Article

Card Innovation Needs to Be a Focus in 2021

technological image of smartphone and credit card
By Amanda Glincher

4 minutes

Digital transformation will be required to retain and attract new members.

With 2020 came a move to all things digital. In payments, digital-first cards—new and replacement cards that are available digitally before a physical card is issued—have risen as the new standard. While financial institutions of all sizes were previously investing in innovation, the last year has created a triple threat—the power of big tech, infrastructure investments of mega banks and the ongoing pandemic. Credit unions must make digital transformation a focus to retain and attract new members.

The necessity for innovation hasn’t been lost on credit unions. They know digital is important, but for many credit unions the urgency has been on other types of advancements—not on cards.

Yet payment cards have become the primary focus of innovation in digital banking transformation. A few reasons why:

  • Cards are the most frequent and important interaction financial institutions have with their account holders.
  • Tech giants see an opportunity in cards and are encroaching on banking relationships.
  • Payments are the beachhead for the entire banking relationship. Delivering powerful experiences for members builds brand loyalty and enables cross-selling of other products.

Cards Are Consumers’ Focal Point for Everyday Engagement

Purchases are the most frequent interaction that consumers have with their financial institutions, providing the most opportunity for issuers to provide meaningful engagement.

“The average customer interacts with their bank at least twice a day for payments-related matters … making payments a beachhead for cross-selling other financial services,” according to McKinsey.

In addition to transactions, payments are also the No. 1 source of inbound calls, with 11 of the top 12 reasons for service center calls being payment-related. Not only are payments the most common interaction, they can also drive increased costs to credit unions and increased aggravation for members if handled incorrectly.

Digital-first cards provide members with the ability to take control of their financial lives and build trust and loyalty with their credit union.

Tech Giants Threaten Both Deposits and Interactions

The opportunity in payments is clear and tech giants aren’t going to let it pass. The past year has seen everyone from Apple to Facebook attempt to enter the market. As some succeed, they are setting new standards in banking.

When the Apple Card was announced in 2019, it set a new expectation for onboarding. For too many issuers, in-person or clunky online account applications remain the norm. Apple gave consumers a taste of what digital-first could look like—and it starts with simple onboarding.

Unlike Apple, Google’s announcement of smart checking and debit accounts is not exclusive to the tech giant. Google is partnering with existing financial institutions and trying to be a platform for these digital-first capabilities.

A partnership with Google may be an opportunity to innovate quickly and provide the experiences consumers are seeking. It also means that the financial institution is relegated to the role of providing a stored-value account and that Google owns interactions and loyalty in the cardholder relationship.

At the end of the day, your members are banking with you because they trust you. Outsourcing innovation to tech giants dilutes the member relationship and moves you—the issuer—to the back burner.

How Credit Unions Can Compete

Tech giants have taken a consistent approach to what a digital-first card experience looks like—credit unions need to at least match that in these areas:

  • Get and use a card quickly. Frictionless end-to-end onboarding, combined with immediate access to a digital-first card, provides applicants with easy access to funds. Issuers gain the ability to remain top-of-wallet and drive immediate spend.
  • Manage with self-service. Empower members with controls and assisted self-service to turn cards on and off, manage geographic and retail limits, report a lost card, and more.
  • Understand spending. Provide purchase clarity and enhanced data, analytics and insights to provide deeper understanding.
  • Engage with perks. Interact with cardholders through contextual alerts and relevant offers, bringing both guidance and delight to members at the moments that matter most.

Strong Innovation in Payments Creates Confidence

While some issuers have the internal infrastructure to make this possible, for most it’s just not realistic to build out a digital-first program with existing resources. The right fintech partner will provide the structure for a modern card portfolio—quickly and on top of existing infrastructure—while still allowing the issuer to maintain the relationship with members.

Your members are seeking these tools and will be delighted to know they can now access them through their most trusted financial partner—you.

Amanda Glincher is part of the team at Ondot Systems, the digital card services platform for credit and debit issuers. Driven by a motivation to bring more accessibility to people in all areas of life, her 17 years of marketing experience include both the non-profit and tech sectors. When she isn’t developing marketing programs, she can be found baking with her children or noodling over a puzzle.

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