For a technology which is based around speed and
convenience, it is ironic that instant issuance has seen a slow
take-up in the cards market. It has been available since the 1990s,
and while it has gained traction in parts of the US and Asia, it
has failed to catch on elsewhere. Louise Naughton
reports.
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Instant issuance, the software that allows the
issuance of new credit and debit cards on the spot in minutes
rather than weeks, was promised to set the banking world on
fire.
The technology has caught on in the
US, with around 35% of US issuers offering the service through
their branches. Asian and Middle Eastern banks have also been using
the technology for years. In Europe, however, the story is
different. Only around 10% of cards issued in the EU are issued via
instant issuance and banks have been slow to take up the
technology.
Opinions on the technology are
divided between those who see it as a useful card activation and
customer service tool and those who see it as an unnecessary cost
with an appearance that can potentially “cheapen” the look and feel
of card products.
MasterCard and other proponents of
the technology, say instant issuance technology is a “powerful tool
allowing issuers to develop and maintain a strong customer
relationship and drive overall card activation”.
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Increasing card
activation
It says that this provides issuers with additional places to
acquire new cardholders, including shopping malls, airports, sports
and entertainment events to name but a few. MasterCard also argues
that instant issuance encourages immediate use and allows issuers
to partner with merchants and organisations to offer additional
incentives for cardholders to start shopping right away.
Debate on instant issuance is
particularly strong in the UK currently, where Metro Bank recently
became the first to offer the service.
It launched its first branch in
Holborn in July using its ‘ready to go’ credit and debit cards to
tie in with its customer service orientated approach to
branch-based banking.
Paul Marriot-Clarke, retail
managing director for Metro Bank, said one of the biggest sources
of inconvenience for customers is having to wait for a credit or
debit card and the process of issuing a PIN which, he claims, they
will probably forget.
When asked why Metro Bank are the
only UK high street bank to offer the service, Marriot-Clarke told
CI other banks are focused on recovering losses they made
during the financial crisis and an investment into instant issuance
does not figure particularly highly on their list.
“Other banks in the UK spend their
time trying to find out how to service customers at the lowest
possible cost, highest-scale way possible – obviously these
machines don’t enable you to do that,” said Marriot-Clarke.
“If you were to look at the total
cost, including the number of calls into call centres to re-issue
PINs, then I wouldn’t be surprised if it is not as expensive as
perhaps the traditional banks think.”
Earlier this month, CI’s
sister publication Retail Banker International revealed
Metro Bank had hit its one-year target for customer accounts in its
first month of business. Metro Bank’s chief executive Craig
Donaldson claimed instant issuance technology had “undoubtedly
played its part” in helping to exceed its targets.
Marriot-Clarke said other banks’
strategies seem to be focused on migrating customers away from
branches. Making a move into deploying instant issuance is not a
decision that sits easily with them as it goes against their end
goal.
“For Metro Bank, our proposition is
based around branch banking so it makes sense for us to deploy
these machines,” said Marriot-Clarke.
Unembossed cards can
‘cheapen’ brand
Other banks in the country are less convinced. A manager of one
of the UK’s largest banks, who wished to remain anonymous, said
instant issuance technology had no place in modern retail
banking.
“Customers are aware of the wait
for credit and debit cards and we hear no complaints from them in
this respect,” he said.
“The unembossed ‘flat card’ look
that some instantly issued cards are sporting look and feel cheap,
and moreover cheapen the brand of the issuing bank. Funds would be
much better invested into other aspects of customer service that
hold value for the consumer.”
Some instant issuance services do
now allow for an embossed instant issuance product, however.
US-based technology company DCS says 6,000 branches in the country
are installed with its Cardwizard solution, 2,700 of which are able
to issue embossed cards.
Marked difference in
take-up
Similar debates about instant issuance are occurring all around
the world. While issuers seem to be aware of the technology and the
benefits it can bring to modern-day banking and consumer
relationships, there is a marked difference in uptake.
Gemalto claims to represent 40% of
the instant issuance global market share with its Dexxis
solution.
Dexxis was first unveiled in France
in 2007 and Xavier Larduinat, director of strategic marketing for
Gemalto, argues it leads the market by a long way.
“The overall microprocessor banking
cards market is 830m units according to Eurosmart,” said
Larduinat.
“Out of this total, it is hard to
extract how many were issued the standard way or with the ‘fast
track’ instant issuance technology. This service is still
relatively new on the market. My estimate is that we are still at
less than 10% of the overall volumes.”
Larduinat argues that some
countries in Asia have strongly adopted instant issuance to
simplify the user experience. He said the Asian market has also
deployed the solution as a way of removing the fraud threat of
sending a card via mail. Suzanne Tong-Li, senior vice-president of
the secure transactions business unit for Gemalto Asia, echoes this
statement and told CI that instant issuance is already
making moves to enter the credit card market.
