17 August 2017
Paul Underwood

Plastic Card Perspective

Paul Underwood - Thames Card Technology

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Plastic is dead? Long live plastic!

24 February 2015  |  4169 views  |  3

Apple Pay, Google Wallet, Samsung Pay and PayPal are just a few of the solutions which financial technology commentators predict will bring about the downfall of cash and the plastic card. Others predict cashless and plastic-free societies by 2025. Do banks and their consumers genuinely believe this is true?

A Smarter Card

This month, the Smart Payment Association published statistics revealing that a staggering 1.5 billion smart payment cards were shipped globally in 2014. With the US migration to EMV® and contactless gaining momentum, this trend is on a steep upward trajectory.

Consider that, in 2014, the US accounted for 185 million shipments, up from 30 million in 2013. In fact, one report projects a compound annual growth rate in the North American smart card market of 18.4% until 2019 so this number is set to grow significantly. On top of this, less than 10% of the cards shipped in the US were contactless. The industry will therefore see organic growth just from greater bank adoption, consumer demand and standard card lifecycle replacement. Once contactless cards are in the hands of end users, the convenience and user experience benefits will be obvious, which will further fuel increasing demand.  

Taking this into account, claims of a near-term cashless and plastic card free future are unfounded, and this is without even considering new innovations. Bank cards with a mini-computer, an LCD screen and a digital keyboard can display a one-time-password for two factor authentication, your balance as well as your transaction history. In addition, cards are in development which activate an otherwise latent dynamic magnetic stripe when a password is entered. No password, no payment allowed.  

Plastic and Beyond

As we speak, companies are also working with manufacturers to integrate biometric fingerprint scanners into payment cards. Separately, quantum physicists are bringing forward quantum computing technologies to develop cards that are impossible to counterfeit.

Security and Convenience Breeds Trust

In this industry, history shows that increased consumer confidence and trust breeds adoption. Without question, mobile will get more popular and plastic is yet to win over some consumers to become their default payment method. But do bear in mind that plastic is simpler, quicker and more secure than any other method.

Payment methods aren’t easily killed off, we add to them to increase security, options and convenience. When cheques are still in circulation, can we really discuss the demise of cash or plastic? Payment instruments are symbiotic; we use different methods in different situations. There may come a day when plastic is put out to stud, but that day is far beyond the horizon.

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Comments: (3)

A Finextra member
A Finextra member | 25 February, 2015, 09:37

Paul

Very interesting article with data to back up your thoughts.

I agree that smartcard growth in USA has been strong. Its driven driven by the fairly recent adoption of EMV in the US.

Looking at the customer experience, however, I can't see a valid reason why clients would rather carry a card (or cards) when a secure mobile app with tokenisation becomes widely available.

I think the demise of the smartcard will be rapid once it starts. Here's why.....

. Card issuance is expensive and delivery of the card is slow compared to digital delivery over a mobile network.

. Treatment of stolen and lost cards is also very problematic compared to a mobile wallet.

Interested in your thoughts.   

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Nick Collin
Nick Collin - Collin Consulting Ltd - London | 25 February, 2015, 10:47

@Paul.  My sentiments exactly.  I too was impressed by the SPA statistics. I've long been interested in technology innovation, particularly as regards payments, and all the evidence suggests that we tend to overestimate the speed with which new technologies are adopted and underestimate how long old technologies stick around.  See here for a presentation:  http://www.collinconsulting.co.uk/technology-innovation.html .  I expect the plastic card to be with us for many decades to come

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 25 February, 2015, 13:09

@NickC + 1. With due respect to @BillG, I recently tweeted: "we underestimate the extent of sensible change in 2 years & overestimate the extent of frivolous change in 10 years."

https://twitter.com/GTM360/status/568719393674436608

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