Card Opportunity: Squarely in the Middle
The last year was dominated by the overhaul of premium credit cards and their corresponding marketing campaigns. Big players contemporized products by refreshing them for a new generation, adjusting annual fees upwards, and either adding new perks or “zhushing-up” existing perks. This included heavy-hitters Chase (Sapphire Reserve) and American Express (The Platinum Card) among others. Recent new entrants (i.e. Robinhood, Bilt) suggest an unstoppable focus on the super prime segment.
The Wall Street Journal observes Gen Z cardholders are “squeezing the most out of premium cards requiring a commitment to juggling the increasingly unwieldy series of perks, points and redemption schedules.” The payoff is the enjoyment of burning rewards towards DoorDash purchases, accessing airport lounges, and scoring tickets to concerts and events.
On the flip side, as we enter Q4, industry experts point to a largely ignored segment with a distinctive mindset and needs. These consumers are referred to as mid-tier or “middle-class” prospects. Unlike super prime prospects and cardholders, they’re not enchanted with premium perks and aspirational rewards but seek a product construct that is pragmatic, with stable rewards and fees (CNBC).
Why the Middle Now?
The big players hold 95% of the accounts among super prime and prime consumers (EMARKETER), and these two segments traditionally account for spending growth. Over the past few years, when these large organizations changed their underwriting to better focus on and serve affluents, fintechs and BNPL players then began the takeover and domination of the sub-prime segment. Furthermore, the fintech model worked to pick up the sub-prime slack while disrupting the acquisition pipeline of the past.
With the upper and lowest tiers now covered, who’s left? Who might be a new source of reliable spending? It appears a better understanding of and response to the squeezed middle – not super prime and not sub-prime consumers – is the newest opportunity well suited for regional and community banks.
Betwixt and Between
This middle-class opportunity segment has unmet needs. Recent research from Auriemma Group validates an opportunity for “marketing to a segment that in many ways has been ignored.” The research goes deeper by describing their mindset as “increasingly polarized.” These consumers “feel caught in the middle—between cards that feel ultra-premium or ultra-basic.” They are looking for a middle-market option, and issuers able to provide one could discover an underserved segment of the cardholder population.
Segment Insights from Auriemma also include:
- 60% of cardholders agree that issuer credit card products focus too heavily on premium perks and benefits
- 44% observe that most cards available today are either too premium or too basic for their needs
- While 57% feel forced to choose between cards with high fees and strong rewards or low-cost cards with limited value
“For many, the choice isn’t between good or bad card offerings—it’s between paying for benefits they don’t fully use or settling for a product that feels stripped down.” Jonathan O’Connor, Senior Manager of Research, Auriemma Group
ISO: A Better Balance
What do those caught-in-the-middle consumers actually want in a credit card? When looking at this segment, Auriemma Group found:
- Only 14% of cardholders say they would prefer a card with strong rewards and benefits paired with a high annual fee.
- 32% prefer moderate rewards and benefits with a modest fee.
- Almost 50% prefer a no-fee card with fewer rewards and benefits.
- Among the 31% of cardholders who feel cards in market do not meet their needs, the reasons are: high interest rates, annual fees that exceed the card’s value and rewards misaligned with spending.
It all adds up to: They desire a card with sufficient credit, rewards that are easy to redeem, competitive rates, and value that aligns with everyday spending. For this segment, these features and benefits “consistently rank above aspirational perks.”
Take Advantage of the Opportunity
Consider offering a product to better serve the “in between” audience with acquisition and awareness campaigns that reach the middle tier consumer.
For this segment, the customer journey is essential to attract, engage, and satisfy. But how can FS marketers take advantage of this opportunity for the squeezed middle?
- Use very specific targeting and segmentation. The middle market encompasses Gen Z and Millennials but will require suppressing the top tier and sub-prime consumers including those who are heavily engaged with BNPL.
- Product value is of primary importance, and segment value is not highly aspirational.
- Review your card portfolio and be prepared to revamp as needed to strike the critical balance of cost and reward value proposition they seek. Practical and accessible card features and benefits are your product design guardrails – no spreadsheet required by these cardholders.
- Tip: Position the product accordingly with a proposition that speaks to the value-seeker.
- Message carefully. Avoid copy and visuals that are too aspirational and experiential such as overly travel and dining-centric, ensuring that your look, tone, and feel aligns with everyday spend and day-to-day utility usage.
- Remember: Speak directly and transparently to these consumers. Leave the card-as-lifestyle enhancements to prime prospects who are responsive to big fee and big perk card marketing tactics.
- Use reward accelerators, balance transfer offers, line increases and redemption opportunities towards everyday needs (as feasible considering portfolio risk and revenue).
Lastly, when engaging with the squeezed middle, The Financial Brand asserts that success will be dependent upon helping the prospect or cardholder contextualize card benefits within their lives and helping them navigate the card as an essential tool in their financial management arsenal.
Want to dig deeper into this segment and card marketing? Explore more insights from Media Logic:
Commercial Banking Focus…Lower Middle Market: A Closer Look
Reaching the Unbanked and Underbanked: What Financial Marketers Need to Know
