Expanding card rails:

Twenty years ago, payments experts predicted the advent of something called “omnichannel payments” – the ability to pay anywhere, at any time, using multiple payment methods in any channel. More than two decades later, we are firmly in the omnichannel era, as online and offline payments channels are used regularly by most consumers who jump between physical cards, digital wallets, and account-to-account transfers according to their situation.

A consumer might pay by mobile for their parking, then use a card to pay for coffee, or make a charitable donation using cash – all in the space of five minutes. If the age of omnichannel payments has set consumers free and given them unparalleled levels of choice and convenience, then it has also created a challenge for banks: how can they keep their payment offerings relevant in this new world?

In what follows, we explore how banks can reinvent their payment offering for the digital era, whether that’s enhanced fraud protections, boosting profitability, or combining physical and digital channels to transform consumer payment behavior, offering personalized and omnichannel payment options.

Furthermore, revitalizing a bank’s payment offering can help banks navigate the range of significant challenges they face today, from spending 70% of their IT budgets on maintaining legacy systems1, through to a decade of weak profit growth, new digital-first competitors and slow product innovation processes.

There’s a common belief that the physical payment card is a 20th-century form whose time has gone. This argument points to rapid growth in wallet-based payments, which media outlet Payments Dive says will make up 52% of all payments by 20302, and instant account-to-account payments, projected to account for one in three of all payments world-wide by 20293, as signs that the card era is over.

However, given that 56% of wallets globally are funded by either debit cards ⁴ or credit cards , rising to 71% in Europe and North America, it’s safe to say that most digital wallet transactions are essentially card-based. Furthermore, although most European markets are now compliant with the EU’s Instant Payment Regulation (IPR), instant payments adoption appears patchy, with markets such as the UK, Nordics, and Poland making overall adoption appear faster than is really the case – especially in Southern and Central Europe.

Claims of the death of the card also ignore the fact at cards remain the most popular way to pay outside Asia and Latin America ⁵ – and that card payments continue to grow strongly in both volume and value across Europe from an already high base. 

In what is becoming a digital-first world, cards continue to grow alongside other payment options. What matters is that all options are secure and convenient to use. Statistics from the European Central Bank show that the number of cards in circulation grew by 6.5% last year, and have grown by 4.65% on average over the last five years⁶. The number of card payments, meanwhile, was up almost 11% last year (10.91%), while values increased to more than €5,225 billion, up 8.67% and more than double the total value of digital wallet payments last year (€2,003 billion). While there’s been much focus on the growth of digital wallet spend, this comes from a much lower base than existing card usage, which continues to rise at pace – as the above statistics demonstrate.

There are a number of reasons for the continued popularity of cards. The first is that, as Visa Europe pointed out in a recent study, two-thirds of European consumers continue to prefer cards as a payment form, especially for contactless transactions⁷ and to fund digital wallet payments. According to Visa, that’s because consumers know, understand and trust cards and how they operate, whether that’s at point-of-sale, where ECB statistics tell us (see footnote 3 below) 85% of POS transactions are now contactless, or online.

Secondly, both cards themselves – and the way they are used and managed – have evolved for the digital era. In terms of functionality, cards have added additional functions beyond Near-Field Communication (NFC) contactless transactions. These new capabilities include biometric security, multifunction payments on one card (BNPL, debit and credit, loyalty and more), and tokenization – to name but a few.

The new range of card functions extends to their use as a second factor under the physical possession rule for Strong Customer Authentication (SCA) in the EU’s second payment services directive (PSD2). All of these factors help banks to combat the rising tide of online fraud at a time when it’s estimated that online fraud losses grew by 19% in the UK alone last year⁸.

More than any other technical factor, the capacity to manage cards using tailored, white-label apps has breathed new life into physical cards as a product. Mobile card management apps are empowering the digital natives of Generation Z to set spending limits, change PIN numbers, order cards and a wide range of other functions. Research shows that dedicated card management apps drive more card activations, higher usage at POS, higher total spend and more interchange revenue for banks compared to traditional management through website, email and paper communication. To cite one example, banks using app management systems saw total cardholder spend grow by 4.2% in 2023 compared to 2.3% for those banks using traditional management approaches.

In summary, the modern card industry enables banks to give consumers the card they like with the features and payment methods they need – a sure recipe for remaining top of wallet. On top of these developments, cards themselves have become more powerful and flexible – even as they’ve also evolved to meet societal demands for greater sustainability and wider accessibility for disadvantaged groups.

In Tietoevry Banking we have more than 30 years’experience working with over 200 client banks throughout Europe. Though our Card Issuing, Personalization and Financial Crime Prevention offerings we deliver at every point in the card value chain. As a partner that delivers expert advice on everything from your product strategy through to individual program implementations, we help you get card products to market rapidly and at low cost.

Our flexible card and mobile solutions can be tailored to meet your needs, from integrated service offerings featuring all components through to single modules that meet specific challenges. Our card issuing offering extends across the entire value chain, from program and card design through to processing, fraud protections, and end-of-life card recycling. All services are offered on a Software as a Service (SaaS) basis.

We also offer a market-leading range of premium cards designed to ensure your most valued customers have access to the cards their status deserves – from gold and platinum cards through to ceramic cards and OLED cards that light up when used.

Our fraud prevention unit helps improve the performance of fraud defense and AML functions. We have delivered a better than 95% detection rate for fraudulent transactions, plus end-to-end Fraud and AML services that reduce cost and complexity. Powered by innovative artificial intelligence, our solutions are highly specialized and continuously upgraded to ensure maximum effectiveness. This includes flexible, wide-ranging services and tools tailored for the needs of banks and financial institutions. We help reduce the amount of time and money clients invest in their Fraud and AML functions – including the number of full-time employees required in your internal function.