Alkami's 2024 Telemetry Data Report Highlights the Effects of a High Interest Rate Environment on Consumers, Financial Institutions

Rhea-AI Summary

Alkami Technology has released its 2024 Telemetry Data Report, which examines the impact of high interest rates on U.S. consumers and financial institutions. The report is based on transaction data from over 2.5 million account holders and a survey of 1,500 digital banking consumers. Key findings include that 67% of Americans report a significant impact on their living standards due to rising interest rates, with 59% living paycheck to paycheck. Mortgage originations have declined by 72.5% from December 2020 to December 2023, while HELOC balances rose by 31.7% from December 2021 to December 2023. Auto loan payments increased by 57.1% from December 2019 to December 2023, and CD openings surged by 10.8x from Q4 2021 to Q1 2023. Credit card payments increased by 19% since 2020, and BNPL users grew 5.17x from 2019 to 2023. The report aims to help financial institutions understand and navigate these trends to improve customer loyalty and digital banking experiences.

Positive

• The average drawn balance on HELOCs increased by 31.7% from December 2021 to December 2023.
• CD openings increased 10.8x from Q4 2021 to Q1 2023.
• The number of BNPL users grew 5.17x from 2019 to 2023.

Negative

• 67% of Americans report a significant impact on their living standards due to rising interest rates.
• 59% of Americans are living paycheck to paycheck.
• Mortgage originations declined by 72.5% from December 2020 to December 2023.
• Auto loan payments increased by 57.1% from December 2019 to December 2023.
• Average credit card payments increased by 19% since 2020.

Insights

Financial Analyst

The 2024 Alkami Telemetry Data Report offers valuable insights into the current high-interest rate environment and its multifaceted impact on both consumers and financial institutions. Given the significant decline in mortgage originations by 72.5% from December 2020 to December 2023, there's a clear indication that higher interest rates are deterring new home buyers. Conversely, the 42% increase in mortgage loan principal suggests that existing homeowners might be refinancing for longer terms or higher amounts, possibly due to rising property values.

The substantial rise in HELOC balances by 31.7% from December 2021 to December 2023 indicates that homeowners are leveraging their properties for additional credit amidst expensive borrowing costs. Furthermore, the startling 57.1% increase in monthly auto loan payments underscores the financial strain on new car buyers, which could have broader implications for the auto industry.

For retail investors, understanding these trends is crucial. Financial institutions heavily reliant on mortgage and auto loan origination might experience short-term pressures, but those with diversified portfolios, including HELOCs and credit cards, may fare better. The significant increase in CD openings also signals a shift towards safer, interest-bearing deposits, reflecting consumer caution.

Market Research Analyst

This report sheds light on shifting consumer behaviors in response to economic pressures. The fact that 67% of digital banking Americans report a significant impact on their standard of living and 59% are living paycheck to paycheck, highlights a growing financial vulnerability among the population. The increase in BNPL (Buy Now Pay Later) users by 5.17x from 2019 to 2023 points to a rising preference for alternative credit solutions, likely due to the high costs associated with traditional credit products.

Retail investors should note the potential for increased financial stress within the consumer base, which could lead to higher default rates on loans and credit products. However, companies offering digital banking solutions, like Alkami, may benefit as financial institutions seek more sophisticated tools to manage customer relationships and maintain loyalty amidst these challenges.

More than two-thirds of Americans say they have experienced a significant impact on their standard of living

PLANO, Texas, June 26, 2024 /PRNewswire/ -- Alkami Technology, Inc. (Nasdaq: ALKT) ("Alkami"), a leading cloud-based digital banking solutions provider for financial institutions in the U.S., announced today the release of its latest research, the 2024 Alkami Telemetry Data Report. The report examines the high interest rate environment and its impact on consumers and financial institutions. The transaction data was compiled from an aggregated panel of more than 2.5 million account holders. The data was supplemented by an Alkami-commissioned research study, conducted in partnership with The Center for Generational Kinetics that surveyed 1,500 digital banking consumers in the U.S., to assess how the current macroeconomic environment has impacted attitudes and behaviors of the different generations.

