How Credit/Debit Card Companies Can Enhance Customer Trust and Win market share

The digital payments ecosystem, including contactless credit and debit card adoption, has had two watershed moments in the past few years, the first being the demonetisation and now the COVID 19 pandemic. Both events accelerated the digital payments economy so much so that even demographics that were technologically challenged now prefer using their credit/debit card instead of cash. 

However, the impact of COVID-19 seems to be more far-reaching. So even though digitalpayments have seen a benefit, there are larger pressing issues in terms of financial security & purchasing power, which seem to be under stress.

COVID-19 and Implications on Personal Finance

However, while the pandemic has helped drive the adoption of digital payments, these are also testing times where personal finances at large are under a lot of stress. According to a FIS survey, only 30% of the people reported not being impacted by the pandemic, while most seemed to have suffered some financial pressure.

Not only this,  younger demographics reports that they are unlikely to be able to meet financial obligations for more than 3 months while their older counterparts seem to be slightly well placed to stretch it out

COVID-19 and Digital Banking Tailwinds

While COVID-19 has and is likely to continue having negative financial implications across the board, it has led to a dramatic shift in buying behavior, with people preferring to order online in a contactless fashion, instead of going to physical stores. An obvious implication of that has been the usage of digital payment, including credit, debit cards as well as digital wallets. 

While youngsters were already fairly active users of digital payments, COVID-19 has seen Senior Gen Yers also take to digital payments fueled by encouragement from their young ones who helped them understand its technicalities to ensure they stay home, protected from the pandemic. It’s not surprising that the significant shift to contactless payments has been driven by people’s need to feel safer.

Not only that, this shift to online buying has also led to another interesting trend where existing brand loyalties are being questioned, and people are trying new brands for their day to day needs. Incumbent Brands that have successfully launched an online presence are still likely to hold on to their loyal customers, but digital-only brands have managed to corner this huge base coming online for their needs

How Banks & Credit Card Companies Can Solve For This New Frontier on Digital

Revamped Processes and Services

With the double whammy of the need for digital payments and definite stress on personal finances, banks are likely required to also think through new ways to come through for their customers and truly come out as a partner. Some clear actionables that seem to emerge include real-time/faster payment options, reducing/waiving penalty fees on low balance accounts as well as flexibility in loan terms as well as creative EMI options including low processing fees on not just big-ticket purchases like bike, car purchase but also online purchases including groceries as well as clothing & electronics

While these help credit/debit card companies and banks stay relevant and acquire new customers, there is also a dire need for banks & credit/debit card companies to continue innovating to retain and increase wallet share of their existing customer base. One clear way for credit/debit card companies to do that is to rethink rewards & loyalty programs.

There are clear signals that older consumers who likely have higher spending power seem to be underrepresented when it comes to the adoption of loyalty programs. So, credit/debit card companies need to not only make their loyalty programs resonate with older consumers but also continue to keep innovating their loyalty programs for the younger demographic as well.  Historically loyalty program rewards have centered around exclusive discounts on products & services but increasingly consumers consider ‘cashbacks’ as a key component of loyalty programs

‘Building Trust’ – The Key Pillar for Building Long-Term Digital Payments Solutions by Banks and Credit Card Companies

Even as the digital payments ecosystem continues to grow, it will not be without its challenges. Trust emerges as the most significant cornerstone for credit card companies to truly drive higher adoption, both amongst younger and older demographics.

For banks and financial institutions to drive credit card adoption, it is imperative to build & communicate TRUST when it comes to personal data and information security.

The ground reality is still not all rosy, though. The payment ecosystem still sees apprehensions by certain consumer cohorts who are wary about contactless digital payment adoption. 

What stops consumers from opting for Digital/Card Based Payments

So, even as digital payment continues to grow it is clear that the credit/debit card companies need to act on both solving for & communicating about robust safety/security features to ensure that digital payments continue to flourish in a post-pandemic world

How Credit Card Companies Can Solve For This Lack of Trust around safety/security

The biggest trust enabler that consumers report is for their credit card providers to have robust data encryption technology to ensure the highest level of data privacy. This specific issue plays a much more vital role with older generations, who understandably question how and where their data is being managed.

The need for robust data security is crucial for data privacy and financial security, given the increasing incidents of cyber frauds and identity theft, which have far-reaching implications beyond just losing money. Credit Card companies that adopt and maintain the most sophisticated technology solutions for data privacy & encryption stand a better chance to drive higher adoption.

One solution to curb cyber fraud like keystroke hacking that now most banks and credit companies have adopted is providing a virtual keyboard on online portals to ensure that if you have to enter your passwords on public computers, hackers can’t use keyboard click data to steal your passwords.

A few other ways credit card companies continue to push for more technology-driven data privacy & security include:

• A Chip + Pin based system instead of a normal chip/magnetic strip based authentication system. This includes an extra step for the consumer to manually enter a pin, which helps ensure that no one with only your stolen credit card can get away with siphoning away the money. However, while this adds a layer of security the need of the hour especially as a result of COVID is to innovate further and offer high security in a completely contactless fashion. Phone manufacturers like Apple & Samsung already have completely contactless payment options that allow you to integrate your debit/credit cards into an app and make completely contactless payments. It will be imperative for credit/debit card companies to actively try and partner with OEMs, build more integrated solutions to ensure they can drive adoption of their cards by seamlessly integrating with more and more contactless payment frontend applications
• A push notification based solution for validating online transactions instead of just an OTP based approach like the one recently developed by Amex. So while your OTP is still prone to be less secure because it is routed by a third-party phone carrier, a push-based notification to be approved by the Amex app ensures that all your data is encrypted within the AMEX environment.

Solutions around Technology-Based Enablement of Communication/Interaction Infrastructure

How Consumer Interactions Are Changing With Their Banking Partners

The implications for banks are not just around alleviating concerns on safety & security of payment transactions alone. Banks are now required to rethink every aspect of their business, including how consumers see the various bank touchpoints. 

It seems apparent that not just payment modes but even communication is moving online/phone. In the future, too, this is likely to be the trend, thereby requiring banks to overhaul their communication infrastructure and enable contactless options for customers to conduct their interactions with the bank.

How Credit Card Companies Can Ensure Delivery of these New Customer Expectations

Even as credit card & digital companies solve the technology quotient on data privacy, the battle is only half won. Consumers expect their credit card provider to communicate with clarity and transparency about how the company will use their information. 

Not just that, they expect control over what specific information is being collected and used by their credit card provider. As we continue to live increasingly online, seeking control of our data will be of paramount importance. This is evident by the recent scrutiny on the likes of Facebook and Google, who are now under tremendous pressure with respect to their data collection & usage policies.

Credit card companies are solving the issue of giving more control to users by pro-actively offering customers to choose what information they want to receive when they want to receive it through their online portals and apps.

For instance, my credit card provider allows me to choose the kind of notifications/prompts I want to receive from them, thereby putting me in control of information.

In essence, consumers want to be in control of their data. They expect their banking partners to respect and appreciate consent or permission driven use of their data. The digital payment enablers and specifically credit card companies will not only have to upgrade their technology systems to offer the highest levels of data privacy & security but also truly ensure that their customer is in control of his/her own data to gain market share as well as retain those loyal customers.

Image Source(s): A survey conducted with over 2000 respondents by FIS Global, a provider of technology solutions for merchants and banks in India