Digital Transformation: Card Innovation Can No Longer Wait

As COVID-19 changes the way consumers interact with banks and credit unions, and tech giants redefine expectations for what is possible in digital card experience, transformation has taken on more urgency. Even financial institutions with aggressive innovation roadmaps find themselves reacting to increased demands for fresh technology. What can issuers do to speed up their plans and respond to consumer needs?

The past year has brought a tidal wave of change to banking and digital-first cards have come to the forefront of the new standards being created. Large financial institutions were already heavily investing in digital, but now there’s also a new segment of players on the banking field — Big Tech.

Big tech companies see an opportunity in banking to provide the experiences that consumers have become accustomed to in other areas of their lives. A triple threat arises when you combine the dollar spend from big banks, the power of big tech and the ongoing pandemic. Regional and community card issuers must make digital a focus to retain and attract new cardholders.

The necessity for innovation hasn’t been lost on smaller issuers, but their focus has often been hazy. They know digital is important, but for many banks and 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 cardholders builds brand loyalty and enables cross-sell to other products.
  • Digital card innovation drives profitability.

Cards Are Consumers’ Focal Point for Everyday Engagement

Payments are where to rubber meets the road in banking. Purchases are the most frequent interaction that consumers have with their financial institution, 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 number one source of inbound calls, with 11 of the top 12 reasons for service center calls being payments-related. Not only are payments the most common interaction, they can also drive increased cost to issuers and increased aggravation for cardholders if handled incorrectly.

However, a stressful situation can quickly become one of relief if a cardholder has a positive experience.

COVID-19 has only exasperated the issue of customer experiences. Overnight, consumers went from relying on brick and mortar retail and in-person purchases to placing online orders and trying contactless payments at record rates. And a large percentage of these new behaviors are expected to stick. In fact, 57% of people say that they will continue using contactless payments post-pandemic.

Digital-first cards that provide the consumer with these abilities allow individuals to take control of their financial lives and build trust and loyalty with their financial institution.

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.


Apple was the first tech giant to launch a redefining card product with Apple Card. When the Apple Card was announced in 2019, in partnership with Goldman Sachs and Mastercard, Apple didn’t simply introduce a new credit card. They set a new standard 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 that takes mere minutes.

In addition to the ease of digital onboarding, Apple also made spending insights frictionless. Consumers want budgeting tools and support with their finances, but they don’t want it to be complicated. Apple provides the level of detail needed without the heavy lift to understand it.


Much like Apple, Samsung recognizes the need to provide cardholders with insight into their spending, but without forcing them to budget. A close competitor to the iPhone, Samsung recently launched Samsung Money for their phone users, providing a no-fee, interest-bearing debit card account with a heavy focus on cash management. These capabilities are easy to access and provide users with exclusive discounts on Samsung products.


Unlike Samsung and Apple, Google’s announcement of smart checking and debit accounts is not exclusive to the tech giant. Google is partnering with existing banks and credit unions in an attempt 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 the interactions and loyalty in the customer relationship.

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

How Financial Institutions Must Strike Back at Big Tech Competitors

Other tech giants, such as Facebook and Amazon, have been making consistent efforts to gain a foothold in financial services. Clearly banks and credit unions must defend their territory, and do so by taking away the main opportunity that competitors currently enjoy: providing a superior digital experience, particularly around payments.

The tech giants have taken a consistent approach to what a digital-first card experience looks like — financial institutions 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 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 consumers with controls and assisted self-service to turn cards on and off, manage geographic and retail limits, report a card lost and more.

• Understand spending.

Provide purchase clarity and enhanced data, analytics, and insights to provide deeper understanding.

• Engage with perks.

Interact with consumers through contextual alerts and relevant offers, bringing both guidance and delight in the moments that matter most.

Digital Card Innovation Drives Profitability

Too often, financial institutions view digital innovation as a cost center rather than a profit driver. They see it as something that has to be done to keep up with consumer demand and demographic changes, rather than something to drive bottom-line results.

But the most profitable issuers view digital-first cards as not just a way to drive account growth, but to optimize operations, reduce fraud and increase top-of-wallet preference:

• Optimize operations: 11 of the top 12 reasons for service calls are related to cards and spending. Furthermore, 16% of service calls, and 42% of disputes arise from transactions that a customer does not recognize. Giving customers self-service options at their fingertips and more information about their purchases just makes business sense.

• Reduce fraud: The average stolen card is used almost three times before the cardholder notices something isn’t right. With active alerts, this can be reduced to just a single transaction. Providing cardholders more control and awareness about where their card is used can significantly lower fraud costs.

• Increase top-of-wallet preference: Issuers make significant investments to ensure their card is the one consumers choose. Credit issuers in particular load cards up with rewards, perks and incentives to drive wallet preference. One of the best ways to build loyalty and usage is to provide convenience and clarity when they use and manage their card.

Strong Innovation in Payments Creates Confidence

Today’s banks and credit unions need to go digital-first and they need to be able to do so quickly. A recent Aite report highlighted the opportunity seen by large tech companies and neo-bank entrants into the market. The concern of retention and growth is only expected to increase as such players introduce digital-first functionality.

Conversely, legacy issuers have established relationships and already own market share. Most individuals — even younger generations — prefer to remain with their trusted financial institutions. By embracing and adopting digital-first technology, banks and credit unions can maintain their competitive advantage over big tech.

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 cardholders.

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

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