The plastic payment card is dead. Long live the plastic payment card!
Forgive the whipsaw attitude, but that’s how it can feel sometimes when discussing the future of payment cards. On one hand, advances in mobile technology, biometrics and other areas tease a future that requires no consumer to reach into a purse or wallet to make a purchase. On the other hand, consumers — virtually all of them — still reach into their purses and wallets to pull out payment cards, cash or the occasional checkbook at points of sale.
What to make of that?
A sense of clarity came from Sebastien Clamagirand, general manager of secure payment and identity at NXP Semiconductors during a recent discussion with PYMNTS’ Karen Webster.
The main message he offered? The payment card has “a long life ahead of it.” He told Webster, “Even if you consider technologies like mobile, you can see that the consumer is still paying with payment cards.” In fact, total card shipments are going to increase over the next year, according to IBM research, thanks in large part to chip and EMV cards.
Much of that comes down to inertia — if something works well for a consumer, and remains in the mainstream, why bother changing? After all, bills and accounts are tied to specific cards, and banks offer solid and increasing protections against fraud (some of those features, like real-time alerts, are tied to mobile devices, of course).
Besides that, cards are widely accepted — even pop-up stores, or the smallest of the small mom-and-pops or that dude on the corner selling questionable roses can accept plastic via their mobile phones.
But cards have something else going for them: innovation. In the past — and this no doubt continues today — issuers appealed to consumers via the physical look and feel of the cards. Just consider all those hip, cool cards that seemed to give the cardholder entry into a secret club based on affluence or other factors. Rewards, too, drove card signups, and still do.
Innovation, though, is a different beast, at least in 2018 and going forward. More and more consumers use cards that are capable of contact and contactless transactions — that is, dual interface.
According to Clamagirand, putting transit payment functions onto more bank-issued payment cards is another area ripe for more innovation and mainstream acceptance — the contactless chip enables quick boarding of subways and busses. That not only avoids any potential for conflict of interest — woe to any innovation idea that requires a bank to share card real estate with a competing brand — but it speaks to consumer desires for speed and convenience, and to having to carry around fewer cards.
Biometrics, too, represents a new path for payment card innovation.
That could mean storing mathematical representations of consumers’ thumbprints on a card in a secure manner, protecting transactions at a potentially higher level than is now the case and negating the need to remember or enter PINs. Consumer resistance would likely be a significant force — many consumers still associate fingerprints with criminals, and may find it creepy to “unlock” cards in such a manner — but, then again, more people are getting into the habit of using fingerprints to unlock their smartphones.
Ah, yes — a bright new future for plastic cards. But, as with most things that are fun and worthwhile, the devil’s in the details. In the case of cards, that always comes around to manufacturing and issuance costs. As Webster noted, one reason that multiple-function cards failed to take hold in the United States is because they are expensive, especially given the relatively low rates of consumer adoption — the adoption rates didn’t justify the costs.
Biometric cards will not exactly be the cheapest products to make, though savings will no doubt come with more mass production and mainstreaming of that card form. To keep costs under control, card makers need to figure out how to integrate innovations into existing features and manufacturing processes, Clamagirand said.
There also has to be a market for the types of high-tech cards that will seek places in all those purses and wallets. Developing markets are an obvious target, with issuers able to use those innovative cards to stand out from their competitors and please the first-wave technology adopters. But emerging markets, too, will have need for high-tech cards, which can help encourage customer acquisition for issuers and provide a higher level of security.
The stubborn survival of checks provides a signal that plastic payment cards are a long way from their demise. But even more than that, those cards can absorb innovative features in ways that checks never could. There is no doubt that mobile will account for more payments and commerce with each passing year, but it would be folly to count plastic out.