High Gasoline Prices and Inflation: What’s the Fallout for the Card Industry?

Published by: Javelin Strategy & Research

Published: Aug. 1, 2008 - 15 Pages

Table of Contents

Overview

Primary Questions

Findings and Analysis

Methodology

Rising Gasoline Prices and the Fallout for the Card Industry: What’s the Bigger Picture?

Majority of Consumers Demonstrate Likelihood to Take Advantage of Cash Discounts

Consumers Will Change Method of Payment in the Face of a Surcharge

Merchant Complaints on Interchange Do Not Elicit Consumer Sympathy

Reality Check for the Present:

The Vast Majority of Consumers Show Awareness of Transaction Fees

High Percentage of Consumers Believe Interchange Affects Pricing

Companies Mentioned

Table of Figures

Figure 1: Consumer Likelihood of Accepting Discount for Cash or Check Usage

Figure 2: Consumer Likelihood of Card Usage with Surcharge in Place

Figure 3: Consumer Attitudes on Reduced Interchange’s Effect on Pricing

Figure 4: Consumer Awareness of Interchange

Figure 5: Consumer Beliefs on Interchange’s Effect on Pricing

Abstract

Rising consumer prices, along with the high price of gas, have produced friction in the consumer payments arena. It is not only retailers and oil companies that are bearing the brunt of this consumer angst, but surprisingly the credit card industry as well. This Javelin research note analyzes the consumer reaction to credit card fees vis-à-vis merchants and others, and also looks at the potential fallout beyond gas prices as inflation, currently at 5.53%, may rise.

Primary Questions

• Will consumers accept cash discounts for gasoline and other purchases?
• Will this result in behavior change and overall decreased card usage?
• Will there be a discernable decrease in transaction volume per cardholder?
• How does the potential for card transaction surcharges among merchants further affect issuer profitability?
• As inflation for other goods is highlighted in the media—beyond gasoline prices—what is the potential fallout and pressure on card issuers?
  • From a public perception of the card industry perspective, and
  • Potential increase in legislative and regulatory scrutiny?

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