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The Need to Differentiate Driving Metal Payment Cards Opportunity
The payment cards market overall is going through a technological and innovation transitional phase. Innovative technologies and card bodies are defining the future of the payment card, with vendors looking to offer next-generation transaction authentication via products including the biometric payment card and Dynamic Card Verification Code (DCVV) display cards and, at the same time, looking at materials and card construction in order to differentiate.
Today traditional banks and financial institutions are having to compete against one another while also having to combat the rise of nimble, agile fintech companies. In order to remain relevant, financial institutions are looking toward differentiation and, as such, the relevance and popularity of the metal card has risen, moving from a product once only available to the high net worth affluent sector toward mass adoption.
Traditional banks are the main competition of fintechs, which are looking to use a combination of digital and physical services to provide a differentiated set of services and added value to enable them to better compete against traditional incumbents. Alongside this, fintechs are launching paid-for subscription accounts, layering on services and offering different products as a platform to migrate free account users toward premium subscription-based services.
Banking strategies are now shifting to a more targeted approach, combing digital services with a premium physical product and looking to offer specific sets of services and added value tailored to certain user types, including frequent travelers, foodies, frequent shoppers, and those who are technology-savvy. The card form factor doesn’t offer these specific services, but it is proving an integral piece of ensuring a differentiated banking solution, creating more desirability, customer loyalty, and stickiness and ensuring higher levels of customer interaction and retention.
It's Not All about Metal
Regardless of who is issuing a metal card—whether it be a traditional bank, fintech, or technology Original Equipment Manufacturer (OEM)/service provider—the defining factor is that it is not only the metal card that is defining the market.
The metal card is one piece of the puzzle and presents a card body that differentiates and stands out from the crowd, but the other defining factor is the added value services offered, with metal, the physical form factor, allowing a user to be associated and recognized as a premium account owner of premium banking services.
Services and metal cards are complimentary to one another, and the launch of a metal card without access to additional services would not have the same impact or same factors. The metal helps represent the service and added value being consumed, but without the premium services, the card would simply be a standard account card, but in metal format.
Understand Your Products, Clients, and Market Dynamics
Understand Your Products: The variety of metal card composites (full metal, hybrid, veneer, and core) can, at face value, look extremely similar, but each type has its own pros and cons and metal card providers need to be mindful and ensure they are hitting the right areas in regard to weight, sound, quality of metallic finish, and contactless enablement.
There are a variety of metal composites, but by far the most popular is stainless steel. It is more economically viable, looks good in edge to edge applications, and is durable.
Full metal cards can largely be considered legacy solutions or, at best, a market in which extremely low volumes are issued annually. As the market moves toward contactless enablement, focus is being placed on veneer, hybrid, and core solutions.
Veneer hybrid, and core solutions may not necessarily be the goal of the industry, but they offer a way of delivering the metal feel and look with reliable contactless enablement.
Understand Your Clients: In terms of metal card supply, it’s important to understand each bank/financial institution’s requirements. This has a direct impact on the type of metal card solution offered, as it relates to finish, incorporated technology, and usage.
Up until very recently, credit cards were the dominant metal card type issued, driven by premium solutions offered by major U.S. issuers. In terms of usage, credit cards are largely used at the Point of Sale (POS) and have lower interactions with Automated Teller Machines (ATMs), meaning a solution that is not so durable is viable.
Fintechs within Europe are now pushing the metal card envelope toward debit cards, which are inherently subjected to harsher environments and usage, commonly used for cash withdrawals at ATMs, which adds another dimension as it relates to durability, with metal debit cards having to deal with arguably harsher usage and environments.
This directly translates to the requirement of offering a broad portfolio, which can cater to credit and debit card usage at a variety of weights and finishes, on top of contactless enablement in order to cater to broad issuer requirements.
Conversely, if only targeting a certain end customer—Fintechs, for instance—then product portfolios’ requirements should be geared toward focusing on contactless enablement, high quality finish, and a weight level of 14-18 grams.
In summary, defining the target client will ultimately define a card vendor’s metal card product portfolio.
Understand Your Market: With a variety of metal card bodies available, it will come as little surprise that this has directly translated into a diverse range of choice and uptake as it relates to metal card construction.
As a whole, the United States is extremely diverse. Chase has decided to go with a metal core variant with a Polyvinyl Chloride (PVC) exterior, which limits the impact on design and is considered an easier route to market overall, whereas American Express has gone with a heavier card with a plastic PVC front layer. The United States also has another market dynamic at play: the rise of contactless migration across a multitude of different issuers’ card portfolios.
Europe has a slightly different set of market dynamics than the United States does, with fintechs and neobanks such as Curve, Revolut, and N26 driving demand and increased metal card issuance. Today the traditional European banks and financial institutions are testing the waters as it relates to metal card products, but it is the fintechs that are the real drivers behind increased metal card demand within Europe.
Different dynamics and driving forces in different regions will help define metal card product portfolios and considerations need to be made related to these dynamics in order to push the correct product type to the correct region.
Aim for the Middle Ground: The middle ground is where ABI Research believes the greatest metal card opportunity is presenting itself. Growth opportunities are largely presented in the issuance of hybrid/veneer or core cards, which bring the full metal experience as it relates to sensory fulfilment (look, feel, and sound) as well as technology and design.
Contactless migration programs are accelerating dual interface demand and thus an evident move to hybrid/veneer and core metal card products is apparent in order to supply metal-based cards with contactless capabilities.
Providing a metal card experience as it relates to look and feel and the continued move to contactless is driving banks and financial institutions to look toward the middle ground as it relates to metal card products.