Card manufacturing is generally regarded as alogistical concern, but as payments technology advances, how cardsare made and packaged will become a strategic issue.
Let’s start with a basic premise – cards will not disappear.Despite the growth of virtual cards, mobile payments, and other newpayment forms, cards will be with us for a long while. Cards don’trequire batteries, they can be carried in any wallet, and unlikephones, you can use them for payments while making a call ortexting. (Yes, it’s rude, but there are plenty of people for whomthe cell phone comes before all else, even interacting with a clerkor other human being in their presence. I have seen plenty ofpeople who would rather hand over a card than interrupt theirtexting.)
Given that premise, what happens in all the other payment formswill affect prepaid cards, and retailers and financial institutionswill need to make strategic decisions about how their cards aremade based on that.
On the open-loop side, it is likely that most, if not all cards,will eventually become chip cards with the adoption of EMV and theincreased acceptance of NFC. This will be another strike againstopen-loop gift cards especially. Open-loop gift card profitabilityhas been hurt by regulations including the Card Act of 2009 and theDurbin Amendment to the Dodd Frank Act. Adding to the cost ofoperating a program by increasing manufacturing costs will nothelp.
On the closed-loop side, issuers will need to examine their prepaidcard programs to decide how best to proceed. They can continue tooperate a magnetic stripe card system, they can move to chips, orthey can investigate a third way to accept the cards.
Chip cards on the closed-loop side raise the same cost issues asthey do on the open-loop side. But for a company that sees frequentreloads and has its cards tied into a loyalty program, Chip cardsstart to make sense. Those companies operating a card on aRestricted Authorization Network that rides open-network rails mayfind that they must adopt chip cards.
Keeping the legacy system may also be effective for some issuers.The infrastructure is in place and the customer and employeeexperience is there. However, depending on the speed of change,issuers may find that manufacturers would like to focus theirmanufacturing resources elsewhere. This could drive up costs andreduce availability.
A third way would be to adopt a bar code system or other type ofvisual code that can be read by a store’s scanners. This would meanprinting a code on a card that is similar to the ones used formerchandise or that are displayed in some mobile applications. Thepackaging would need to change to prevent fraud, but this issomething that most manufacturers already have worked out.
As the future approaches, issuers and card manufacturers shouldstart working together rto figure out what the next generation ofcards looks like.
