The manual processes that characterized the past - handling cash, customers filling in paper forms, bank tellers assessing your creditworthiness based on human underwriting skills - have moved to digitized payment options, improving the application approval time from weeks to minutes. Credit assessment evolved from a painstaking lengthy process, often with human intervention, to automated, instant decisioning supported by analytics and credit modeling. Our view is that the ecosystem will benefit most from all participants working together.
Fintechs and large organisations partnering together is often the fastest and most cost-effective way to test new market propositions, enhancing customer experience at scale. True winners in the long term, will be the organisations who recognize the value of customer data, and monetize data to provide data-led, frictionless and tailored experiences. Disclaimer: The statements and opinions expressed in this article are those of the author s and do not necessarily reflect the positions of Thoughtworks.
Will credit cards become a thing of the past? Digital innovation Blog. By Vic Wolff. Published: August 21, Our world is moving towards a near cashless society. Disruptive forces have transformed the payment and credit landscape, accelerating the shift to digital channels. The way we pay today and how we defer payments has changed entirely from where cash was king and credit was granted by the cornershop grocery store.
Then everything changed with the introduction of credit cards. In this article, we look at the genesis of credit cards, how the industry in Australia is faring today and the players that are transforming the future of credit.
Plus, we look at how collaboration between the players in the ecosystem schemes, banks, fintechs, merchants and processors has evolved. A brief history of credit cards There was a pivotal moment in history in September which forever changed the need for cash in society. Will credit cards soon become a thing of the past?
Summary We moved to a payments and credit ecosystem that has become digital, real time, data-rich and more frictionless for the end-consumer. Related Blogs. Digital innovation. Banks confront new customer demands, and the question: When to create or collaborate? What does the future hold for the credit card industry? The fact that cards are replacing cash and their usage will continue to grow is old news. All of those things are continuances of trends and developments that are already taking place, and will play out in the near future.
But what more is in store for the industry and what will happen in the longer term? Risk management, financial planning, marketing, and payment systems will all evolve as a result of these technologies. The coming changes will fundamentally transform the ways we manage the inflow, accumulation of, and outflow of value in our lives, geared towards the future transcendence of legacy institutions, financial products, currencies, and intermediaries. Risk management will be forever changed by artificial intelligence.
Blockchain services like Provenance will facilitate loan securitization with reduced risks, lower transaction costs and liquidity benefits. Financial planning will also be reshaped. Artificial intelligence will reshape marketing by predicting what we want to buy before we buy it, dynamically changing its pricing to maximize profit for the retailer and programmatically advertising it to us at the most opportune times in our lives.
The timely suggestions made by our augmented reality glasses and virtual assistants will become the new window displays and end-caps. This gives cardholders more flexibility over how the card is used across different environments, as well as having the ability to manage card features on the move, e. Although still in its infancy, when it comes to adopting new ways of transacting, the digital wallet from Apple, Apple Pay is a good indication of how these products will evolve.
Once again, Apple takes their obsession with customer delight to the banking world under the banner of "Cashless made effortless".
They illustrate how a year-old product can be revamped and made more appealing by changing how consumers interact with their "physical" wallet. These digital wallets or apps can also help with industry challenges like fraud and security by enabling the immediate "report a lost card" feature, enabling better authentication through facial recognition and other biometrics. There is also the ability to allow more controls on spending at the point-of-checkout, allowing spend to be managed by category, retail store or type of product.
This is a handy feature if running a "family" of cards within a household, where restrictions on spend can be managed at the user level. All the developments we have seen in the digital wallet space are set to position the card as more of an invisible, but crucial backbone in payments. If we borrow from the world of film, the card emulates some of the changes we have seen in Hollywood, where prominent actors have moved "off-camera" to more behind the scenes roles in the form of directing and producing.
In this newer "invisible and digital" guise, these payments types ultimately lead us to a more cashless society, where we see more growth in capabilities that support peer-to-peer cash sharing, mobile wallets, and even cryptocurrency for everyday transactions. Another way credit cards will be used in the future may be carrying out payments with bots and AI assistants. Existing AI assistants like Google Now, Amazon Echo, and Siri could be used to make payments for goods that can be delivered to your doorstep.
Again, these all allow for the payment to be embedded into technology, and the old plastic form factor does not feature so prominently. These AI channels represent a significant opportunity for the card market, as even social media giants like Facebook are keen on the idea of bot-powered payments. Cards in the future need to offer greater convenience, enhanced security and real-time fraud protection. This is not to say that current credit cards do not provide all of these, but there is room for improvement as fraudsters become more creative when duping consumers into sharing their card details.
Preventing these types of scams has got to feature in any product re-design, as the industry continues to pay a hefty price for criminal activity. Experts believe that no matter what innovations occur in the card market, one thing is for certain: under the theme of sustainability and protection of the environment, plastic will have to go. After all, its primary function is housing the chip that communicates with POS terminals to process payments.
It is expected that cards will be produced using more sustainable materials, especially if we reflect on the amount of plastic being used to manufacture cards annually, which is the equivalent weight of Boeing s planes. Such an astronomical amount of plastic is undoubtedly putting a strain on the global fight for sustainability. Newer options like manufacturing from ocean plastics, other biodegradable and recyclable materials may be the key to eco-friendly cards.
Contactless, or RFID Radio Frequency Identification chips, are rice grain sized and can be implanted into several wearable devices, including rings, watch straps, bracelets, key fobs, etc. These developments allow consumers to use near-field communication technology to give the convenience of making payments without pressing any buttons.
In a cashless or card-less society, that may well see cards becoming more and more invisible, the world of card-based loyalty also needs to be revamped. There is no doubt that loyalty schemes are arguably one of the most popular credit or debit card features. It is the reason customers decide on a particular card over another. But loyalty schemes as we know them could be changing in the near future to encompass newer and more rewarding features.
Firstly, we could see more loyalty schemes with greater flexibility in fee structures, with interest rates varying based on usage or specific goods and services being purchased. Secondly, as credit card technology changes, loyalty vouchers need to become digital to enable faster collection and redemption at the point of checkout. One of the best examples of this, even after all these years, is the Boots Advantage scheme in the UK. Here customers can use either a card payment at checkout or use their reward points.
There is only one downside with this scheme, in that these points can only be earned and spent in Boots.
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