The transformation of payment cards

by Jeff Parker, CEO, Paymentology

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The ongoing digitisation of payments can perpetuate a false narrative that traditional payment cards are becoming obsolete. The reality is that card payments are thriving globally, adapting to the new age of fintech and smartphones. While the landscape of financial transactions is ever-changing, the truth is that one size does not fit all – and different markets have different payment requirements. 

While in mature markets, there has been a swift adoption of instant payment solutions, in developing markets, the focus has moved towards card-based systems, both physical and virtual, along with the rapid expansion of instant networks. Within such environments, traditional notions of card usage are experiencing massive transformations. 

Although some regions are still familiarising themselves with physical card formats, the true innovation is in integrating cards with cutting-edge technologies. This feeds into the rise of virtual cards, digital wallets, and tokenisation mechanisms, marking a new era of convenience and security in financial transactions.  

The era of hybrid cards

Hybrid cards are one of the most exciting developments to emerge in this area. Such cards are not the typical single-function payment cards but instead switch between debit and credit functions, currencies, and the conversion of digital assets. This translates to a broad variety of possibilities for consumers, enabling them to navigate an increasingly digital financial landscape with ease. 

This is not only expanding the use cases that cards can support but also embeds ‘payment by card’ into a wide range of user journeys – leading to quicker and hyper-personalised customer experiences. In such experiences, payment is invisible and can increase customer satisfaction, loyalty and engagement. It shows that whether for in-person transactions, online payments, international transfers, or navigating blockchain technologies such as Web 3.0, the physical card remains a crucial element. 

An evolving payments landscape

The landscape of payment methods is as diverse as it is innovative, with digital wallets, wearable technology, and biometric authentication becoming increasingly popular. The same is true for contactless payments, with the contactless payment market set to rise at an 18% compound annual growth rate to reach more than $12 billion globally by 2032.  

Such innovation does not decrease the need for the physical card as it is embedded throughout the next generation of payment technology. It enables a range of unique customer journeys, transforming its role in the payments ecosystem. Yet an important point to bear in mind is that attitudes towards these new payment methods vary significantly across different demographics, geographical regions, and between consumers and businesses.  

In Kenya, the mobile money pioneer M-Pesa dominates, offering a range of P2P payments, virtual wallets and credit cards. Mobile money transactions make up more than half of Kenya’s $110 billion GDP. However, in North America, credit cards are practically extensions of self, with 82% of U.S. adults having a credit card in 2022. Rewards programs and ingrained financial habits keep plastic firmly in wallets.  

Recognising these regional nuances is key to appreciating the broader context of payment evolution. 

Innovations in Tokenisation and connectivity

At the core of these new payment innovations is tokenisation and the connection to payment rails – be it local networks or global giants like Mastercard, Visa, and Union Pay. Such connectivity is not just a technical feat – it enables a smooth, embedded payment experience, whether through mobiles, wearable tech, or even more futuristic avenues. 

These developments aim to make payments as seamless as possible – and to embed the ‘payment by card’ process into various user journeys, making it faster, more convenient, and almost invisible. This level of seamlessness is critical to driving customer satisfaction, loyalty, and engagement.  

The future of cards

In decades to come, it is not about asking which technology will replace the card. Instead, it is about understanding how the fundamentals of card technology will affect and shape new payment methods. The widespread adoption of the physical card enables interoperability, ensuring seamless transactions across continents and platforms. 

Cards are playing a central role in the transformation taking place within the world of payments. The key is to anticipate which payment methods will evolve from this technology and dominate the market and which will fade away. Essentially, it is the users who will decide where the journey will go – and it is up to payment providers to give them the choice. 

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