George Tong: Got it. That’s helpful. And related to the trends that you’re seeing on the card side, can you discuss growth trends you’re seeing with credit card marketing and prequalification volumes?
A €“ Mark Begor: Yeah, that was fairly strong in 2022 and in the fourth quarter. And we would expect that to continue at a fairly strong level in certainly the first quarter, which we gave you guidance on. And I think in our broader guide for 2023, we expect kind of a broad softening in the economy in the second half, and that’s factored into our outlook for the year.
A €“ John Gamble: Just as a reminder, our Financial Marketing Services business was weak last year, right? And we talked about that throughout the year. And what we expect is we expect to see it kind of flatten out in 2023, part of it just because we’re lapping a weak year and part of it because we think we’re improving some of the product offerings we have. But — so overall, for us, our Financial Marketing Services business was generally not strong in 2022, but we’re expecting a little better performance and some growth in 2023.
Q €“ George Tong: Great. Thank you.
Operator: Thank you. Our next question is coming from the line of Surinder Thind with Jefferies. Please proceed with your questions.
Q €“ Surinder Thind: Thank you. Hi, Mark, just following up on the questions from the last analyst. Just big picture-wise, I mean, does the relative strength of kind of what you’re seeing in like auto card, P loans, at this point in the economic cycle both from like a marketing spend perspective and as well as volumes, does that kind of surprise you at this point? And maybe how should we generally think about the cyclicality of the business? I mean, if the economy was to maybe fall into a recession late 2023, is that when we would maybe expect to see lenders pull back a bit more? Just trying to gauge if there’s structurally anything different that we should be thinking about this time around?
A €“ Mark Begor: I think this is a different economic event than we’ve ever seen before, right? You’ve got interest rates increasing rapidly. You’ve got inflation at a level that it hasn’t been in 40 years, but you also have people working. That usually doesn’t tie together. Normally, you see unemployment increase as there’s an economic event. And I think the real question is that — I’m not an economist, but the real question is that — is there going to be the so-called soft landing with interest rates and inflation? With the labor report from last Friday, it doesn’t feel like that, meaning there’s going to be continued interest rate increases to try to tame inflation. But the variable on all the verticals you described in financial services, where financial services companies, I ran a credit card company for a decade, where a credit card company or a financial service company will start tightening up is when people aren’t working.
And when they’re not working, they can’t pay their bills or they slow down their payment of their bills. So that’s the dichotomy that we have in 2022 and I call it the early parts of 2023, is you’ve got an economy that clearly is seeing pressure. You’ve got companies that are tightening their belts, which is impacting some of our B2B volume. But you got a consumer that’s still fairly healthy. Their consumer confidence is down, but they’re working so they’re still paying their bills. Our assumption for 2023 is that doesn’t continue, meaning there’s some weakening of that in the second half is kind of how we laid it out. And then, of course, on top of that, we’re disproportionately impacted versus some of our peers by the massive mortgage market decline that we’ve had.
We’ve been living in a mortgage recession for six-plus months, and we’ve got another six months until we get the first half strength of 2023 behind us. But last year, the mortgage market decline impacted us — just the market impact of that was close to $0.5 billion, a little over $0.5 billion. So we’ve been living in a usual economic environment. And from our perspective, quite positively, Equifax has continued to grow through that.
John Gamble: And just as a reminder, as you think about USIS, right, two of the areas that are performing extremely well that are driving a lot of our growth are commercial and identity and fraud, right? So segments that are not necessarily embedded within the consumer, but where we think we have differentiated capabilities and benefits that should allow us to grow nicely in markets that may even weaken.
Surinder Thind: Thank you. That was my question.
Operator: Thank you. Our next questions come from the line of Heather Balsky with Bank of America. Please proceed with your questions.
Heather Balsky: Hi. Thank you for taking my question. I’d love to ask about the — on workforce, the non-mortgage verification side of things and how you’re thinking about those businesses into the year, especially given sort of the macro backdrop that you’re layering into your guidance and both on the Talent and Government side, how you see those businesses shaking out?
Mark Begor: Yes. I think we talked about that, and John can jump in. But we expect those businesses to still perform very well. Remember, the underlying levers that verification has, it starts with records. So our 12% increase in records last year benefits 2023. And then we’ve got 10 new processors that we’re going to be adding records in 20 — during this year in 2023. So records were positive in all the different verticals that we sell into, whether it’s government, talent, auto, cards, P loans, the non-mortgage verticals in verification. We’ve got price increases in the marketplace. We’re rolling out new products in every one of those verticals that really benefit growth going forward. So that’s a positive. And then just underlying penetration.
Remember in every one of those non-mortgage verticals for verification, we have fairly low penetration in cards, in auto, there’s a lot of penetration opportunity. P loans is pretty high. Like mortgage, we do a lot — we have — we cover a lot of the ground in P loans. But then you go into talent and government, there’s just a lot of market penetration opportunities. So then the flip side of that is the underlying market for those. What’s happening to the economic impacts in there? And the one place that we’ve highlighted is talent and around verification where there is some reduction in hiring, but we said that we expect that business to still be up over 10% for 2023. Government is also a vertical that if there is an economic event, there’s going to be more people going for social services, which will be a positive for that vertical.
We expect that to grow positively through 2023.
John Gamble: Yes. And just as a reminder, and Mark already mentioned that we’re expecting total non-mortgage for EWS next year about 13%. So still very, very good and that even reflects weakness that we’re going to see in ERC, right? ERC was very strong. And now with the end of that program, that pandemic-based program, you’ll see a significant reduction there, which is non-mortgage, and we’ll still grow 13% through that, so.
