Cards will still be popular for at least the next decade. Here are the implications for banks.
In an earlier article I looked at how card numbers and spending on cards grew well above long-term trends across Europe last year – and why this happened. Simply put, consumers in North America and Europe prefer paying by card for the convenience, choice and simplicity – as we demonstrate in a new white paper. At the same time, multi-function cards featuring NFC contactless transactions have enhanced the utility and popularity of cards as a payment method, while new security features such as biometrics are making cards safer to use.
As we point out in our study, “Card use keeps growing – the strategic implications", there’s no doubt that account to account payments (A2A) and digital wallets, among others, are going to play a very significant role over the next decade. However, cards will continue to be key – and that has significant implications for bank strategy.
Given that cards are not going away any time soon, banks should seek to reduce complexity in their approach to cards and introduce more resilient, efficient and modern card management systems. At Tietoevry, we are aware of many institutions still operating card platforms between five and twenty years old which struggle to integrate modern payment methods, from virtual cards through to Open Banking payments. Publicly available data supports this view, with PwC[1] estimating that banks and insurance companies now spend 75% of their IT budgets on patching up legacy systems – leaving little room to invest in innovation.
By contrast, investment in modern technology stacks and digital-first products could speed up time to market, dramatically cut the time and cost banks spend on maintenance and improve customer service. There are examples across the value chain, from more sustainable card issuing practices (switching from paper to electronic communication, producing post-consumer plastic cards) through to fraud defences (modern AI systems that learn from fraud events) and acquiring and processing (omnichannel acquiring products able to handle everything from cards to crypto).
Our white paper also explains how banks can address their current profitability crisis by making smart investments in modern card systems that reduce long-term operating costs, improve the profitability of their payment operations and enhance customer satisfaction. Furthermore, having modern card systems will mean banks can automate more and devote more resources to innovating for the benefit of their customers – and their shareholders.
[1] See Techsense, 2 May 2022, “What are the hidden costs of legacy systems?”: https://techsense.lu/news/hidden-costs-legacy-systems-pwc