TNS Financial Insights has released our 10 payment projections for 2016 and, as a critical sidebar, is also releasing the following predictions for developments and trends for leading card segments:
Credit card ownership has increased over the past two years, in part due to the increase in online and mobile commerce. In the coming year, physical credit card use will very slowly decline, while contactless/virtual credit card use will increase. Mobile payments will strengthen, with credit cards firmly established as the lead payment method. Currently, credit cards are the principal method used with mobile (66%) and Apple Pay (79%).
- $19 cash is preferred for payments up to
- $50 credit cards are preferred for payments above
Security solutions are advancing. EMV will alleviate some fraud, but card-not-present fraud is likely to increase. Tokenization is becoming more of a reality since the introduction of mobile wallets. Enhancements to credit card designs or services which are linked to security will increasingly affect acquisition and retention, e.g., 34% of consumers say a photograph on card for security reasons will support their decision to open an account, and 58% say identity theft protection services will prompt acquisition.
Rewards are more popular than ever, with 75% of all network cardholders using rewards programs. Despite the widespread appeal, many issuers have devalued the points or miles needed to claim an award. Cash back will continue to hold the lead in card penetration, with issuers rolling out more creative improvements to the product. On the rise, however, are promotional bonuses which will feature more prominently as a way to entice acquisition.
As technology continues to disrupt the payments industry, one thing is sure, debit cards are a mainstay. Though penetration and activation rates remain stable, the diversity of debit card use is expanding. Debit cards are increasingly a stored payment method for digital wallets, albeit less so compared with credit cards. Millennials and GenXers are especially likely to use their card online or with a mobile wallet for in-store and online commerce.
Security will remain a top concern among debit card holders in 2016, particularly as a payment for online and mobile purchases. Half of debit cardholders (49%) say they do not believe it is safe to use their card for online purchases. While EMV will help reduce some fraud, less than one-fourth of debit cards were EMV-enabled at the end of 2015, though conversion is expected to increase substantially in 2016.
Debit card rewards are still alive. In 2016, rewards will take on a renewed focus with emphasis on value creation. Issuers will develop more merchant partnerships to support their rewards programs, while consumers will have access to a broader array of rewards and merchant-funded discounts. Millennials, GenXers, and Hispanics are especially likely to consider rewards as an important component of their relationship. All told, the right rewards will provide a stronger motive for consumers to use debit cards for everyday spend.