The payments landscape is rapidly evolving. Traditional card payments that have long dominated the market now face growing competition from innovative alternatives. Yet, the card industry isn’t standing still. From e-commerce to fintech disruption, cards are finding new avenues for growth and adaptation. Here are some interesting trends we have uncovered.
Cards face competition from alternative payment methods
Cards have dominated the payments landscape for some time, but they are increasingly facing competition from alternative methods. In Asia-Pacific, where cashless payments are commonplace, QR code-based payments are surging in popularity, especially in markets such as China, India, Malaysia and Thailand.
Buy now, pay later (BNPL) is another alternative payment method making waves in the industry. Funded through either payment cards or bank accounts, BNPL is steadily encroaching on territory previously held by credit cards in markets such as Australia, Sweden and the UK. BNPL is particularly popular for e-commerce, as consumers value the ability to verify the quality of the goods they buy before making payment.
Digital wallets are also seeing significant uptake for in-person and online transactions thanks to the enhanced convenience they provide. Whilst primarily used via smartphones, we’re also witnessing increased adoption through wearables like smartwatches. It’s worth noting that while digital wallets don’t require the physical presence of a payment card, they primarily run on card rails rather than account rails.
A bright future for card payments?
So, how does the future look for traditional payment cards? Whilst the newer payment methods are gaining ground, the future of traditional payment cards remains promising. In the e-commerce sphere, card usage continues to hold strong, with an interesting twist: debit cards are increasingly being used.
Traditionally, credit cards (and prepaid cards to some extent) were typically the preferred choice for online shopping because they were perceived to be more secure than debit cards. Additionally, in some markets, a significant proportion of debit cards were either issued on domestic networks or under the Maestro or Visa Electron brands, which were often not enabled for e-commerce usage.
However, the landscape is shifting. We’re witnessing a dual trend: the migration of cards to Mastercard and Visa networks, coupled with domestic networks introducing e-commerce capabilities. This evolution is paving the way for broader debit card adoption in online transactions.
New growth avenues: fintechs and SMEs
It’s not just e-commerce where cards are finding new growth areas – small and medium businesses (SMBs) are increasingly turning to commercial cards to modernise their spending practices and move away from cash. The rise of video conferencing and environmental concerns have somewhat tempered growth in travel-related spending, but this area generally continues to expand.
Fintech issuers are playing a crucial role in driving card expenditure growth, particularly in markets like the UK, where they offer fast, in-app account opening and issuance of digital and physical cards. Consumers often use products from these issuers to complement their primary current account, especially for budgeting, travel and leisure, as well as taking advantage of app-based features such as bill splitting in restaurants. Traditional bank issuers are now reassessing and revamping their product lines in response.
Financial inclusion driving growth in card spending
It’s not just new use cases such as e-commerce which will continue to drive card spending; in many markets around the world, financial inclusion initiatives are expanding the size of the banking customer base by encouraging unbanked people to open an account and, in turn, to use cards rather than cash. Not only that, but credit cards continue to serve as valuable financial management tools for consumers, though the inflation boom seen in 2022 has now calmed down.
The cards industry is not standing still, with new use cases and areas of growth continually emerging. The future of card payments is not just about maintaining relevance – it’s about evolving and expanding to meet changing global needs.
As the landscape shifts, staying informed is crucial for industry professionals. To find out more and dig deeper into our cards and payments research, click here or contact me at [email protected] to set up a call.
