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The 2024 Outlook for Credit Cards: Navigating Turbulent Times

Boaz Gam

Boaz Gam


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  1. 3 Main Credit Card Challenges FIs Must Keep in Mind
  2. What Is the Winning Strategy for Modern Financial Institutions?

What Are the Dominant Credit Card Challenges in 2024?

Over the past several years, the global payment ecosystem has been experiencing significant challenges, such as major economic shifts caused by the pandemic, rising inflation, and increasing interest rates. These issues have been manifesting themselves across a variety of aspects, including the performance of credit cards.

Therefore, FIs face a pressing need to optimize the resilience of their services in light of tighter household budgets, liquidity concerns, and changing consumer preferences. In this guide, we go over the main obstacles payment cards are expected to encounter in 2024 and provide insights into how they can potentially be addressed. Keep reading not to miss out on all the practical tips!

3 Main Credit Card Challenges FIs Must Keep in Mind

The payment industry is extremely dynamic, as it is influenced by a variety of forces. While some of them drive positive changes, others create substantial setbacks. Below, you will find the three key factors that are currently presenting challenges in the credit card sphere:

1. Economic Downturn

What Are the Dominant Credit Card Challenges in 2024?

During the COVID-19 outbreak, many governments across the globe launched relief programs that were aimed at helping individuals and businesses cope with the unexpected economic challenges. As a result of these measures, people’s savings increased while credit card metrics, on the contrary, dropped to record lows.

Yet, now that the world is recovering from the pandemic and relief schemes are no longer in effect, there are growing concerns about the potential onset of a recession. As consumers start feeling the pinch of increasing prices caused by inflation, they often begin to rely on credit cards too much and end up having trouble paying even the minimum monthly installments.

Besides, the prime rate surged from 3.5% in March 2022 to 8.5% in July 2023, and it is not expected to return to the 4% range in another 2-4 years. While credit card companies can’t control such unwanted things that are happening in the economy, there are still ways in which they can prepare themselves and their clients for what the future may hold.

For instance, FIs need to take steps to reassess their risk management strategies and adjust credit limits and interest rates accordingly to mitigate potential losses. Additionally, introducing flexible credit bill payment options and financial education programs can help their customers better manage debt during periods of inflationary pressure.

2. Delinquency Increase

What Are the Dominant Credit Card Challenges in 2024?

Another prevalent issue in the financial sphere is linked to the increasing delinquency rate. This is mainly due to household budget constraints aggravated by inflation and higher costs of financing through credit cards, installment loans, and home financing.

Even though consumer rates are slowly beginning to drop from recent highs, it is forecast that it will still take two to three years for inflation to return to the Federal Reserve’s targeted rate of 3%. Consequently, protecting the balance sheet in the face of weakened credit quality will be a fundamental challenge for FIs in 2024.

To effectively address delinquency during such a trying time, companies offering credit card services must adopt a holistic approach. This involves implementing advanced risk assessment tools, actively engaging with struggling borrowers, conducting extensive market research, and actively designing tailored financial products based on the gained insights.

3. Regulatory Adjustments

What Are the Dominant Credit Card Challenges in 2024?

Both domestic and international regulatory changes have the power to significantly impact the operations and profitability of credit card issuers.

For example, the Durbin Amendment, which was enacted in 2010, had a profound impact on debit card interchange fees, capping interchange fees at 21 cents plus 0.05% per payment. In other words, the bill limited the amount banks could charge for debit transactions. In response to this initiative, most banks implemented new fees and eliminated some free services to offset their revenue losses.

Now, Senator Durbin is proposing legislation for credit cards, which is set to affect the rewards model, the cornerstone for a wide array of credit card services. If the Credit Card Competition Act of 2023 goes into force, it is likely to boost competition in the industry and restructure fee systems.

Moreover, FIs may be facing new regulations on data privacy, anti-money laundering, and security protocols in the foreseeable future. All of these measures are sure to transform credit card services, which is why all relevant stakeholders must be prepared. Credit card issuers must proactively monitor legislative developments and continuously adapt their operations to stay compliant.

It is also crucial to leverage current trends and find creative approaches to service innovation. For instance, should the rewards model as we know it disappear, credit card issuers must find ways to adapt and meet customer needs. One potential solution could involve the implementation of merchant-funded rewards, introducing a “do this, get that” approach.

What Is the Winning Strategy for Modern Financial Institutions?

What Are the Dominant Credit Card Challenges in 2024?

Overall, the payment sphere is currently going through a challenging time marked by economic uncertainty, major regulatory changes, and rising delinquency cases. Therefore, we may be on the brink of seeing a completely new credit card model evolve in response to these shifting conditions.

FIs that will focus on taking strategic steps to prioritize technological innovation, flexibility, affordability, and enhanced customer engagement are sure to be able to navigate this rapidly evolving landscape effectively. Moreover, such an approach will help them to build up resilience and position themselves for sustained success in the payment industry.

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