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How The Cards Business Is Transforming

Mobile capabilities, nontraditional competition and new regulations are among the trends reshaping the cards business. What does it mean for the major players -- and for banks?

Growing Need for Mobile Management

Carlos Menendez
Group Executive, Global Consumer Products, MasterCard Worldwide

Nearly 85% of all transactions around the world are still conducted in cash -- whether in markets where the payments industry is not as developed or in markets where consumers historically are used to paying in cash for everyday items. Either way, our industry has a tremendous opportunity to build value propositions that will move consumers and businesses to electronic "cashless" transactions.

Some of the biggest opportunities are in the global youth and affluent segments. As an increasingly influential group, the youth are leaving cash behind and represent a strong opportunity to capitalize on the growth in e-commerce and mobile commerce with digital wallet systems such as our own MasterPass.

The affluent are also an important growth segment, particularly in Asia, which is heavy with domestic and international travelers whose lifestyle dictates a level of service, convenience and flexibility best delivered by card payments. That is why we have invested in MasterCard Travel Services and the Priceless Cities program to meet all their travel needs and with access to unique experiences in cities around the world.

Looking ahead, we are focusing on smarter solutions to support transactions that are more "cashless":

• Innovations such as display cards showing available balances and rewards, and EMV-enabled combo cards with credit, debit and installment loans all in one product.

• Customized products meeting the demand for segment-based solutions of our issuers and our merchant partners.

• Partnerships with governments and nongovernmental organizations to support the distribution of social benefits and funds for disaster-relief efforts.

All of these efforts contribute to our goal of creating more value for stakeholders and a more efficient "world beyond cash."

Rethink How Cards Are Offered

Aleia Van Dyke
Analyst in Payments, Javelin Strategy & Research

We're seeing several key trends. First is widespread digitization of payments. Most traditional task-based, cash-based payments are falling by the wayside, while there's a proliferation of electronic payments. We are also seeing an increase in the use of prepaid and mobile, which is dramatically changing the payments and cards space.

The industry as a whole is challenged by new and constantly changing regulations, and card issuers know they'll be challenged by future regulations as well. We also see that many banks today have to re-evaluate their card-issuing strategies, whether evaluating the fee structures for certain types of cards, whether or not they even want to offer certain cards, or whether they only want to offer certain cards to a specific customer segment.

The industry is changing rapidly, and so is the way banks will compete in the future. Today we see many new competitors in this space, which is becoming worrisome for banks and card issuers. When we think of payments, we no longer simply think of traditional credit card companies; we're starting to think of nontraditional players such as Google and Apple that we wouldn't have associated with the payments space 10 to 15 years ago. We're seeing more partnerships, and we'll see more banks change the way they offer cards so that they're not just offering a single product.

Anticipating End Users' Expectations

Jay Cary
VP, Digital Global Corporate Payments, American Express

The expectations and behaviors of corporate clients are evolving, as mobile has become a tool for convenience across every aspect of day-to-day life. As consumers, employees have technologies that make their personal lives easier, and they want access to similar technologies in the workplace. Therefore, it has become essential to integrate with technologies that they've already adopted in their personal lives to foster higher employee engagement within travel and expense programs.

Service and technology providers like American Express have begun to make such offerings available to mobile expense companies. Employees using expense management apps can soon record receipts and manage expenses in near real time on their devices. As a result, companies will benefit from greater compliance and productivity among employees, especially those who frequently travel for business.

As an example, American Express recently integrated with the TripCase travel app. Employees who link their corporate cards with TripCase can view trip-relevant benefits associated with their corporate cards, such as airport lounge access or in-flight wireless, within their TripCase itinerary.

Moving into 2014, expect to see technology providers continuing to focus on adaptable platforms and new integrations that benefit employees and provide scalable solutions for corporations that drive greater ROI and compliance, as well as quicker and more accurate reporting.

[8 Big Stories Transforming The Payments Landscape]


Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio

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