Juniper Research defines credit cards as a payment instrument which allows consumers as well as cardholders “to borrow money to pay for products and services, and make deferred payments for their purchases in exchange of monthly interest based on the amount owed.”
As noted in a report by Juniper Research, “the premise of credit cards is simple; most commonly, it entails a revolving credit, which enables cardholders to access to a limit set by the card issuer instantly and allows them to carry their balance forward month-to-month in exchange of a small fee.”
Others, such as secured and cash line credit cards, “let users borrow money against the cash deposits they made, which serve as their card limits and on one-time cash basis upon an agreed pre-set limit respectively.”
Juniper Research further notes that issuers, thereby, “make profits on several items on revolving credit, such as interest income (known as APR [Annualized Percentage Rate]), late and debt suspension fees.”
The report from Juniper Research added:
“Credit cards, in this respect, are often compared to small loans. Furthermore, by providing more benefits, such as discounts and loyalty points to consumers, credit cards have solidified their value in the market as practical and beneficial payment instruments throughout the years. In the B2B (Business-to-Business) space, credit cards provide access to a working capital and offer certain rewards with enhanced controls over spending in B2B payments with near ubiquity thanks to payment network and issuer collaboration.”
Payment networks and issuers also increasingly “collaborate with fintechs to capitalise on this payment vertical.”
Juniper Research also mentioned in their report that mobile wallets’ steady “rise to prominence as a payment method in recent years had its tipping point at the conjunction of long-standing attempts at creating cashless societies worldwide, and COVID-19’s effect on cash-free payments.” Mobile wallets “offer several other benefits, mostly convenience, speed, and security, as users do not need to remember PINs and passwords when making in-store purchases or fill in security credentials when buying online.”
In the context of payments, these wallets are “tethered to credit cards and enable users to store their transaction information in a single device.” However, while they are enablers, “they are also challengers to traditional credit cards, especially in the eCommerce domain.”
The report added that the primary delivery methods of these wallets “are NFC and QR codes, which enable users to make in-person credit card payments at the POS, while some solutions can also combine various methods such as Bluetooth, and MST (Magnetic Secure Transmission – employed by Samsung).”
One recent example of the conjunction of credit cards and mobile wallets is Apple
Card, which “launched in the US with Goldman Sachs in late August 2019, dubbed as a
credit card designed for iPhone.”
The company aims “to bolster its card proposition with Apple Pay Later, which can pave the way to Apple Card eligibility, as a standalone solution to be released in Spring 2023.” Apple Card is “available as a physical, metal card, which does not feature a card number, CVV, expiration date or signature on the card.”
Like traditional credit cards, it “offers cashbacks on Apple, Apple Pay, Uber, and UberEats purchases, and instant rewards without an annual card fee.”
As noted in the report, the number of credit cards “issued via digital card issuance platforms will exceed 321 million globally by 2027, from 120 million in 2023.”
This growth of “almost 170% reflects the use of new advanced digital capabilities, such as digital loyalty schemes and instant issuance, as card issuers aim to combat competition, including buy now pay later.”
As mentioned in the update:
“Credit cards will account for over $9.7 trillion in spend globally by 2027. This
represents a significant opportunity for card issuers to drive revenue growth by
choosing the optimal credit card strategy. Rising affluence in emerging markets will be a significant driver of credit card adoption. As such, digital card issuance
platforms are critical to delivering credit offerings in these mobile wallet-dominated markets.”
The report added:
“In emerging markets, the ability to instantly issue digital cards will be a key factor in users choosing credit cards over other payment methods. Card issuance platform vendors must ensure localization to enable cards to be quickly pushed to the wallets popular in each market.”
The report further noted:
“By 2027, the monetary value of rewards for users ffrom credit card use will reach
$103 billion globally, driving overall adoption. Card issuers should focus on
app-based loyalty to maximise the appeal of these rewards; partnering with
well-connected digital loyalty program providers to maximise their appeal. If
issuers fail to do this, they will lose out to better-connected vendors in a highly
competitive credit cards market.”