The effects of digitisation have been far-reaching, with the payments space in particular benefiting from the movement. That said the death of credit cards have been greatly exaggerated, and those touting the demise of plastic as a means of payment have been misinformed.
This is according to Chris Wood, executive for card issuing and payments at Nedbank.
Yes, we know that Wood has a vested interest in ensuring that local consumers still use their credit cards to make payments, but citing a 2018 TransUnion Industry Insights report, he notes that there has been a 2.6 percent increase in credit card use during Q1 2018 year-on-year.
Sticking with the familiar
“Apart from the convenience and security of having a physical card to pay with, it still gives most consumers a sense of comfort in that it is a tangible representation of the money they have,” he explains.
“In the past, cheques fulfilled this role for many people, but now that they are effectively dead and buried, and people’s interactions with cash is typically very fleeting, the plastic card is the only long-term, physical representation that people have of their relationship with their money,” adds Wood.
The Nedbank executive also notes that South African consumers get a lot of comfort from the physical touch of a credit card, also stating that being able to either physically tap, insert or swipe a card offers a greater degree of control compared to a purely digital system. As such he still foresees it being several years before credit cards become obsolete in the payments space anytime soon.
The new wave
Wood acknowledges that this will change, however, when younger generations of consumers who are more at ease in the digital space and using their mobile devices to get things done, start entering the job market and contributing to the economy.
“A good example of these changing consumer dynamics can be seen in the speed with which the majority of, predominantly young, people have embraced contactless card payments, like tap to pay. These types of advances in payments that require little to no interaction with payment devices will undoubtedly pave the way for entirely cardless, mobile technology enabled transactions sometime in the future,” he points out.
“Ultimately, a fast-growing need for mobility and flexibility of payments will drive the evolution of credit payment transactions and, in all likelihood, lead to the eventual disappearance of plastic cards entirely,” says Wood.
Unfortunately the Nedbank executive’s crystal ball cannot foretell when that day will come though.
The core requirements
What he does note is, the fact that financial institutions need to be cognisant that customers require three things when it comes to payments – convenience, security and instant mechanisms.
“No matter what form credit cards take in the future, most people will still always require credit in one form or another to meet their needs – the primary one being the need to be able to make payments wherever they are, whenever they need to, secure in the knowledge that their bank is there to enable and support the transaction,” he espouses.
“Whether these payments are made using a piece of plastic, a cellphone, a digital payment platform like Nedbank scan to pay or some other piece of futuristic technology, is neither here nor there. All that matters is that our customers know that we are always there for them and they can rely on us to meet their payment needs,” he concludes.
According to Wood then, the form factor by which the next wave of digital payments take is of little consequence, especially if financial institutions fail to deliver on the basic tenants that consumers are in search of when performing transactions.
[Image – CC 0 Pixabay]