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Finance

How Credit Card Issuers Can Transition To a Post-Card World

The credit card recently turned 55, but instead of celebrating a fruitful half-century, it may be forgiven for fearing its untimely demise. Digital payments are now gaining traction among both merchants and consumers and the technology surrounding the digital wallet is accelerating at breakneck pace. Soon, consumers won’t even need to take out their phone to make a payment: a sensor will automatically deduct funds from their account much like the automated toll pass system deducts a fee when you drive through the toll.

Credit card issuers need to think carefully about the impact of the digital wallet on their business strategy or risk becoming irrelevant in a post-card world. Issuers only need to look to companies like Borders and Blockbuster to see what can happen when strong businesses fail to anticipate the impact of technological change. On the other hand, credit card issuers have advantages that many other companies do not, such as powerful established networks of merchants and consumers. Issuers need to take action now to leverage their existing strengths – their networks, their customer bases and their brands – while adopting new technologies to maintain and bolster their positions in a digital world.

As they think through their futures, it is important for credit card issuers to remember the fundamental functionality of the credit card. The value of the credit card has always lain in credit and payment convenience, not the physical card. As the industry changes, issuers need to focus on continuing to offer customers convenience thereby boosting their brand. 

Issuers will soon lose the branding opportunity that comes from having their name associated with a physical credit card. Previously, if a company had a branded credit card, customers who signed up for the card would see the company logo every time they took the card out, ensuring that the brand was regularly top of mind. They would also provide an opportunity to strengthen relationships with customers through loyalty programs such as offering points for every dollar spent that can be redeemed for gift cards or travel miles. Physical cards also provided an advertising opportunity, giving new consumers exposure to the brand when loyal customers used their branded card at restaurants and stores. Without the opportunity to sway consumers with brand and image, issuers need to deliver value in new ways. If consumers find real-time, immediate and measurable value in their branded credit card, they are more likely to hold on to it.

Since credit cards are carried by customers everywhere that they go, one way to add value to customers’ lives is to adopt location intelligence technology to deliver service at the right time and place by delivering location-specific offers on their cards. When a customer “checks in” to a location on a smartphone, this provides valuable information about that customer’s most current needs and wants. Companies can respond by offering highly tailored promotions. For instance, when a customer goes on vacation and checks into a hotel, the card issuer could provide discounts at the hotel restaurant. When the customer checks-in at a tourist attraction, the card issuer could offer real-time discounts to a nearby memorabilia store. These kinds of promotions pre-empt customers’ needs, providing value and convenience, thereby forging a bond between customer and issuer.

When presenting location-specific discounts, it is important to give the customer the opportunity to opt-out. Credit card issuers can strengthen loyalty by giving customers the opportunity to “geo-fence” – that is, to indicate locations, such as their workplaces, where they do not wish to receive offers. Issuers can also add to customers’ sense of security by providing them with superlative safety measures. Soon it will be possible to identify cardholders with unique markers, such as fingerprints, retinal scans and voice recognition. Issuers need to adopt these security measures ahead of their competitors to show that they are deeply invested in their customers’ security. This will also ensure that the issuers themselves avoid losses due to fraud.  

The world is going cardless and there is no turning back. As new technologies come to the fore and consumer behavior moves towards even more ubiquitous smartphone and tablet adoption, credit card issuers need to ensure that their brands survive, even as the plastic cards themselves begin to disappear. The good news is that credit card issuers already have strong customer and merchant relationships on which to build. Capitalizing on these strengths and incorporating new technology will help them stand out even in a post-card world.

 

Nat Cooper is Enterprise Solution Principal at Pitney Bowes Software

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Nat Cooper

Nat Cooper is Enterprise Solution Principal at Pitney Bowes Software

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