Credit cards on the decline as Visa says we have passed ‘peak plastic’

Australia has reached “peak plastic” and credit card transactions will now start to decline, as people increasingly adopt mobile and wearable payment technologies, according to the new country manager of Visa.

In his first interview since becoming the head of Australia, New Zealand and the South Pacific at Visa in January, former local head of Citibank’s consumer banking operations Julian Potter told The Australian Financial Review the tipping point for change in consumer payments preferences would come when things like Myki or Opal cards could be stored on your phone in a digital wallet.

“I use my phone and it just took a few goes and then the habit set in. Once you start using mobile or wearable payments, the sheer convenience of not needing to carry your wallet just becomes habit forming,” he said.

“But our sense is that once we can get everyday spending on things like transport and you can have your drivers licence in a digital wallet … we’ll see it take off because your dependency on having multiple ways to pay really starts to decline.”

More than 90 per cent of face-to-face transactions using Visa credit cards are now contactless in Australia.

But despite the shift to mobile technology, Mr Potter said cash would remain a part of society for some time yet, predicting it would still make up about 15 per cent of transactions in five years.

Mr Potter, who spent 27 years working in retail banking before joining Visa, said his big priority for the next few years was to target the “long tail” of small businesses still trading in cash.

“Australia’s proportion of spend in digital and electronic formats has surpassed cash for some years, but there’s still a big opportunity to pick up the long tail from smaller merchants that are still using cash,” he said.

“Retailers over time will see that unless they’re enabling customers to pay digitally, they will lose out on sales … My gut feel is that within five years we’ll be at 85 per cent digital and a fast-growing proportion of payments will be thanks to connected devices like mobile and wearables.

“We’re working on ensuring that accepting payments is less dependent on hardware, and instead shifts to software, with things like PIN on glass.”

PIN on glass

The comments from Mr Potter come as Jack Dorsey’s Square has already started trialling credit card payments on smartphone screens, after receiving the green light from the PCI Security Standards Council last year. The council is made up of the five largest global credit card companies including Visa.

For the wider fintech industry, the PCI Security Standards Council unveiled its new security protocols for software-based PIN entry on off-the-shelf smartphones or tablets in January.

Coinciding with the growing shift to mobile and wearable payments is a movement from businesses to enable tokenised transactions, in which a card’s 16-digit number is replaced with a token that is useless for cyber criminals to steal.

This formed a key part of Visa’s security roadmap released last year, which outlined a four-year process for Australian banks to adopt new standards for e-commerce transactions, designed to make online shopping easier and reduce fraud.

Visa strategy

In 2017 the number of transactions using the Visa Token Service grew by 79 per cent across Asia Pacific.

The roadmap also signalled Visa’s support for fingerprint scans being used as a method of authentication for face-to-face transactions over $100, as well as only purchases, as well as more data sharing between card companies, the banks and merchants.

As a company, Visa posted 21.9 per cent revenue growth to $US18.4 billion in 2017 and it is valued at $268.7 billion. It counts 16,000 financial institutions as clients, is accepted at more than 46 million merchants and has issued 3.3 billion Visa cards.

To drive innovation the company has established “innovation centres” in San Francisco, Dubai, Singapore, Miami and London.

Visa is also investing in start-ups, having backed fintech successes including Stripe and Swedish company Klarna.

Mr Potter said the company would likely make a number of fintech acquisitions, which would build up the capability of the business and broaden its value proposition.

Source: Australian Financial Review Jul 9 2018 

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