Cash was already going the way of the dinosaur, and then COVID-19 came along and upended all of our lives. 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, so they switched to digital wallets that let them “tap to pay” at checkout.
The move further from cash and more toward cards and payment platforms is just one way the credit card industry changed dramatically throughout 2021. But there are also other trends that affected the economy as a whole and may continue to do so well into 2022 and beyond.
We interviewed experts to find out what trends they noticed regarding credit in 2021, and what they expect from the credit card industry throughout 2022. Here’s what they said:
Consumers turned 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 showed that consumers were paying an average of almost 10 bills per month and generally turning to digital payments that year. 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.
The 2021 ACT Speedpay Pulse Study showed more of the same, but that the move toward digital payments only accelerated in 2021. In fact, the 2021 study showed that consumers increased their reliance on subscription services paid with credit, and that 7.4 percent of respondents used a mobile wallet in the previous 12 months. Further, around 40 percent of consumers used credit cards (or debit) to pay their monthly bills in 2021, whereas 60 percent of consumers still used checking account deductions.
More consumers in search of rewards
The 2021 ACI Speedpay Pulse Study also revealed more consumers are showing interest in their rewards points. Among consumers who were making one-time payments with a credit card, around 60 percent did so in order to earn rewards on their spending. This goes to show that well over half of Americans are still eager to earn rewards points on their spending, particularly on regular purchases and recurring bills.
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 lost some of their luster in 2021 as many consumers slowed down on travel due to the pandemic.
This is part of the reason most new cards that hit the market in 2021 featured flexible redemption options instead of airline miles or hotel points. Further, this is the impetus that caused Chase to come out with and continually extend 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 craved more contactless payments
Patrick Hodo, CIO of the Texas-based software vendor Red Maple, says more and more shoppers are still doing their best to practice social distancing, which normally requires 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 showed 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 emerged
David Shipper, who serves as a senior research analyst in Aite Group’s Retail Banking & Payments practice, says one big trend we saw in 2021 involved 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 very famously launched its new Bitcoin Rewards Credit Card in 2021. Not surprisingly, this card lets customers rack up the digital currency known as Bitcoin in place of traditional cash back.
‘Masked cards’ grew 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 showed the company’s own card-masking services growing at 20 percent to 30 percent annually as of last year. Recently, Abine estimated that the number of Americans using masked cards has reached up to 10 million.
New types of credit card fraud surfaced
Like any other year, 2021 brought with it more types of credit card fraud we have never seen before. One of those emerging trends was 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 if 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 brought about new competition in the credit card space, such as more flexibility in rewards earning and redemption and even more vendors accepting credit cards as payment.