Mobile Payments Disrupted By What They Sought Out To Disrupt; The Plastic Card

By Christopher Danvers, Vice President Digital Strategy & Payments, American Airlines Credit Union

Christopher Danvers, Vice President Digital Strategy & Payments, American Airlines Credit Union

Plastic seems to be back in fashion, consider­ing the intense focus by many on finding ways to eliminate the plastic card. Retailers remain focused on reducing transaction accep­tance costs and increase loyal­ty, and seek to increase the use of their mobile apps at checkout over a plastic card. On the other side of the spectrum, we have Fintechs who are also mobile-app cen­tric in their approach with many offering innovative user experiences and newer ways to digitally exchange value.

"The next evolution for the traditional payment card in the U.S. to issue contactless cards"

And then there are the partnerships between device and wearable manufacturers and the card brands themselves. These have focused on keeping the card payment at the center of the transaction, but digitizing the card credential with the device acting as the physical card through tokenization – which brought us ‘The Pays”.

But the physical plastic card seems to be making a big comeback in two ways.

Fintech & The Boomerang Back to Plastic

It’s interesting to watch the Fintech industry evolve their business ideas and plans as they grapple with many of the realities associated with banking and payments.The new mantra of this movement was to disrupt and replace traditional banking as it exists today.You’ve seen this stance soften a little and evolve into seeking partnerships financial institutions, industry regulators, and incumbent payments brands and providers.Some of this was out of necessity, and perhaps some as they continue to navigate and understand the complexities of the financial industry and payments ecosystem.

The realities associated with achieving universal acceptance of a payment function have also been a critical influence.Venmo is an excellent example of how a Fintech strategy has evolved and “boomeranged” back to plastic to support their evolution. Venmo became a verb when its app empowered a younger generation to exchange value amongst themselves, and to teach their parents how to send them money more conveniently.Their early success was not only due to making it easier to exchange value but also due to the overall user experience by integrating a social media element with emojis.Venmo, owned by PayPal who itself has made strides to become a holistic payments platform, has evolved their payments model from just focusing on person-to-person payment use cases, and now issues a Mastercard debit card. Why? So their users can easily access the money they receive and store in their Venmo app at traditional and online retailers. You also need to be a regulated financial institution to be able to license and issue Visa and Mastercard payment card products, which means Venmo also partners with a traditional financial institution to provide the card-based access to their mobile wallet app.

Apple’s journey with Apple Pay has evolved differently. First starting as a partnership with payment brands and financial institutions to enable a digital instance of their existing plastic payment card, and then with the launch of their own Apple pay Cash Card. The Apple Pay Cash Card is a prepaid card issued by GreenDot, but is an entirely digital card with no plastic and is set up in your Apple Wallet to send and receive money via iMessage.

But plastic is also making a comeback in Apple’s payment strategy with the new and highly anticipated Apple Credit Card issued by Goldman Sachs. The Card will feature a traditional payment card, but in true Apple style as a card that reflects Apple’s brand and experience, while also seamlessly integrating into the Apple ecosystem across your apple devices.

The Convenience of Contactless Plastic

The next evolution for the traditional payment card in the U.S. to issue contactless cards.The rollout of EMV chip cards by issuers and EMV payment terminals at retailers has made this next evolution possible.The partnerships between the payment brands and mobile device manufacturers brought to the U.S. our first experience of contactless payments with “The Pays.”

Contactless cards will bring a quicker checkout experience to cardholders and retailers, as you will need to “tap to pay,” which will process faster than a contact chip transaction at checkout.Contactless transactions will also be as secure as a contact chip transaction, so cardholders and the issuers of cards will remain protected from counterfeit card activity.

While using any of “The Pay’s brings an added layer of security with biometrics and tokenization, the quick “tap to pay” transaction experience of a contactless card promises to move the physical payment card back to the top of the list as the quickest way to pay at checkout.

These trends almost guarantee that ‘plastic’ payment cards won’t is replaced entirely anytime soon, and will continue to play a complementary role in the evolution of payments and banking by both traditional banking and payments providers, as well with disruptors and Fintechs alike.

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