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Consumer expectations are changing across the board. The world has become faster and more digitized. Payments in particular have been moving towards real-time operations for years, further expedited by the COVID-19 pandemic. Yet, physical credit and debit card issuance can still move at a snail’s pace. The solution? Digital issuance.
To learn more about whether digital issuance of new or lost debit and credit cards is important and relevant to cardholders, PaymentsJournal sat down with Randy Piatt, Vice President of Product Solutions and Marketing at Fiserv and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
The transformation of cardholder expectations
Payments industry professionals have been prophesizing exponential growth towards digitization for years now, and only very recently have those theories been borne out. “We’ve had digital wallets since 2014 or so,” said Piatt. “We keep talking about the time that people are suddenly going to shift overwhelmingly to digital, and it was always, ‘It’s next year, it’s next year, it’s next year…’ What we found in the pandemic was an actual tipping point that forced people to be digital.”
Financial institution customers by and large want to interact digitally with their bank, rather than needing to call or meet in person. This preference holds for all people irrespective of demographic, facilitated by the massive digital adoption resulting from the COVID-19 pandemic. “We used to talk about the digital divide,” noted Grotta. “That divide is really blurring now.” The definition of “digital native” is broadening to include older generations.
Merchants are also pushing for digital purchase initiation, even for in-store purchases, as businesses move towards curbside and in-store pickup. “Merchants seem to be OK with higher interchange rates that come with card-not-present [transactions] simply because they know they’re closing out a purchase in an easier way,” Piatt explained. More than that, both merchants and consumers are beginning to recognize that digital wallets are, without debate, the safest payment capability on the planet today.
The importance of digital issuance in the customer journey
Digital issuance is all about creating and maintaining connectivity to cardholders and their spend. For new card experiences, how do you get cards to customers while managing card production costs? The answer is digital issuance. For replacement card experiences, how do you avoid the attrition of spend when customers develop spend habits with another card while they wait for the physical plastic? Again, the answer is digital issuance.
Piatt shared an anecdote about losing his debit card and subsequently cancelling the card until a replacement could be sent by the card issuer. “In the middle of watching a March Madness game, the subscription cancelled because they had sent the notice that they had closed my card,” Piatt shared. “But there was no digital issuance, so I couldn’t get the new card credentials.” He ended up renewing the subscription with a different card, so the initial card issuer lost that share of spend.
Additionally, a 2020 Fiserv study showed that roughly one-third of consumers who receive a new card in the mail actually wait another 2-3 weeks before they actually activate it. “We’re not just talking the 7-10 days for delivery, we’re talking possibly 3-4 weeks of no spend, and spend on a different card that maybe is not from that issuer,” clarified Piatt. Digital issuance erases that gap. In a world where most everything is measured in moments, not days, issuers would do well not to underestimate cardholders.
The necessity of the instant issue experience
The reality is that cardholders have developed real-time expectations through the other digital experiences they have in their life. “People are essentially permanently anchored to their mobile devices,” Piatt pointed out. “At this point, it’s an extension of who they are… some people might say that Wi-Fi needs to be now on Maslow’s hierarchy of needs.”
For card issuers, real-time connectivity to their systems of record for card credentials is key. For debit cards in particular, this is quite a hill to climb, as those integrations are not real time, but can be overnight. Still, overnight means customers get a digitally issued card 6-9 days faster than the normal plastic delivery, which is a meaningful improvement.
Some issuers might be overwhelmed by the length of an instant issuance project, but there are ways to break it down into categories. “For example, they might look at first starting with the introduction of digital issuance for new accounts, or they might start digital issuance in their call center to help with lost or stolen replacements,” suggested Grotta. “I don’t think that you necessarily need to boil the ocean. You can work your way into it until you achieve your goal of being able to offer digital issuance on all channels.”
How issuers can respond to the real-time expectation
There are three main things for issuers to consider in their response to this modern expectation:
- Know the competition – Issuers are not up against other financial institutions; they are competing with all of the real-time digital experiences elsewhere in customers’ lives.
- Focus on infrastructure – To do digital issuance the right way, ensure that all cards are enabled for digital wallets, and work purposefully to solve for real-time integration into the back-end banking core, even to the point of changing cores if necessary.
- Invest resources deliberately – Don’t think about instant digital issuance merely in terms of reducing human capital, but with an eye towards intentional assignment of resources to more profitable activities.
“For some issuers, this is going to require a difficult conversation,” Piatt concluded. “‘Can my system, my technology stack, get me there today? If it can’t, am I willing to make a change?’… Otherwise, you’re not going to be able to compete with the other digital experiences that fintechs, retailers, and other institutions are bringing to market.”