Credit card trends Pt. 2: Technology
Before the advent of digital TV, Europeans used to laugh at the quality of American television pictures. They’d joke that NTSC (which actually stood for National Television System Committee, and was the technology upon which this country’s color television transmissions were based from 1953) should more accurately stand for “Never Twice Same Color.”
Credit card trends in America–a clearer picture
It was true that NTSC was inferior to the PAL system used in many foreign territories. That’s because NTSC was a much earlier innovation. And it’s often the case that nations that innovate first are leapfrogged by others that piggyback on their genius. (That’s a mixed metaphor that relies on the dubious premise that it’s possible to leapfrog while piggybacking.)
Exactly the same thing happened with credit cards. Invented in the United States, they were quickly picked up by foreigners, and today many countries have more sophisticated technologies enabling transactions.
Credit card companies set for change?
Now there are signs that American credit card companies are set to take back world leadership in technology, according to a white paper titled “Four Important Trends Shaping the Future of Credit Cards,” which was published last week by payment processing company First Data. For instance, it mentions Blueprint from Chase, which is a sophisticated online tool that allows customers to pay down balances (and parts of balances for different sorts of purchases) in ways that best suit them.
How credit card use could change
First Data sees four areas in which technological innovation are most likely:
- Mobile payments. In this scenario, smartphones and similar devices take over from credit cards as payment media, and could possibly all but replace them.
- Multifunction cards. These cards could embed many sorts of novel functionality within a new generation of credit cards that retain the size, shape and thinness of today’s plastic. (See section about Dynamics below.)
- Contactless cards. Many Americans already have contactless cards but relatively few Americans have begun to use them. Also known as “touch and go” or “wave and pay,” contactless cards allow users to make payments simply by holding the card in close proximity to a data reader.
- Improved fraud protection. There are nearly unlimited methods for protecting card data, including “rolling codes” encryption and PIN-enabled cards that use ultra-thin buttons embedded on the face of the card.
Credit card companies’ best way forward?
First Data sees such technologies as a way for credit card companies to emerge from the challenging environment within which they have had to operate since the credit crunch. It sees this form of innovation as an alternative to the cost-cutting strategies that many issuers have been pursuing in recent years, and a possible answer to the more limited appeal that some traditional marketing tools (such as credit card rewards programs) have.
Another example of American inventiveness comes from Dynamics Inc. This Pittsburgh-based company is deploying the sorts of technology used in smart phones to create smart cards that allow users to choose whether a particular transaction is charged to their debit or credit card accounts. Some of these smart cards can provide high levels of fraud protection when a card is lost or stolen. Citi has already used Dynamics smart cards in customer trials.
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