May 29, 2015
Credit cards have still not lost their significance in the US. The new revolution in the payments technology space—like Apple Pay, digital wallets, mobile point-of-sale (mPOS) and other contactless payments methods—has however increased the convenience of people using cards in their day-to-day life.
Though there are other payment methods like debit cards and prepaid cards, credit cards have retained their momentum in the country with a revenue generation of $2.631 trillion in 2014—higher than debit and prepaid cards as per indications in The Nilson Report.
As credit card loans are one of the profitable businesses for banks compared to other low-interest segments, they are at the top of their business, attracting and retaining new cardholders. Increasing perks like loyalty points and discount coupons attached to the cards are enticing customers to use their credit cards more often.
According to a study conducted, the average number of credit cards owned by an American is more than three. In such scenarios, banks cannot use the same techniques like emails and card pitches to attract new customers. So they have renewed their terms with co-branding which was temporarily phased out during the recession. Co-branding helps banks to partner with retailers, airlines and hotels to attract creditworthy customers. Retailers also benefit from co-branding which allows them to negotiate for lower card fees and also share the revenue occasionally.
US’s transition to chip-and-PIN cards might also increase card usage in the country with the process being a lot safer and secure. However, the transition also gives rise to a question as to how many people would still use physical cards compared to contactless payments.
One approach banks can employ to increase usage of contactless payments, capture the space and move ahead with technology is by enabling newer payment methods in stores through co-branding partners.