When consumers speed up the card replacement cycle
As the digital age reduces the wear on physical cards, how is it that some consumers are requesting new cards more frequently?
Despite the heightened security that comes with EMV chips and tokenization, consumers remain worried about their personal data being exposed in a seemingly nonstop parade of breaches. This leads to many cardholders requesting a new card as a precaution, even if they have no evidence that they were directly affected by a particular breach.
Farmers & Merchants bank, for example, rapidly issued about 800 EMV-enabled debit cards after fears about a breach earlier this spring. The $150 million-asset bank did not make an executive available for comment, but it was concerned about addressing customers' fears about breaches rather than responding to a specific breach, according to Rob Dixon, product director at CPI Card Group, which handled the card issuance.
"It's less about their cards being compromised than seeing news about a major breach at a place where they shop," he said. "The customer wakes up and sees a report about a breach, and wants to have his or her card replaced quickly whether they are a victim or not."
Dixon did not say how many cards get replaced across the market because of this fear, but given the rising number of breaches and the attention these breaches receive, it's likely this anxiety will be around for some time.
This trend may also drive the use of virtual cards, which can be reissued faster because they can arrive in an app.
"Mobile wallets have struggled to take off over the last 10 years, but as they gain traction, consumers will want to get cards and they won't want to go through the process of waiting for cards in the mail," Dixon said.
The Denver-area company will expand and market technology over the next year that allows instant issuance of virtual cards, selling issuers on the benefit of making card accounts available for mobile app use within a few minutes. It has already taken steps to prepare for multichannel commerce by joining the FIDO Alliance, which pushes flexible digital alternative authentication solutions that are more tenable for digital commerce than static usernames and passwords.
"With the expansion of wearables, for example, the ability to remotely issue payment capabilities for a band or a payment object where you don't go through a point of sale will be vital," Dixon said. "If a bank can create provisioning seamlessly it can help maintain top of wallet position."
Virtual instant issuing is becoming more common as card makers adjust to a future that has a heavy emphasis on mobile, said Tiffani Montez, a senior analyst at Aite Group.
"If you look at the product road maps there's all sorts of digital focus," Montez said, adding revenue for card making will be pressured moving ahead. "They're going to want to make sure they are creating a product that supports where the consumers are going to be."
There will still be a demand for traditional instant issuance of plastic cards. In general, the number of financial institutions that offer instant issuance is increasing, Montez said. She added that about 23% of institutions in the U.S. offered the service at the end of 2016, a number that's expected to reach 55% by 2021.