Getting Smart About Thin File Student Grads and Their Credit Card Worth

by Brian Riley 0

Woman hand holds a credit card and uses a laptop computer to shop online.

Here is an opportunity to learn about the potential revenue from a state-college grad that might revolve versus the Ivy-leaguer who might just be a transactor.

The CARD Act of 2009 disrupted student credit card marketing with a means test and parental approval for certain types of accounts.  The market, which used capture about 12% of total card consumer spend now only contributes a fraction.

An unexpected consequence of the well-intentioned CARD Act is that now students come out of college with thin or no-hit bureau scores.  The American Banker covered an interesting story about how BankMobile, a digitial only bank with 800 university partners, is attempting to build a model based on academic history and how they maintained their student bank accounts.

What is interesting here is not that they are working on the post-college segment, but that the firm presented this to the CFPB first and appears to have at least some early support.

  • “One of the huge advantages of banking with us early on is we get to know their behaviors and what sort of majors they have and when they graduate, what sort of cash-flow potential they have, etc.

  • The use of education data in loan decisions has been controversial and is still being examined by the Consumer Financial Protection Bureau. In September, the CFPB sent Upstart its first no-action letter, which meant the online lender could continue doing what it was doing but must send quarterly reports to the agency about its loan applications and decisions.

The post-student market is still an important segment for the future of payments.   Perhaps this new model will increase engagement and create new account segments.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

Read the quoted story here

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