Just as many traditional financial institutions are being forced to improve their conventional product offering due to the innovations made by Fintech companies and start-ups, credit card lenders are also set for disruption. In the more than 55 years since Barclays launched the first credit card in the UK, the financial ecosystem has shifted dramatically.
Cash-back cards and products that offer air-miles as a reward for spending are no longer enough to maintain the custom of Millennial and Gen Z clients, let alone attract new customers.
Next Generation of Finance Consumers
A recent survey released by EY found that more than half (51%) of Gen Z consumers say a Fintech company is their most trusted financial brand, compared to only 23% who name a national bank. Whilst in the past, financial firms may not have had access to the data required to ensure that each customer can be assessed personally, those days are long gone.
In the face of growing interest in buy now, pay later (BNPL) services, credit card lenders are rapidly approaching a crossroads. The allure of credit cards is being eroded by the ease of accessing BNPL solutions at check out. With major BNPL firm Klarna set to launch a card in the UK soon, how can credit card firms innovate and survive?
Future Focused Fintech
One of the most impactful ways that credit card lenders can improve their products is by embracing data to enhance how eligibility checks are performed and increase inclusivity. The advent of open banking and big data has brought with it the ability to provide credit cards to those with low credit scores in a way that is deeply personalised and financially responsible.
The customer of today expects much more than just a credit facility from their card provider, with money management tools that incorporate the latest AI technologies being a key differentiator. Apps like Cleo that enable users to build their credit, budget and use an AI chatbot to manage their account are setting customer expectations at a high level.
The ability to set up virtual credit cards also gives credit card lenders a new feature that users want. As a mobile payment method, virtual cards are safer, convenient and allow defined spending limits to be set by the user. Having access to single-use card numbers reduces the risk of fraud, as after the customer has used it once for an approved purchase, the number becomes invalid.
Perhaps the most important innovation for credit card firms is the adoption of the latest mobile account management solutions. For example, creating a card management app for smartphones that uses a biometric login, Apple Pay and Google Pay support, card freezing, alongside a range of additional improvements, is vital to stay competitive
Countless other features, such as personalised rewards and repayment schemes and instant virtual credit cards, are also available to credit card firms looking to offer a truly modern payment experience for customers.
If credit card providers are to stay relevant to younger generations, then not only will they need to adopt these technologies, but it will be critical to remain agile. This could mean changing outdated technology systems and becoming increasingly flexible in their approach to adopting innovation.
Written by Finbarr Toesland, Editorial Contributor.
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