Plastic cards likely aren’t going away anytime soon, so some card networks and issuers are creating ways to make cards more valuable to consumers, such as by enabling them to provide access to multiple accounts.
Issuing such hybrid cards doesn’t necessarily translate to creating a “new buzz” in the industry, but it illustrates how issuers are expanding their thinking about what they can do with plastic cards, says Patricia Hewitt, director of debit advisory service at Mercator Advisory Group Inc. and author of the report “Hybrid Cards: I’ll Have Two of Everything.”
After all, when a successful company such as PayPal Inc. creates a prepaid card to complement its online-payment methods, it indicates key industry players believe plastic cards continue to have value, Hewitt says.
But the creation of dual-purpose cards is “more complicated than one might think” because the back ends of payment systems must handle multiple channels for one card, Hewitt says.
Processors such as Total System Services, Inc., or TSYS, and others are moving to quickly resolve that complication (see story).
TSYS has created software to handle multiple accounts linked to one card, while issuers that process their own card transactions such as Citigroup Inc. control back-end development for hybrid cards, helping to alleviate concerns over security and processing, Hewitt adds.
Because use of plastic cards for payment continues to grow, issuers are in a position to take the market to another level by making the cards “very plastic” in the eyes of consumers, meaning the card can do many different things, Hewitt suggests.
If issuers handle consumer education about hybrid cards properly, they can position the dual-purpose cards as a bridge to eventual consumer acceptance of mobile payments, Hewitt contends.
“If the consumer sees that plastic in their wallet can do more, it will be easier to translate that to a mobile wallet doing more,” Hewitt says.
Few hybrid cards exist, but those in use are filling consumer niches and are creating an aura of endless possibilities, Hewitt contends.
Dual-currency cards may be the most common hybrid variation, but they serve a specific consumer niche, usually the world traveler or someone living in Europe who does business in various countries, Hewitt says.
Hybrid cards can offer dual technologies, dual accounts or dual payment options within one account, or some combination of all of those options, Hewitt explains.
For example, American Express Co. offers cardholders on monthly statements the option to pay in full or choose an extended-pay option for items costing more than $100. Moreover, JPMorgan Chase & Co. offers the Chase Blueprint card that allows a consumer to make similar choices at the point of sale, Hewitt says.
Citibank offers customers in India a hybrid card that serves as a prepaid card for the country’s transportation systems and as a regular credit card account, she adds.
In an example of how a hybrid card can offer dual payment technologies instead of two different consumer services, Fifth Third Bancorp and Bank of America Corp. offer cards that can initiate PIN debit transactions or credit card transactions, Hewitt notes (see story).
“A hybrid card changes the strategy for issuers, but they don’t want to create a huge educational barrier that would slow adoption with these products,” Hewitt says. “You don’t want to make this too complicated when asking a consumer to make changes.”
Banks may have been slow to develop hybrid cards the past few years because “they had so much more on their plates,” Hewitt suggests. A hybrid card strategy has to compete for investments into other products, such as EMV smart cards, or mobile payments, she adds.
In emerging economies, banks could make a stronger business case for hybrid cards because they can tie together a prepaid account with a credit account to attract new cardholders, Hewitt suggests.
“I think the technology is present to enable various hybrid card strategies, but it’s more about getting these account types into the market and letting consumers judge for themselves,” Hewitt says.
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