The Future’s Bright as Cards Get Smarter - 7 Sept 2015
We hear it all the time …wallets are taking over, virtual currencies are gaining more traction and the payment is moving to the mobile. Oh, and payment cards, if not dead, then they’re in the final years of life. Reading some of the commentary in the press and at events, you’d expect never to see a payment card again – not matter how smart. The truth, of course, is considerably different.
We hear it all the time …wallets are taking over, virtual currencies are gaining more traction and the payment is moving to the mobile. Oh, and payment cards, if not dead, then they’re in the final years of life. Reading some of the commentary in the press and at events, you’d expect never to see a payment card again – not matter how smart.
The truth, of course, is considerably different. Shipments of EMV cards are growing rapidly. It took 25 years for smart card shipments to reach the 1 billion mark. This happened in 2011. It took just 3 years to reach the second billion. This is not the kind of growth you’d expect from a faltering technology.
Not only this, innovation is alive and well in payment card space. We have seen an amazing increase in the share of contactless-enabled, dual-interface cards. The number of different form factors is dramatically increasing – including wearables in the shape of Barclays PayBand, Barclays Lyle & Scott jacquet and others. And we’re seeing a new generation of on-card screens that turn cards into smart authentication devices.
But even if we were to ignore all these things, it wouldn’t matter. Cards are, and will remain, important for three hugely significant reasons.
• First, ApplePay, SamsungPay and Google Wallet are cool and contemporary, but they all still rely on the user having a physical payments card(s) as the ‘payment launchpad’. And of course, in order to replace cards (or any other form of payment for that matter), penetration rates need to be around the 100% mark. For that to happen a seismic shift in consumer and merchant habits is required. It hasn’t happened yet, and won’t do for some time.
• Second, the card remains the issuer main marketing tool. Cards are taken out of purses and wallets tens of times a day. Not only that, the evolution of multiplication cards is opening up a new world of exciting services and brand-building use cases – adding access control to payment to allow users to get into offices, gyms, football stadia and airport lounges. This is already happening. Banks are already working with airlines and soccer clubs to deliver these to their audiences, while flight check-in via the card is also very much on the agenda.
• Third, the security aspect. There’s simply nothing more secure than the hardware/software combination of a smart payment card.
Should be need to provide more evidence as to the longevity of the card, it’s worth thinking about this: It took 25 years for smart card shipments to reach the 1 billion mark. This happened in 2011. It took just 3 years to hit the second billion. This is not the kind of huge growth you’d see from a dying technology.
Also, to come back to the question of newer mobile wallet options, banks have to pay for the privilege of allowing customer to use ApplePay and similar. Whenever a user ‘onboards’ a card to these new mobile apps, the bank is obliged to pay a commission to the brand. They do it, but they don’t like it. Arguably, they’re not in the business of encouraging it.
But to position this discussion as a conflict between card manufacturer/issuer and the wallet providers is to encourage a battle where none actually exists.
In the SPA’s view, card and wallet technologies compliment one another. They offer the user and merchant choice – and that can only be a good thing. Innovation is good for the industry and the consumer – whether that’s innovation in terms of the development and wider adoption of wallets, or the evolution of the card form factor and dramatic increase in the sophistication and multiplication of cards and opportunities.
Doubtless both technologies will coexist for many years to come. And if form factors change as a result of technology advances and the development of the embedded and wearable’s markets, then that’s all to the good too. Let’s remember, the smart card is not defined by the form factor, but by globally accepted international standards. So we may not have ‘cards’ in 20 years, chances are they’ll still be around…the technology embedded into a variety of devices.
There are claims that smart cards are an old technology. This rather misses the point. The date of invention doesn’t have to imply obsolescence. Consider the microprocessor and Internet Protocol (IP). Both were invented in the 1980s, and both couldn’t be more relevant today.
What is important in established technologies is the capacity to evolve and adapt to fulfil evolving user needs. Current EMV cards with their computing cryptographic capabilities, increased security features and memory, contactless interface and flexible form factors do exactly that. They are as different from first generation cards as today’s internet is from when Sir Tim Berners-Lee invented it some two decades ago.
So when commentators discuss the role of the payment card, it’s worth pointing them towards growing shipping volumes, increasing innovation and the explosion of form factors. And while you’re doing it, don’t forget the huge and growing value cards are continuing to deliver to end-users, merchants and issuers.