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The Future of Credit Cards

Jason Steele

At a recent conference devoted to travel and credit card rewards, executives from Chase, Barclaycard, US Bank, Capital One and American Express were on hand to share their views on the future of credit cards — and there was a broad consensus on where the industry is going in the next few years.

Here are four of the biggest credit card trends on the horizon that emerged from the discussion:

1. Banks are leveraging Big Data. When you think about it, credit card issuers don’t just collect money, they also collect massive amounts of data. They know who you are, how much money you make, and where you spend it. The next step is for them to provide offers that are directly relevant to customers. Think of the way that your grocery store uses a loyalty program to track your spending and offer you coupons at checkout, but then imagine that model extended across multiple merchants. That is what is implied by Big Data.

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2. Card issuers will capitalize on mobile devices. Closely tied to their push to capitalize on their data, banks see a future where they can present these offers to their customers in real time. By combining location information and spending data, banks can present customers offers that they can act on when away from their computers. The question then becomes, will cardholders value these offers, or find them to be a nuisance? Banks are betting that the more relevant they are, the less of an issue they will be.

Banks also hope to offer cardholders not just deals and offers, but valuable information to help them manage their spending. In a follow-up interview I had with Shane Holdaway, Managing Vice President of US Cards for Capital One, he described a future where his bank would offer information to consumers about how they spend, and how to spend smarter. In his vision, your credit card becomes a budgeting tool rather than just a method of payment and finance.

3. Banks will offer more products to the unbanked and underbanked. Do you know any adult who does not have a bank account? The FDIC Household Survey concluded that 8.2% of U.S. households are unbanked (meaning they don’t have a checking or savings account), and more than 20% are underbanked (meaning they have a checking or savings account, but use non-bank means of credit, like payday loans) — and those numbers are growing. Sonali Chakravorti, Vice President of Membership Benefits for American Express, stated that in partnering with Walmart on the BlueBird prepaid card, American Express was looking at the next generation of customers who don’t even want a bank account. While it remains to be seen, the next generation might find bank accounts as relevant as land lines, compact discs, and print publications.

4. Expect less junk mail, but more social media marketing.  Matthew Massaua, Senior Director US Card for Barclaycard, made the point that credit card marketing is changing to meet the times. According to Massaua, social media marketing of credit cards is growing while direct mail marketing is starting to decline. In fact, Barclaycard has lead the way in integrating social media with its credit card products by introducing its innovative Ring card .

David Gold, General Manger of Partnerships for Chase Card Services, highlighted the importance of new media to the credit card industry. In fact, he noted that he wakes up every day worried about what will be written online about his products by bloggers who focus on how many cents they can get out of of each point. Others on the panel also admitted following blogs and other online outlets closely. So when you read a site like this, you can be sure that the banks are listening, too.

The industry will undergo an evolution, not a revolution

Change is coming, but it won’t be overwhelming. When asked about the pace of change in the industry during the next two years, four of the five panelists characterized the industry as going through more of an evolution than a revolution. Only Bob Daly, Senior Vice President of US Bank, would hint at some major change his bank could introduce within the next two years. Whether he was trying to out-psych his competitors, or he has something extraordinary up his sleeve, only time will tell!

It was interesting, and educational, to hear credit card industry executives share their thoughts on the future. By understanding where credit cards are going, you won’t be surprised when you get there.

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