During the last couple of years, volatile market conditions have made it more difficult for consumers to improve their finances. In addition, a lack of financial literacy has negatively impacted consumers’ ability to expand their buying power. This can include opening new lines of credit, which is a source of revenue for financial institutions.
Empowering your consumers with credit education and resources can create opportunities for them to open more of these new accounts, which can help lead to additional revenue for your business.
Credit card account openings decreased in 2023
Economic turbulence is affecting businesses everywhere, including financial institutions. Uncertain market conditions have forced banks and credit unions to take revenue-preserving actions, such as tightening their credit card loan standards for consumers.
As a result, credit card digital account opening growth slowed in 2023, and the trend threatens to continue.[1] This decrease in the opening of new credit card accounts can negatively affect lenders that aim to grow their business by encouraging consumers to borrow more money.
Consumers’ financial literacy also plays a role in their ability and inclination to open new accounts.
Uninformed consumers may be less likely to open new accounts
Without a strong understanding of finances, many consumers find themselves in an unfavorable financial situation. Less than 30% of Americans have a financial plan,[2] and lacking financial knowledge cost individuals $1,819 on average in 2022.[3]
Consumers without basic knowledge of finance or credit best practices usually have lower credit scores and may be less likely to qualify for credit card offers with low interest rates.
So, what can financial institutions do to counteract decreasing credit card account openings?
Help improve consumers credit standing with credit education
Credit education programs can have a positive effect on consumers’ credit standing and general understanding of healthy financial habits. More than 65% of consumers enrolled in a credit education program see an improvement on their credit scores.[4]
Credit-educated individuals can typically attain higher credit scores, which can help improve their chances of meeting the more restrictive credit standards banks have put in place due to volatile market conditions.
Consumers who are better informed about credit and finances make better financial decisions, save, and borrow more money, and may be more likely to open new credit card accounts. This presents a valuable opportunity for financial institutions to offer highly desired credit education services to the consumers who need it.
Deliver services your customers want
A recent study showed that 57% of consumers want their financial institution to provide resources and support to help them better manage their finances, and 54% feel that their bank is responsible for teaching strong financial habits.[5]
Consumers expect these financial services from the banks they do business with. Refraining from offering them could put your business at a disadvantage when compared to the banks that do.
Make sure the services you provide include credit education that empowers your consumers to become more financially confident. This can help drive consumers to borrow more money and potentially open more new credit lines, which can drive additional revenue for your business.
Visit our website to learn more about how offering credit education services can help your consumers save more, borrow more, and open more new accounts.
[1] eMarketer, Credit Card Marketing 2023.
[2] BusinessDIT, The State of Financial Planning, April 2023.
[3] National Financial Educators Council, Cost of Financial Illiteracy Survey, 2023.
[4] Experian Internal Data, 2023 credit lift study for users tracked from Dec 2020 – Dec 2022.
[5] MX Technologies Inc. What Influences Where Consumers Choose to Bank. 2023.
