First Data recently reported 10.6% y/y growth in U.S. credit card volume, up from 9% in 2Q11 and 8.2% in 1Q11. As the economy takes some (often faltering) steps towards recovery, there is significant opportunity for credit card issuers to build on this strong momentum, and win share from other payment methods, particularly cash and checks.
However, the payments industry is on the cusp of significant change, as technological innovation is leading to the emergence of new payment methods. Much industry coverage this year has focused on the introduction of both online online person-to-person (P-to-P) and mobile (online and at point-of-sale) payments.
So, how should issuers respond to this emerging payments landscape? Some are developing new types of plastic (e.g., integrated debit/credit cards like the Fifth Third Duo Card; prepaid cards; smart cards). And issuers are also investing in non-card payment methods, with many launched online P2P services this year, and some starting to get involved in mobile payments consortia (e.g., Citibank in Google Wallet; Capital One and Chase said to be talking to Isis).
In addition to developing new products, there are four other areas that issuers should focus on, in order to position themselves to take advantage of emerging payments opportunities. These are:
- Strategy: create an overall payments strategy that that provides a blueprint to guide investment in both existing and emerging payments solutions. The strategy should focus on developing a long-term migration plan that encourages the customer base to use emerging payments, while also optimizing returns from existing payment products
- Structure: develop a dedicated unit to oversee emerging payments investments and working to build organization-wide understanding of—and commitment to—an emerging payments future
- Intelligence: generate and leverage intelligence on emerging payment technologies, competitor initiatives, and the voice of the customer
- Partnerships: build on the growing consensus that no one can go it alone in the emerging payments landscape to develop relationships with various stakeholders in the emerging payments space (e.g., card brands, IT companies, payment processors), stay at the cutting edge of developments, and be poised to benefit if and when certain emerging payments gain real traction