I’ve said it before and I’ll say it again: cards aren’t fit for digital commerce. They’re costly, they’re clunky, and they provide an experience that’s stuck in the past. At a time when consumers want fast and frictionless online payment experiences, cards just can’t keep up.
This is why I believe we are at an important inflection point. Account-to-account (A2A) payments, powered by open banking rails, are gaining traction. At the same time, card payments are slowly losing payment share.
So I still see a future without cards — or, at the very least — a world where cards are no longer the incumbent. In this future, which is far closer than you think, we’ll all be paying (and getting paid) by bank.
What’s the problem with cards?
There’s a saying in business that we all need a nemesis. And it’s easy to pitch cards, owned and operated by behemoth companies, as that nemesis. It’s just as easy to see why I, the CEO of an open banking payments network, want to position TrueLayer as the David to the card Goliaths.
But let’s recognise the reason we all, myself included, still rely on cards. Cards enabled digital commerce. They paved the way for us to do exactly what TrueLayer is doing today, seizing the opportunity to rewire and reinvent the way we transact online.
The next generation of payments are being built from the ground up, with online commerce in mind.
The simple reason that a world without cards is so important is that cards were never designed for online commerce. They’ve been retrofitted from a physical payment method into an imperfect online option. Whether it’s the sixteen-digit number you need to input before a transaction, the ongoing battle of card-not-present fraud (for which 3Ds2 has been built, yet hampers conversion), or the various fees that are so painful to SMEs, cards are no longer fit for purpose.
That’s why the next generation of payments are being built from the ground up, with online commerce in mind.
What will replace cards?
So what does a perfect digital payment experience look like? Ideally, payments should flow directly from the payer’s bank to the recipient. No plastic you need to carry around, obviously, and very few intermediaries to keep the process simple and low cost.
Most importantly, the process of paying should be easy. No long numbers or passwords to remember, while still knowing the method is secure by design. In short, a good UX.
Open banking payments can deliver this experience. You may have seen them called bank to bank payments, A2A payments, pay by bank or instant bank payments. But whatever we call them, the core of it is a native mobile experience, where payments are made directly from the bank to the merchant (and vice versa).
Collaboration is key to the future of bank payments.
When it comes to account to account payments, we are on a journey. Four or five years ago, open banking was basically just a concept. It’s now grown to an industry that handles 11 million payments every month in the UK, with over 7 million active users.
That growth has been strong and consistent, but we shouldn’t pretend we can sit back and relax. There are still many things we need to improve and fix in the name of creating a payment experience that works for everyone.
Bank payments benefit everyone in the value chain — the banks, the merchants, the consumers, the third party providers. Understanding that will unlock the kind of long-term growth to challenge the card incumbents. For example, when we first started out, we realised we were lacking a payment feature entirely. Collectively, as an industry, we came together and made that happen. The fact that we’ve done it already — and there were naysayers back then — shows that we can do it again.
Everyone involved sees the future on the horizon, but we still have a way to go.
Earlier this year, I chatted to Megan Bramlette, Director of North America & EU Payment Acceptance at Amazon, as well as Mark Bryant, Chief Payments Officer at NatWest Group. The core of the conversation was collaboration. As Mark so succinctly explained. “We [banks, merchants, TPPs] need to work together to find the right way for bank payments to succeed, on behalf of the customer.”
I’m so energised because I see the likes of NatWest going beyond what was originally mandated by PSD2, and Amazon actively working towards embedding bank payments in their checkout flow.
As Megan explained: “My job is to ensure [Amazon] customers have all payment options that meet their needs. We want to do that in the most low cost, frictionless and easy-to-use way possible. Bank payments are a part of that revolution.”
This proves everyone involved sees the future on the horizon, but we still have a way to go. One of those areas for improvement is the payment experience.
Payment experience is customer experience
During the Money2020 panel, Megan said something that I think sums up the biggest step we need to take to really unseat card payments: “In order for bank payments to take flight, the customer experience (CX) will have to be better than cards.”
Mark, looking at it from the banks’ point of view, agreed: “With bank payments, and our suite of APIs, we’re enabled to take things to market quickly, and test and learn. But at the heart of it, we need a great CX for the user.”
I think CX goes double when we’re talking about ecommerce. We’ve seen bank payments gain traction in iGaming and financial services, but ecommerce is a much bigger step, where we need to improve the experience for every use case and fill in any missing gaps.
Gone are the days when cards were a necessary part of online payments.
Take VRPs for example, which can enhance the shopping experience for merchants and consumers when it comes to recurring payments. In a YouGov survey, more than half of the respondents said they would sign up for more subscriptions if they had one easy way to cancel them.
As I said before, we’re on a journey. That journey will take more than a decade, but card payments have had 50 years to get where they are now. When you think in those terms, the pace of change for bank payments is much more exciting.
A world without cards? Or a world with more choice?
I know the title of this piece is bold. A world without cards entirely? A more reasonable prediction is that we will all have more choice. Merchants won’t need to default to cards because, despite their shortcomings, they’ve historically been the only way to give customers something approaching a good customer experience.
From the merchant's point of view, Megan believes that payment choices at checkout will be more varied: “I think the online paying experience is going to get a lot more diverse… my job is to make sure we offer the full complement of payment methods to customers in the best way possible. Bank payments are part of that, and a huge area for growth.”
So no: cards aren’t going to vanish in the blink of an eye. But don’t let that lull you into complacency. Gone are the days when cards were a necessary part of online payments. More choice and a better experience are out there. And it’s only a matter of time before people realise there’s a better way forward.