Direct mail volume in the financial services sector is down dramatically, as many of the bigger companies walk away from once-thriving businesses that are now deemed too risky because of the economy, such as offers of credit to consumers with less than stellar credit histories. Direct mail credit offers haven’t disappeared completely, however, as both big financial firms and some more marginal institutions continue to find opportunities to target consumers.
Financial services direct mail volume for 2008 fell 25% from 2007 levels, according to a recent report from Mintel Comperemedia.
“The decline is influenced by financial services companies migrating to lower cost acquisition channels such as the Internet, accentuated by the fact that there’s an enhanced credit risk in every offer,” says Randy Watson, industry executive for financial services, at Acxiom. He expects a portion of the decline will be long-term because of the lower cost channels. However, “when the credit markets turn, many firms are in the position to be back in the mail quickly,” which will bring mail volumes back up, he says.
In the meantime — and no one really knows how long that is — financial services companies are adjusting to the new economy by targeting fewer people and changing their messaging.
The big growth area in terms of direct mail volume for 2008 was reverse mortgages, with a 7% increase in new customer acquisition mailings, a 37% increase in reverse mortgage offers to existing customers, and a 67% increase in informational mailings to existing customers, according to Mintel.
While the overall volume for reverse mortgages is modest, “it’s interesting to see them being marketed in this economy as people need cash,” says Steve Clifford, VP, financial services at Mintel, via e-mail.
Offers around reward or rebate programs are also on the rise, says Andrew Davidson, VP of competitive tracking services at Synovate. “This is a direct result of more offers going to households with very high credit scores,” and issuers pulling back from those with lower credit scores, he explains.
In the fourth quarter of 2008, Synovate reports 72% of credit card offers were reward or rebate offers, up from 63% in the fourth quarter of 2007. This is a result of an increase in mailings for co-branded airline cards, such as the Citi/AAdvantage American Express card and the Chase United Mileage Plus card.
“In November, the big issuers basically pulled back from mailing everything else, and the only offer they mailed was for co-branded airline cards,” Davidson reports.
“There’s still direct mail credit card offers going out, it just seems that the mass market, pre-approved volume has really fallen off,” Watson adds. Instead, card issuers mail to a smaller pool of names, massaging a bigger pool of data to come up with those names.
“Companies are pulling files from various sources and running the data through scores and models to qualify names,” says Davidson. “They have to sift through more data and more information to make more targeted offers.”
On the sidelines of the major financial institutions are credit unions, many of which report substantial increase in mortgage loan volume, according to the American Credit Union Mortgage Association (ACUMA).
Credit unions have “consistently engaged in direct mail marketing for years,” said Bob Dursa, president of the ACUMA. While that volume hasn’t necessarily increased of late, “credit union members are taking them more seriously now that several banks have gone out of business, and they’re looking for institutions that they can trust,” Dursa said.
While mainstream financial institutions are giving many consumers the cold shoulder, retail giant Wal-Mart is stepping up its efforts to offer financial services to lower-income American consumers.
Last week, Wal-Mart said it will lower the purchase price of its reloadable, pre-paid Visa debit card, the Wal-Mart MoneyCard, from $9 to $3. The card has a $3 charge for reloads and a $3 monthly fee. The retailer also is making financial information and experts available to customers.