The Covid-19 pandemic spotlighted contactless payments. To stay competitive with the future of payments, community banks must offer multifaceted options, like virtual cards, P2P payments and digital wallets.
But building a digital and contactless payments strategy goes beyond just offering digital wallets — though that can be a key tool. To become their customers’ primary transactional relationship, community banks need a strategy to make credit and debit payments easy in any digital channel.
Digital banking and contactless payment adoption accelerated during the coronavirus pandemic. A Mastercard survey conducted last year found that contactless transactions grew twice as fast as traditional checkout methods at grocery and drug stores between February and March. Additionally, Juniper Research found that spend in digital wallets is projected to increase 83% by 2025 due to adoption of digital payments during the pandemic. Three key steps for community banks looking to construct a card strategy are to audit your payments capabilities and gaps, use digital to become the passive provider of choice and diversify your card and payment portfolio.
Audit Payments Capabilities, Gaps
Before bank leaders can roll out new card programs, they must evaluate where their bank’s existing programs are and if any service gaps exist. Common questions every manager should evaluate are:
- How much revenue is the current card program driving, and is it increasing or decreasing?
- What is the wallet share of the bank’s current cards and is it increasing or decreasing?
- Who are customers using to make payments outside your network?
- What payment options can you support? Options should encompass virtual cards, P2P payments, purpose-driven cards that are targeted to specific audiences and needs and digital wallets.
From here, bank leaders can figure out where their greatest opportunities lie. It might be in building a set of niche card programs to meet a specific need, such as teen card accounts, gig worker cards or a virtual card offering. It could also be expanding card options to include prepaid programs, bringing debit cards in-house or adding card controls to enhance the customer experience.
Become the “Passive Payment” Provider of Choice
Once bank leaders understand their opportunities, they need to build strategies that help their cards become the “passive payment” provider of choice. Taking security as a given, customers care most about convenience. They will use the payment option that is the easiest for their chosen channel of commerce.
Digital wallets and contactless are becoming table stakes for banks; they are no longer “nice-to-have” products that will differentiate your institution from your competitors. The rise in e-commerce means that banks must make it easy for their customers to fulfill those purchases with their preferred payment option virtually.
Additionally, customers are increasingly demanding instant access to new accounts. Instant digital card issuance enables customers to issue or reissue a credit or debit card digitally and on demand for immediate use.
Banks should also work to ensure that their cards are able to integrate with existing digital wallets, allowing customers to “push-provision” their cards into their preferred wallet or app, rather than manually entering their card information.
Diversify the Card, Payment Portfolio
A diverse payments strategy is more than just offering a general-purpose debit or credit card. People increasingly want purpose-driven cards that meet their specific needs and situations. Families love accounts that provide the parents control over funds while giving their teens the ability to learn how to manage their money and spend with some autonomy. A dedicated business card can make paying vendors and other bills easy to manage without staff in the office to run a traditional accounts payable team. In addition, many businesses want “team” or “disbursement” cards they can issue to employees and monitor the transactions in real-time while retaining some control over how the funds are spent. The combinations are endless — elderly care accounts, affiliations with membership organizations and gig worker cards are other popular options.
To determine which products a community bank should focus on, leaders need to analyze customers’ spending behaviors by channel, using transaction data to look for trends. Then, they can build campaigns to target the most profitable or most engaged customers.
The additional revenue sources will be vital to community banks’ survival, given continually low interest rates. By building a comprehensive digital, contactless and physical card payments strategy, institutions can positioned themselves to remain the bank of choice for their communities.