The Future of Card Payments

April 2020 | Article


The payments industry is dynamic, constantly subject to change. The global cards and payments market was valued at $721.9 billion in 2019, growing at a CAGR of 7% since 2015. The market is further expected to grow at 8.5% CAGR to reach nearly $999.3 billion by 2023. While customers have leveraged more digital options in recent years, card payments continue to rise.  Debit cards are forecast to account for 50% of transactions in the UK by 2024, with payment volumes hitting 22.3 billion in 2028.

As experts in payments consulting, we often track emerging trends in the fintech and payments industry. In our previous articles, we have explored immediate payments, online payments, innovations in payment methods, cryptocurrency payments, and more. Here’s a look at what we think the future of card payments looks like:

Contactless Cards

The current Covid-19 pandemic has provided a gateway for the increased adoption of card payments across the globe. Governments across the world are encouraging people to forego cash and pay via contactless cards to reduce the risk of contracting Covid-19. Contactless cards function on NFC (near field communication) technology, i.e. they are a form of proximity payment methods. In June 2017, the UK reported that purchases made by debit cards surpassed cash payments for the first time. This increase was driven by the growth of contactless payments which accounted for one-third of all transactions in the UK. In 2018, contactless payments made up 19% of all transactions in the UK. This number is forecast to increase to 38% by 2024. Currently, two-thirds of all adults in the UK pay via contactless cards. There were nearly 124 million contactless cards in circulation at the end of 2018, with 84% of debit cards and 64% of credit cards in the UK having contactless functionality.

Other countries, such as Australia, have reported far greater adoption rates. The Westpac Banking Corporation in Australia revealed that contactless payments approached saturation point and were used in over 90% of purchases in 2017.

In the wake of the global pandemic, several banks have increased the limits – set to prevent theft and fraud – on contactless cards, urging customers to pay via tapping their card against the terminal instead of using cash. As a result, it’s likely that card payments, driven by contactless cards, will continue to grow in the near future.

Virtual Cards

Another innovative service offered by card-issuing companies, virtual cards are digital prepaid cards that can be used just like a physical prepaid card to pay for goods and services. The virtual card market was worth $85 billion in 2015 and has grown to $160 billion in 2018. It is estimated to grow to $500 billion by 2024.

Virtual cards are particularly used by corporates for employee usage as they are easy to load and track. Virtual cards function on tokenization and can be easily customized for single-payment or multiple-payment uses. Intuitive dashboards to issue and track virtual corporate cards allow business owners to gain a better understanding of expenses and funding available. Virtual cards also offer instantaneous fund transfers due to its digital nature and are comparatively more secure than physical cards. When choosing single-payment virtual cards, the risk of fraud is reduced greatly since the card is immediately destroyed. Virtual cards are a step in the right direction when it comes to offering fraud prevention and high-security along with quick and easy payments.

Use of AI and Machine Learning

The incorporation of artificial intelligence and machine learning is extremely useful to prevent fraud and improve services. When it comes to card payments, artificial intelligence allows fewer errors to slip through offering smoother transactions for customers and reduced hassles for the card-issuer. With the incorporation of machine learning in card payments, it is easier to prevent fraudulent transactions. Machine learning analyses past expenditures and will be able to highlight fraudulent transactions almost immediately, thereby protecting sensitive financial and personal assets.

Machine learning and AI are key to the future of card payments — they offer increased efficiency, fewer errors, and theft reduction across transactions. They are particularly useful for card payments made for ecommerce needs due to the presence of third-party sellers and payment processing services. Card-issuers have to be vigilant to prevent/reduce fraud and theft during a high volume of transactions made on ecommerce sites.

Card payments are second only to cash in most parts of the world. As new technology such as contactless cards and virtual cards enters the market across the globe, it is interesting to note the increase in customers choosing to pay with a tap or by generating a prepaid card within seconds. In the last few years, several customers have switched to all-card payments, foregoing cash entirely. This choice has been brought about by innovative card payment services, as well as the convenience of using one card to pay for everything. Evolving consumer habits and the development of new technologies indicates that card payments are going to witness an increase in usage across the globe, perhaps even surpassing cash payments in the near future.

At Penser, we are experts in payments consulting. We offer due diligence, strategic planning, and digital transformation services. Contact us to know more about how we can help your business.

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