The big changes coming to your credit card
Will the rise of payment options like Afterpay see credit cards fade into oblivion? Finance expert David Link looks at why the opposite could be true.
The number of credit cards in Australia is in decline, from an all-time peak of 16.8 million in May 2017 to 15.8 million in June 2019, according to recent data compiled by Finder.
New digital alternatives like buy now, pay later services, such as Afterpay and Zip Pay, may be a factor – but more likely it's a lack of innovation which is turning Aussie shoppers away from their credit cards.
In an era defined by digital and mobile-first, interconnectivity and hyper-personalised experiences, credit cards have largely remained a depersonalised and unmoving product. The same can also be largely said of debit cards. And when we speak of "cards", we mean either physical plastic cards or virtual cards loaded on a consumer's mobile phone.
Does this mean cards are going to go the way of the cheque book, and disappear from our pockets (or our phones) entirely? It's highly unlikely, and instead Aussie cardholders are set to benefit from a suite of overdue innovations to how our cards function and offer value. Here are a few of the changes to credit cards that are already rolling out overseas – and are likely to come soon to Australia.
Greater personalisation
Personalisation is now a benefit we expect from any business we interact with. When we order food through an app, we expect to be able to pick and choose ingredients. Or, when we shop online for clothes, we expect tailored recommendations based on our previous purchases. Streaming services like Netflix and Spotify provide personalised watching and listening playlists based on your tastes and preferences.
Credit cards, on the other hand, continue to be thoroughly depersonalised, but this is about to change. The credit cards of the very near future will offer you rewards programs and other benefits uniquely tailored to your interests and spending habits, and allow you to change them as you wish.
At Verrency, we recently helped Emirates NBD, one of the Middle East's largest banks, to roll out the world's first personalised credit cards through their lifestyle bank Liv. The card lets customers pick the loyalty programs and special offers they want, with the option of changing them as their lifestyle and needs evolve.
For example, if you love to dine out, you might opt for boosted rewards points on restaurant spending. If you're a shopaholic, you may choose special redemption offers at selected retailers. You may choose to earn points on your favourite airline and then, if you decide, change to your favourite hotel points program.
Whatever your preference, it won't be long before these personalised card programs become available in Australia.
More value and more options
Credit cards were born out of convenience and value. Being able to make purchases with nothing but a single small piece of plastic and then deal with the finances at a later date was an innovation that consumers couldn't get enough of. But as technology has progressed, expectations have been raised when it comes to the value you receive from your financial products.
To maintain their place at the front of your wallet, banks and other card providers have to innovate to improve their value proposition.
That begins with banks virtually integrating your card with third-party services, such as micro investments like Drivewealth or Raiz, which round up your purchases and invest the excess into shares or exchange-traded funds (ETFs).
Banks will also integrate your card with merchant loyalty programs, meaning you'll no longer need to carry a stamp card or download a dozen different apps to access loyalty schemes at your favourite merchants. Instead, you will automatically earn and redeem loyalty points or offers at your local supermarket, fuel retailer and coffee shop whenever you tap to pay with your credit card (or your phone).
Buy now, pay later integration
Credit cards do not necessarily need to compete with buy now, pay later services. In fact, it's more likely these services (also known as instalment credit) will become an available payment option via your existing card.
FlexiGroup, the company behind buy now, pay later service Humm, has already announced its plans to launch an instalment credit card called Bundll with Mastercard. Bundll will enable shoppers to group multiple purchases of up to $1,000, with an interest-free fortnight to make repayments.
Crucially, you'll be able to use Bundll at any merchant that accepts Mastercard – whereas some buy now, pay later services need to have individual agreements with each retailer for acceptance.
What's the hold up?
Introducing these sorts of technologies is a hugely time-consuming and costly process for the banks, and a lot of the underlying infrastructure these innovations need to plug into is decades old.
There's also the obvious security and risk implications for banks bringing new technologies into their payments set-up, which means the testing phase of these projects can take several years.
But make no mistake – payment is the most critical touchpoint for the banks' relationships with their customers, and they recognise the importance of protecting that relationship from incursions by tech disruptors. With new technology making it easier for banks to innovate, integrate and personalise what your debit and credit cards can do, change is coming sooner rather than later.
David Link is the Founder and CEO of Verrency, an Australian payments innovator which enables banks to deliver innovation at the moment of payment, without having to invest in costly and lengthy infrastructure overhauls. He has three decades of experience in financial services, including 26 years spent in various leadership positions internationally with Accenture.
Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder has taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.
