Cash was already going the way of the dinosaur, and then COVID-19 came along. All of a sudden, something as innocuous as paying for groceries with paper bills became a scary proposition. For some, even using credit cards seemed daring and they switched to digital wallets that let them “tap to pay” when checking out in a store.
The move further from cash and more toward cards and payment platforms is just one way the credit card industry will continue to change in 2021. But there are also other trends in the works. We interviewed experts to find out what they expect from the credit card industry in the coming year and beyond, and here’s what they said.
Consumers turn to credit cards to pay bills
The coronavirus pandemic has affected virtually all parts of life, including how we pay for goods and services. According to Sanjay Gupta, executive vice president of ACI Worldwide, part of this shift involves paying more bills specifically with credit cards.
A 2020 ACI Speedpay Pulse Study shows that consumers are paying an average of almost 10 bills per month and generally turning to digital payments. In particular, 25 percent of consumers increased their usage of a biller’s website to pay their bills versus mailing in a paper check or dealing with other payment methods. The study also showed that mobile wallet usage increased, with 7 percent of respondents reporting having used a mobile wallet in the last year versus 3.5 percent the year before.
“If there’s one thing we’ve seen emerge from 2020, it’s that customers expect a choice in how they’re paying,” Gupta says. “From physical and virtual cards to emerging alternative payments, we predict that billing companies will allow for flexibility within their payment options.”
More consumers in search of rewards
The 2020 ACI Speedpay Pulse Study, which surveyed more than 3,000 adults nationwide in March and April of 2020, also revealed more consumers are showing interest in their rewards points.
Among consumers who make one-time payments with a credit card, more than 2 in 3 do so in order to earn rewards on their spending. The ACI study shows that this increased to 69 percent in 2020, compared to 66 percent in 2019.
Yet, consumers aren’t necessarily interested in the same type of rewards as they were before. Rutger van Faassen, who serves as head of product and market strategy for FBX at Informa Financial Intelligence, points out that travel rewards credit cards have become less interesting since many consumers can’t (or don’t want to) travel right now.
This is part of the reason most new cards that come out this year will feature flexible redemption options instead of airline miles or hotel points. Further, this is the impetus that caused Chase to come out with its “Pay Yourself Back” feature, which lets consumers redeem travel points for better redemption values when shopping at home improvement stores, restaurants and grocery stores.
Consumers crave more contactless payments
Patrick Hodo, CIO of the Texas-based software vendor Red Maple, says more and more shoppers are following best practices for social distancing, which normally require you to stay at least six feet from other people not in your household. Hodo also points to a Visa Back to Business study that shows nearly two-thirds (63 percent) of consumers would switch to a new business that installed contactless payment options if given the choice. Further, nearly half of shoppers (48 percent) would not shop at stores that only accept payments that require contact with a cashier.
According to Hodo, contactless payments are popular due to the fact they work exactly how they sound. They offer “a way for customers to pay for your goods and services without physically touching a point-of-sale terminal,” he says. “The shoppers can use a debit or credit card, smart card or another device with radio frequency identification (RFID) technology and near-field communication (NFC).”
Unique new rewards credit cards take shape
David Shipper, who serves as senior research analyst in Aite Group’s Retail Banking & Payments practice, says one big upcoming trend involves startups launching new credit card products at a rapid pace.
“It is easier and cheaper than ever before for a startup to launch a credit card, and many startups are working to create something that is unique and rewarding in hopes of taking business away from the big guys,” he says.
For example, BlockFi is currently in the midst of launching its new Bitcoin Rewards Credit Card. Not surprisingly, this card will let customers rack up the digital currency known as Bitcoin in place of traditional cash back.
The Bitcoin Rewards Credit Card is currently on a waitlist, but it’s set to launch to eligible consumers sometime in 2021.
‘Masked cards’ grow in popularity
Shavell says a masked card is a unique, disposable, private credit card number consumers can use to make secure purchases.
“They are completely functional in making payments but don’t share any of your real personal financial or billing data with third parties,” he says. “You can use masked cards whenever you’re uncomfortable giving out your real debit or credit card information or billing address.”
While it’s hard to find reliable third-party data on growth in the use of card-masking technology or services, research at Abine shows the company’s own card-masking services growing at 20 percent to 30 percent annually. Recently, Abine estimated that the number of Americans using masked cards has reached up to 10 million.
New types of credit card fraud emerge
Like any other year, 2021 may bring along more types of credit card fraud we have never seen before. One emerging trend is synthetic identity fraud, which Johnny Ayers, CEO of Socure, says may be increasing at a record pace.
Unlike other types of credit card fraud and identity fraud, synthetic identity fraud “occurs when a criminal uses elements of someone’s real personal information or entirely fake information to create a fake identity, bolstering the new account with other fake information,” he says.
For example, the hacker might use the real address or phone number of one person and the Social Security number of another.
“The idea is to create an account that resembles an actual person but can fly under the radar of traditional fraud detection methods,” he says.
But if you are the unlucky soul whose Social Security number is used, or some of your other personal information is used for a synthetic identity fraud scam, you could spend a considerable amount of time and energy recovering from the damage.
Fortunately, you can take steps to ensure no new accounts are opened in your name. Ayers recommends regularly monitoring your credit reports for suspicious activity. You can even freeze your credit reports so no one (not even you) can open an account in your name until your account is formally “unfrozen.”
The bottom line
The pandemic has changed plenty about our lives, yet the convenience that comes with paying with plastic hasn’t changed a bit. If anything, 2021 should bring about new competition in the credit card space, more flexibility in rewards earning and redemption and even more vendors accepting credit cards as payment.