By Peter Krauss, CEO of Arroweye Solutions
America has experienced radical shifts from the status quo, and consumer behaviors have evolved significantly and quickly in the past 10 months. Not all of these changes will last forever, but three key changes in how and where people pay and get paid are here to stay.
This year, we’ll see which financial service providers embrace these trends and thrive, and who struggles to adapt.
Connecting Cash to Cards: More fintechs, banks, and non-financial businesses will use payment cards to ride the digital wave and bridge the gap between cash and digital payments.
Until last year, digital payments had still not hit their full stride in the U.S. Despite banks, credit unions, and fintechs encouraging use, adoption was not widespread across all consumer markets, especially those who relied on cash as their primary payment method.
But the pandemic quickly intensified the missing connection between cash and digital payment options for these consumers. Many cash-reliant Americans felt a disproportionate impact from being locked out of digital payments early in the pandemic, from the inability to receive wages and tips in a timely manner, to lacking access to online grocery and food delivery services, which generally don’t take cash.
Payment cards emerged as an incredible resource to open those doors and proved the fastest way to put critical funds in people’s hands. Businesses quickly pivoted from cash and paper checks to payroll and tip payment cards, and the fastest government relief funds were distributed via plastic card.
All of these new card-based accounts give cash-reliant consumers a way to receive funds, load cash into a digital account, and access ecommerce, mobile, and contactless payments.
With more consumers able to tap into digital payment options by using cards to connect their cash, adoption skyrocketed, and new market opportunities are everywhere.
Fintechs and other businesses are embedding more payments features into their ecosystems, launching card accounts for a whole host of new use cases, such as neobank accounts, wage payments, expense payments, proof of concept accounts for new business ideas, and more. At the end of the day, cards will remain central to consumer convenience, security and safety and take on an elevated role in the payments landscape.
Microtargeting and JIT Marketing: Financial service providers will better leverage targeted marketing tools to drive customer acquisition and engagement.
The ability to target and deliver solutions to the right audience at the right time has always been a competitive advantage. But the pandemic drove marketers to fully appreciate the need to pivot quickly when customer needs or market demands dictate. This year, businesses that truly embrace “just-in-time” marketing can be much more responsive to customer needs, remaining relevant while competitors race to keep up.
This is due, in part, to the fact that personalized offers improve response rates, attract new high-value segments, enable expanded product breadth, and capture more market share, which is especially important in payments and financial services, where consumer expectations and needs have both increased and become more diverse. Cookie cutter solutions are no longer viable. The ability to target buyer segments specifically and dynamically with the speed of just-in-time production can put debit and credit card offers in market more quickly and at lower cost than was traditionally possible.
Banks, neobanks, credit unions, and fintechs of all sizes can get more aggressive with hyper targeted campaigns, or test markets, thanks to the total flexibility and control over key go-to market elements like inventory, production, and card design. Payment cards are essentially inexpensive billboards and people always have them with them when they pay, whether with physical or digital wallets. Featuring brands’ logos front-and-center during a positive payment experience drives brand affinity that will help lead to long-lasting customer relationships.
Payment cards will drive economic growth in a COVID world.
When people have positive brand interactions, they are more open to cross- and up-selling opportunities, are likely to feel deeper brand loyalty, and more frequently engage with brands. Great payment experiences can boost brand perception and contribute to these behaviors.
Payment card accounts create smooth omnichannel checkout experiences online, via mobile, and in-store—even when point-of-sale infrastructure is lagging. This versatility helps ensure people have positive brand experiences no matter how they pay and can help drive repeat purchases in the future.
And since payment cards can connect more people to the digital economy, more Americans can send and receive funds in a timely efficient way—enabling them to receive wages quickly, order takeout, and shop online. Opening up more spending channels will help drive revenue this year, and payment cards will be at the heart of these transactions.
The demand for contactless is at an all-time high and growing
The use of contactless card payments increased 150% between March 2019, and March 2020.
This shifting consumer payment preferences was slow in coming pre-pandemic, but will be long-lasting as more people experience the convenience and peace of mind that comes with contactless payments. Dual-interface cards, which support both contact and contactless experiences, place fewer restrictions on consumers and allow them to pay the way they prefer no matter the situation. We really saw this come to life with stimulus payments and other urgent payment needs that were driven by the pandemic.
Truly on-demand technology gives fintechs, banks, credit unions, and other financial institutions unmatched flexibility and scalability—and total control over everything, even in massive card programs. On-demand means you can respond to fluctuating market demand as it happens with just-in-time technology that lets you turn on a dime and respond to immediate needs—eliminating inventory forecasting risks and waste.
For businesses that are entrenched in the payments and fintech industries, payment cards can be powerful tools that help knock out your KPIs while engaging customers, creating smooth omnichannel experiences, and promoting your brand—even during a pandemic. Businesses should be bullish on plastic cards for years to come, and we’ll be here ready to help you use them to your advantage.