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Consumer Debit Cards: Technological Trends
In the past several years, the consumer debit card segment has seen a number of technological changes/trends. Below is a summary of examples of these trends and how they have impacted the segment.
EMV Chip
- Europay, Mastercard and Visa (EMV) chips are small, square computer chips on debit cards (and credit cards). The technology creates a unique code for each transaction to protect card holders from some fraudulent activities.
- The adoption of EMV chips has increased over the years across the world with Asia Pacific and the United States having the lowest rates of more or less around 60% and highest in Africa and Middle East at nearly 90% in 2019.
- The card-present transaction rates are, however, higher--at 81% globally in 2019. The highest rate is in Europe (at more than 97%) and lowest in the United States (at almost 63%).
- According Visa, merchants who accepted chip cards saw a 76% decrease in card-present counterfeit payment frauds.
- Biometric/fingerprint sensor may also be expected to be built in on the cards to provide an extra layer of security. This extra layer is expected to be rolled out as soon as this year.
Contactless Payment
- Contactless payments employ short-range proximity technology to complete the payments from a contactless-enabled chip cards to a contactless-enabled checkout terminal.
- The United States, however, tends to lag behind in adopting new banking technologies, and contactless technology is no exception.
- Visa card face-to-face transactions outside of the United States are 40% contactless (on a tap)--90% in Australia, 60% in Canada and nearly 50% in the United Kingdom. That number is in the low single digits in the United States as of early 2019.
- However, a number U.S. banks are currently rolling out contactless cards. These include JPMorgan Chase, Wells Fargo, and Capital One--to name a few. JPMorgan Chase is currently the key catalyst with commitment to move all of its debit (and credit) cards to contactless by the end of 2019.
- In light of the current events surrounding the COVID-19 pandemic, an advantage of contactless cards is becoming clear. In Germany, for example, consumers are switching to contactless due to COVID-19 fears. Germany has seen an increase from 35% to over 50% after the outbreak of contactless payments.
Integration of Cards and Mobile Phones
- Just like contactless cards, digital wallets allow payments without contact--and without the physical cards. These digital wallets also provide storage for multiple cards, and some apps also allow peer-to-peer payments.
- Some banks have also utilized smartphone technologies to provide cardless ATMs.
- Bank of America, for example, introduced digital debit cards in 2019. These digital cards feature cardless payments and ATM deposits/withdrawals.
- According to Business Insider Intelligence's Mobile Banking Competitive Edge Study, the majority of mobile banking users identify access and security as among the most important features. The cardless ATM access is also identified as either "very" or "extremely" valuable by 59% of respondents.
- The study finds a gap between consumer demand and bank supply with only nine of the 20 largest U.S. banks currently offering cardless ATM access. It is, however, expected that more large banks are to follow the trend.