Consumer spending is being fueled by the financial means to fulfill the desire to indulge, according to recent studies. In the U.S. alone, the New York Times reported “excess savings” soared to $2.7 trillion since the outbreak of COVID. After over two years of spending on home offices, decorations and renovations, consumers are embracing luxury spending. Call it retail therapy or a case of YOLO (you only live once), but luxury goods are reporting blockbuster sales despite ongoing supply chain snares, surging inflation, and continued global uncertainty due to the pandemic and war. In fact, the Financial Times predicted luxury goods spending to hit record levels in 2022, surpassing pre-pandemic rates.
This is a key inflection point for financial institutions as the pent-up desire to spend more on luxury retail goods, travel and entertainment is expected to also carry into the payment cards people want in their wallets. Consumers have long valued premier brands and have demonstrated they will pay more for quality. While the early months of the pandemic upended spending patterns, it became clear by mid-2021 to today that luxury brands not only survived COVID, but thrived, posting strong sales and revenue. Growing alongside these luxury trends is the market for a premier luxury metal payment card.
For example, the American Express Rose Gold® metal payment card was so popular that it “crashed the USPS system.” With its stylish design and quality look and feel, cardholders clamoured for this premium metal payment card which combined durability and sophistication. The weight, appearance and distinctive “clank” on the counter when the metal card was presented marked a new era in the card industry and a growth opportunity that today is advancing around the globe as the attributes of the metal card align with the values and aspirations of consumers.
Today, premium metal cards are part of a strong rewards program to target a specific consumer demographic, offering the ability for more banks, financial institutions and fintechs to take advantage of the differentiation of a premier metal card offering. The 2021 Metal Card Consumer Study conducted by Edgar, Dunn & Company showed that a metal card program can be a powerful tool in promoting a positive feeling about a bank, attracting new customers, and driving spending by keeping it at the top of the wallet. In fact, the survey showed that most consumers (70%) would select an offer which includes a metal payment card if all rewards and benefits were equal. This preference for metal payment cards increased 4% from three years ago, when the survey was last conducted. A metal card program aligns with consumer interests in luxury, premiumization and environmental sustainability.
As the race to top of wallet continues to get more crowded, financial institutions must differentiate themselves with consumers. This differentiation is what could allow them to capture a higher percentage of discretionary spending, build brand loyalty, and attract a younger demographic, who could be customers for a longer period of time if retained, and affluent customers who likely will be spending more and generating substantial revenue for banks.
While not every consumer yearns to go on a spending spree for high-end luxury goods, there is a solid desire for quality products. As consumers increasingly seek quality over quantity, the exciting opportunity for the payment card space is that the ongoing premiumization was not derailed by the pandemic, it simply shifted to investments in fewer and better products. Premiumization is no longer just about luxury and exclusivity –it is about relevance, aspiration and meaning. Consumers are not only looking for name and prestige, but also quality products and personal experiences.