The Credit Cards of the Future
NEW YORK ( MainStreet) -- Banks and credit card issuers may be beefing up their digital offerings, but it's going to be a long time before the plastic credit card disappears.
While efforts are being made to move away from plastic, consumers are reluctant to adopt mobile payments because they're unclear of the benefit they provide and security concerns persist. Many people also don't have the technology -- to make mobile payments you need a smartphone or other mobile device equipped with an NFC chip, the mobile equivalent of a credit or debit card's magnetic strip (which is actually more secure, since the codes associated with them change periodically).
|The functionality of credit cards is evolving, even if the plastic itself remains the same.|
"To work the average consumer away from their cards is going to take a while," says JJ Hornblass, executive editor of the blog Bank Innovation . "Plastic works. It's hard to get consumers to change payment methods."
This isn't to say the credit card itself isn't evolving. There has been a big push by several issuers, particularly Visa(V) , to move U.S. cardholders onto EMV chip cards , which are programmed to change their verification value each time a purchase is made. The cards, which are more resistant to counterfeiting than magnetic strip cards, are already widespread in Europe. They have yet to catch on in the U.S., largely due to the fact that merchants don't have terminals equipped to accept them.
Beyond these chips, many financial technology companies have developed products that build upon the plastic payment method as we've come to know it. These cards feature, among other things, dynamic magnetic strips, contact-less payment capabilities and buttons that let cardholders toggle back and forth between various accounts.
Some of these products have been adopted by major financial institutions. Last year, Citi(C) announced a Thank You 2G card , which allows its cardholders to pay with their credit line or rewards points. US Bank (USB) has offered its Mastercard(MA) Pay Pass VITAband -- essentially a wristband that gives its wearer the ability to make purchases via a reloadable prepaid chip -- since July, and Fifth Third Bank (FITB) introduced a dual credit/debit card in September.
But thus far, these products have failed to trigger a full on revolution. Citi debuted its 2G card at the Consumer Electronics Show in 2011, but has yet to offer it to the mainstream public.
"It is available to a small group of people and is something we are continuing to accept feedback on," a Citi spokeswoman said.
Hornblass believes mass adoption has been delayed because no bank or issuer is featuring a product advanced enough to inspire consumers to switch from what they are used to. Citi and Fifth Third's cards, for instance, don't have a feature that allows for secure contact-less payments, while US Bank's wristband doesn't link to multiple accounts.