As U.S. consumers are facing a credit reliance with rising levels of debt reaching over $17T by the end of Q1 2024, the report highlights trends relating to common consumer deposits, and credit products like mortgages, home equity lines of credit (HELOCs), auto loans, credit cards and buy now pay later (BNPL). The findings examine the implications for deposit, loan, and payment products at regional and community banks and credit unions. Key findings regarding these products for financial institutions include:

• Sixty-seven percent of digital banking Americans say the rising interest rate environment has had a significant impact on their standard of living and 59% are living paycheck to paycheck.
• Mortgage originations have been on a steep decline, with 72.5% fewer originations in December 2023 compared with December 2020. The amount of mortgage loan principal, a helpful proxy for trends in home prices, increased by 42% from December 2020 to December 2023.
• The average drawn balance on a HELOC rose by 31.7% from December 2021 to December 2023.
• The average new car buyer in December 2023 is paying $323, or 57.1% more per month for an auto loan than the average new car buyer from December 2019.
• The number of CD openings in Q1 2023 was 10.8x higher than the number of CD openings in Q4 2021. By the end of 2024, 87.7% of the CD balances held at the end of Q4 2023 will mature.
• The average credit card payment has been increasing since 2020, reaching $2,376 by 2023, a 19% increase over pre-pandemic levels.
• There were 5.17x more BNPL users in 2023 than in 2019.

"Through this research, and Alkami's other tools like the Digital Sales & Service Maturity Model Assessment, banks and credit unions can not only assist their account holders in mitigating the effects of high interest rates to strengthen loyalty and provide the best digital banking experience, but also can be informed on where their institution may lie on the competitive curve," said Mark Leher, director, product management at Alkami.

To read the full 2024 Alkami Telemetry Data Report, visit here. Financial institutions can take action now to assess their competitive position and digital maturity level by taking Alkami's Digital Sales & Service Maturity Model Assessment.

About Alkami
Alkami Technology, Inc. is a leading cloud-based digital banking solutions provider for financial institutions in the United States that enables clients to grow confidently, adapt quickly, and build thriving digital communities. Alkami helps clients transform through retail and commercial banking, digital account opening, and data and marketing solutions. To learn more, visit www.alkami.com.

About The Center for Generational Kinetics
The Center for Generational Kinetics is a global research firm focused on delivering custom research that uncovers emerging trends, hidden behavioral drivers, and actionable insights for leaders. The firm has led more than 120 custom research studies around the world for global brands and industry pioneers. To learn more, visit GenHQ.com.

Media Relations Contacts
Vested
alkami@fullyvested.com

Marla Pieton
marla.pieton@alkami.com

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SOURCE Alkami Technology, Inc.

FAQ

What does the 2024 Alkami Telemetry Data Report say about high interest rates?

The report indicates that high interest rates have significantly impacted U.S. consumers, with 67% saying it has affected their standard of living.

How have mortgage originations changed according to the 2024 Alkami Telemetry Data Report?

Mortgage originations have declined by 72.5% from December 2020 to December 2023.

What is the impact of high interest rates on auto loans, according to Alkami's report?

The average monthly payment for new car buyers increased by 57.1% from December 2019 to December 2023.

How much has the average credit card payment increased since 2020?

The average credit card payment increased by 19% since 2020, reaching $2,376 in 2023.

What growth did the 2024 Alkami Telemetry Data Report note in BNPL users?

The number of BNPL users increased by 5.17x from 2019 to 2023.

What does Alkami's report reveal about HELOC balances?

The average drawn balance on HELOCs rose by 31.7% from December 2021 to December 2023.

What trend in CD openings did Alkami's 2024 report highlight?

The number of CD openings in Q1 2023 was 10.8x higher than in Q4 2021.