I chaired a track at the inaugural Money 2020 Asia conference on 15 March in Singapore that covered two-panel sessions. The first session which I also moderated, focused on the future of credit cards in a world that is rapidly turning digital. The second session related to progress being made in real-time payments.
Of course, owing to the theme of the conference, discussion in the cards panel had a strong emphasis on Asia. The panellists consisted of prominent card industry executives and a successful FinTech crypto-entrepreneur.The panellists were:
- Annie Zhang, Regional Managing Director – Asia Pacific, Discover
- Ling Hai, Co-President – Asia Pacific, MasterCard
- Yuichiro (Yuchi) Kadowaki, Senior Vice President, JCB
- Kris Marszalek, Co-Founder & CEO, Monaco
The full video of the panel session discussion is available below thanks to a member of the audience.
But if you do not have time to watch the whole of it, I have highlighted some salient points of the discussion.
Cards continue to be important
- First, the panel confirmed some of the key features of the credit card product that have helped to make it one of the most successful product in the world of financial services for decades
Cards are not just about payment
- Payment is the core feature provided by a credit card but it offers many other services that have become part of our everyday lives. Consumers are able to obtain immediate credit when and where they need it
- Loyalty schemes and rewards are widely used and have spawned an industry ecosystem on their own
- Cards provide a consistency of experience: if you see the card scheme logo in a shop thousands of miles away from home in a different country with a different language, you know your card will work, your credit is good, and you will walk out of the shop with your purchase
- Don’t forget the merchants. They know they will get paid when they sell merchandise to a complete stranger who has a card bearing the card brand that the merchant is a member of
- A card scheme is a circle of trust that is expanding and strengthening all the time
- Cards are secure and unlike other payment instruments, cards can be used on almost any channel – physical or digital
- Finally, and especially relevant for regions like Asia, cards help increase financial inclusion from two perspectives. Cards help people usually on low incomes who are often un-banked, come within the financial services umbrella. This helps their livelihoods grow. Cards also help governments bring more people into the formal economy increasing the number of tax payers
Will the “physical” card remain important?
- In one word “Yes”
- Card is more than a payment method – not least because the credit aspect is important
- Monaco, the crypto outfit represented on the panel is issuing cards as their primary product
- Monaco decided to issue the next generation of cards – metal (and metal hybrid) cards and these have been very helpful in customer acquisition – they provide a new customer experience which is crucial
OK, so what about the future – do cards face real challenges from new technologies such as QR codes?
- There have been many new technologies and innovations but cards have proved resilient
- This is because most of these technologies themselves rely on cards to be the funding source
- A payment card sits behind the QR code as the funding source
- So the danger is not that cards will disappear but that they may get hidden somewhere in the background
- But even if that happens, it is not going to happen to every card and cards will continue alongside QR codes and mobile NFC to be customer facing
- There may be many funding sources for QR codes etc or NFC wallets such as bank accounts but cards are so deeply woven within the fabric of shops and stores and e-commerce websites that they will continue to thrive, evolving and improving, for a very long time
Do digital wallets mean cards will be “used but not seen”?
- Is that bad for card issuers as consumers will not see the card issuer brand? Not necessarily – there are ways to ensure there is a positive interaction between the provider and the cardholder but providing the best checkout experience is what attracts and retains customers to a service
- Digital players are in reality not threats to card companies but will thrive because of them
- Emerging markets such as China have shown that despite all the innovation and technology giants with massive service stacks, the market is progressing rapidly towards a future in which cards appear at the centre of the payments landscape
Do cards provide the optimal digital payment experience?
- Cards can be difficult to use on mobile devices if one must enter the 16 digits card number on a small screen
- But there are workarounds of course. The “Card on file” approach is becoming very popular - save the card details on the merchant website. Once it is there, it is there. The payment works in the background
- Tokenisation technology is of key importance here. It is being deployed across the globe, which will help a card being available for use securely (guaranteeing security for both consumers and merchant) across any environment – physical, digital – whether online, mobile, in-app etc.
What about low value payments (in the IOT scenario where most transactions will be very small)?
- Cards have always been used for low-value payments. Look at contactless transactions. These are mostly low value.
- Cards can be used economically for micro-payments as well and there are processes and platforms available to help in that direction
Are mobile payments dead? Anyone use NFC payments?
- Contactless payments have been driven forward by transport systems where people have shown a preference for using their cards and not NFC enabled mobile handsets
- But still too early to tell or pronounce judgment
- Mobile will grow once the infrastructure is in place. Other than in a few cities, the infrastructure is still not fully available
- Perhaps all form factors will live together
- Who knows, people may one day use NFC technology on their mobile handsets to accept payments rather than make payments
- So mobile NFC may one day ensure there are billions of merchants – all of us – you and me – who are able to receive payments electronically
At some point, will there be a transition from clearing & settlement (old) based systems to systems based on crypto-tokens and blockchain (new) simplifying the global payment landscape?
- A crypto token carries value – enabling direct transfer of value – why would one need systems developed using old methods of clearing and settlement?
- Crypto users are increasing and systems transferring on to blockchain platforms are also increasing
- But, who knows - innovation is happening at such a rapid pace that something entirely different and new may be developed in the future. But, new business models and new customer experiences will emerge that may eclipse today’s “hot” technologies.