions are turning them on and off, for example, or whether that's being able to tell you my preferences or whether that's even able to book that dining experience or book that entertainment experience right through that main front door of my financial institution. I think if we're not capturing them there, then they will feel the need to go to multiple front doors. Yeah.
Chana Schoenberger (42:08):
Okay. Just to wrap up, can you each give me one prediction for what you think the coolest experience will be that people can buy this year?
Mike Cherny (42:16):
Oh boy. Me going to Wimbledon on Dodge Zone
Bunita Sawhney (42:20):
After I got my citizen's umbrella, then I'm going out and I'm figuring out how to get to that Italian experience that you were just referencing. Even
Doug Villone (42:29):
Though I'm based out of Philadelphia. The Eagles go to the Super Bowl again.
Chana Schoenberger (42:33):
Yes. Team event. Well, thank you very much for joining me. Thank you. Thank so much. So fun.
LEADERS is a flagship channel that spotlights C-level executives and top experts as they discuss transformative topics for an audience of key decision-makers. We deliver thought leadership on the most pressing issues driving financial services. The LEADERS series is made possible by the support from top industry collaborators including Mastercard.
