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The COVID-19 pandemic accelerated digital transformation across all industries out of necessity. Financial institutions were among the many businesses that needed creative solutions to accommodate the sudden trend of people working and shopping exclusively from home. One way to strategically adapt to the market is to offer digital issuance.
To learn more about why digital issuance can offer a competitive advantage or equalizer for card issuers, and how organizations should approach its integration, PaymentsJournal sat down with Denise Stevens, Senior Vice President and Chief Product and Digital Officer at PSCU, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
What is digital issuance?
According to a PSCU-sponsored white paper by Mercator Advisory Group, digital issuance is “The immediate creation of debit or credit card account credentials from an issuer’s card management system that can then be push-provisioned into a cardholder’s universal payment wallet…” Instant digital issuance securely tokenizes card details within the cardholder’s mobile wallet and provides for the easy use of those card details across other channels.
This service is useful if a cardholder, for one reason or another, does not have access to their physical plastic card. “It really enables cardholders to continue transacting digitally,” said Stevens, even in the absence of a physical card. “In the case of a reissue, maybe you’ve misplaced [the card], maybe it’s damaged.”
Digital issuance is not just a flashy new payment method for its own sake. According to Grotta, digital issuance is just “really good customer and member service.” Moreover, digital issuance drives top-of-wallet status for card issuers. “At the end of the day, you don’t want the cardholder beat to be interrupted,” explained Stevens. “You don’t want them to choose the next card they have in their wallet because they can’t do any transaction with their primary financial institution.” Offering digital issuance creates a seamless experience for cardholders.
Is the market ready for widespread mobile wallet use?
The market has been trending toward mobile wallets for some time now. According to Stevens, when mobile wallets were first hitting the market several years ago, there was a spirited debate about when mobile wallets would overtake contactless and EMV payments as the predominant payment method. Financial institutions were not certain how to proceed. Now, the data shows clear signs of momentum.
Mercator research shows that 66% of merchants accept mobile wallets either online, in-store, or both. In the past, consumer adoption of mobile wallet payments had been outpaced by merchant readiness, but that changed dramatically during the pandemic. “The market is now clearly well above that halfway mark,” Grotta summarized. Additionally, mobile wallets have found significant footing in the age 18-44 demographic, with usage split between providers like Apple Pay, Samsung Pay, Google Pay, and PayPal or Venmo. “It’s pretty pervasive, even among many of the older groups as well,” Grotta continued.
Some may express skepticism that mobile wallets will remain popular as COVID restrictions wane, but the fact is that the nature and duration of the pandemic caused permanent ripples in the payments space. “COVID created the situation where even some cardholders that had a hesitancy to pay with mobile didn’t have a choice,” said Stevens. Consumers might once have held fears about the potential vulnerabilities of digital transactions, but those worries naturally eroded over time as those methods were more commonly used. Merchants also faced narrower choices for engaging with their customers, and consequently gravitated toward new apps, curbside pickup, and QR code usage to meet consumer needs.
Now, there are two factors that give digital issuance its staying power: habit formation and the appeal of choices. The pandemic is well into its second year and consumers have reorganized their shopping habits. “Digital payment habits that were gained during the pandemic are definitely going to be sticking around,” suggested Grotta. On top of that, digital issuance does not preclude the use of physical cards. Customers will choose the method that is most convenient, and there is no good reason why the introduction of a new payment method would fall out of favor for those who find it helpful. “It’s about choice from a consumer standpoint,” explained Stevens.
Benefits and practical considerations for card issuers
Before issuers roll out digital issuance for their customers, they might find themselves asking two big questions:
- How will this help my bottom line?
- What steps should I take for successful implementation?
From the expert perspective of PSCU, the initial answer is the same for both questions: follow the data and cater to cardholder needs. Understanding cardholder behavior helps financial institutions deliver first-rate personalized experiences. When card issuers examine use cases to ascertain why a cardholder might want or need digital issuance, that also guides them toward the proper implementation.
For example: If a member tends to visit their local credit union and use a physical card, there is a chance the card could be lost or stolen. The card issuer could pitch digital issuance during the reissuing process and fill the gap while the member is awaiting the arrival of the physical card. Conversely, if a member already makes most of their purchases by mobile device, the best inroad for digital issuance is by promoting convenient integration of their card credentials. Adding new cards or updating existing card information is also made easier, which can have a strong and positive impact on members.
After defining specific use cases, issuers should think about all the different channels where use cases can occur and note all the systems involved in payment interactions. From there, digital issuance expands in an iterative process, with issuers gaining more insights into potential scenarios as they analyze more use cases.
The prevalence of digital interactions provides a massive amount of customer data, and financial institutions can use this data to proactively market their digital issue cards and provide superior service. Furthermore, the instant nature of digital issuance encourages more transactions and helps the issuer’s card achieve top-of-wallet status. The bottom line is that when the customers’ needs are met, the business thrives. For credit unions who want support, organizations like PSCU can bring top-notch knowledge of and experience with digital issuance. “It’s really about creating the best, easiest experience for the member,” Stevens concluded.
