An influx of metal credit cards continues, with Capital One now encasing its popular Venture travel Visa card in metal, raising new questions about whether the marketing impact of such cards offsets their cost to manufacture—and reissue in the event of a data breach.
Metal cards entered the picture a few years ago as issuers including American Express Co., JPMorgan Chase & Co. and Luxury Card began issuing EMV cards coated with materials such as steel and 24K gold, to add status-enhancing heft to cards targeting high-spending individuals.
The move to metal appears to be spreading to more mainstream consumers, with Capital One offering new Venture customers a metal version of its no annual fee card, following a test that began in February. Capital One said 95% of the metal in its newest Venture card is made from 75% recycled metal, and it has set no end date for the promotion.
The metal Venture card is at the forefront of another new trend in that it sports a longer shelf life—five years—versus the three-year expiration cycle that’s more common for general purpose credit cards.
“We’re definitely seeing more issuers go to a five-year expiration cycle on EMV cards, in part because a basic chip card costs two to three times more than a plain magnetic stripe card,” said Troy Bernard, director of strategic marketing and products at CPI Card Group, a major card manufacturer.
The combination of cards that are overall costlier to make, that have longer shelf lives, could cut a couple of ways depending on the shifting risk of card fraud, analysts say.
Issuers opting for longer expiration dates may feel less vulnerable to counterfeit card fraud in the wake of the October 2015 EMV liability shift, and they want to get their money’s worth out of the millions of dollars invested in chip cards.
“It’s true that a breach affecting EMV cards is less likely to incite an issuer to replace those cards as the use of the cryptogram creates a unique signature for each transaction and cannot be replayed, devaluing the data… [and] lengthening the replacement cycle,” said Al Pascual, senior vice president and research director at Javelin Strategy & Research.
But while consumers may be less likely to receive a replacement card after a POS breach is detected, Pascual said a major threat still exists around rising rates of card-not-present fraud.
“The challenge going forward will be e-commerce merchant breaches and in those cases, whether it’s a chip card or not, issuers will be much more likely to reissue cards,” Pascual said.
Issuers targeting high-spending consumers with pricey metal cards also may take a bigger overall hit if they’re forced to make replacements, because affluent customers who make more card payments tend to experience higher than average rates of fraud, Pascual suggested.
So far most of the metal cards being issued are in the U.S., and are aimed at premium customers to keep up with the competition, said Zilvinas Bareisis, a senior analyst with Celent.
What remains to be seen is whether metal materials will spread to more mainstream credit cards and even debit cards, said CPI Card’s Bernard.
“Currently metal card issuers are mostly a marketing/advertising opportunity at the higher end of the segment, where issuers are weighing the cost of customer acquisition and retention in hundreds of dollars, versus operational costs,” CPI’s Bernard noted.
With longer expiration dates, metal cards could also withstand a longer period of heavy use than flimsier plastic cards. And the five-year replacement cycle could help general credit and debit card issuers drive customer retention by eliminating a window of opportunity for competitors to steal that customer, he said.
“Other than cost, each time an issuer replaces a card, it’s a hardship for the cardholder who’s registered that card number to various recurring bill payments, memberships, subscriptions and shopping services, and that’s a risk for the issuer for the customer to switch to a different card,” Bernard said.