“Many developing economies in Asia
are progressing quickly in their credit card businesses,” said
Tong-Li.”To encourage frequent and increased credit card usage,
instant issuance is an ideal solution that allows bankers to
promote this proactively rather than wait for clients to walk into
the bank branch. This is especially true for small or new banks
with limited branches.
“Furthermore, statistics also show
that a credit card issued instantly has a higher rate of activation
and usage for a longer period compared to a credit card mailed to
the home.”
Tong-Li does acknowledge that there
are challenges in migrating the technology to credit cards. The
most prevalent is that central bank regulations regarding instant
credit card issuance would have to change.
For example, in Korea regulation
prevents issuers from using the technology. Secondly, banks would
need to review their internal approval processes in order to meet
shorter lead times without compromising due diligence.
However, there is no data to
underpin this prediction of the Asian market and instant
issuance.
“We do not have figures showing the
number of debit cards issued using the instant issuance
technology,” said Tong Li.
“Some countries that are currently
using the technology include Singapore, South Korea, China and
Taiwan. In terms of credit cards, it is a market that is slowly
gaining traction. If the aforementioned challenges can be ironed
out, instant issuance for credit cards is set to grow.”
US market
buoyant
In the US, Dynamic Card Solutions (DCS) also provides instant
issuance and PIN management solutions. Ron Zanotti, senior
vice-president of DCS, said a total of 6,000 branches have been
installed with its instant issuance software.
He estimates that 5,500 of these
branches are located in North America, 300 in Latin America and 200
in the Middle East and Africa.
DCS gained entry into the Latin
American and Middle East and Africa markets two years ago, which
signals that the technology is truly becoming a global fixture in
modern-day banking.
Factors that have driven the uptake
of the CardWizard solution in the region include increased bank
competition, debit card popularity and an increase in mail and
identity theft.
“On average we sign 125 customers
per year. As of 2010, we have had seven years of consecutive years
of growth as a result of increased demand to implement our
software,” said Zanotti.
“In addition, because of the fact
that consumers’ use of cash and cheques is significantly declining
as they continue to embrace a range of card-based payment options –
in particular the debit card – more financial institutions are
capitalising on offering our software to do in-branch card
issuance.”
Zanotti estimates that roughly
360,000 cards are issued per month using DCS’s CardWizard software.
Ninety-five percent of this figure is made up of ATM and debit
cards, with 5% being credit cards.
“Credit card instant issuance is
trending upwards and gaining more traction in the market,” said
Zanotti.
Reaching the mass
market
In spite of the technology’s relatively new entry into some
markets, industry players are no longer monitoring the card numbers
that have been issued via the service.
According to the new product
development team at Visa Europe, it stopped monitoring instant
issuance numbers more than a decade ago.
“During the early stages when it
was a new way of reaching customers the issuance of cards using the
technology was monitored by Visa and banks,” said Claire Treacy,
corporate PR executive for Visa Europe.
“However, since the late 1990s the
technology is considered a ‘normal method’ used by banks and there
are no flags or indicators to differentiate what cards have been
instantly issued.
If there was a new product or new
card program with the instant issuance proposition then it may be
something we would monitor, but this would presumably be for a
limited period of time.”
MasterCard Worldwide reported back
to CI with a similar response.
“Unfortunately our quarterly
reporting doesn’t differentiate cards that are instant issued from
‘normal’ cards so we’re unfortunately not able to provide this
level of insight or estimation,” said Louise Herbert,
communications executive for MasterCard Worldwide.
Zanotti believes that the number of
cards issued using instant issuance technology should be better
documented as it would be beneficial for card issuers and the
associations to realise the business benefits the software
provides.
Larduinat disagrees. He argues that
documentation of instant issuance figures would make no difference
to the uptake of the technology, as it is viewed as a solution to
cope with delivery issues rather than a product offering.
However, he does acknowledge that
rich data would help Gemalto understand the instant issuance market
better.
Commenting on whether instant
issuance will become normal practice for banks, a spokesperson for
Visa Europe said issuers will undoubtedly begin to move into this
area as its research shows that the technology plays a key role in
redefining industry and customer relationships.
Cost versus
benefit
“The technology itself is ready but the view on cost versus
benefit may differ across issuers and therefore the whole industry
appetite,” said the Visa spokesperson.
“As with any innovation, the
adoption curve takes time to develop and it is very hard to
predict. However, as more issuers focus efforts on improving the
customer experience, costs will be driven down and more players
will undoubtedly move in this direction.”
The revolutionary technology which
promised to set the banking world alight now appears to have been
reduced to a dim glow. The benefits of instant issuance seem to be
clear for both issuers and consumers, but there does not seem to be
any great drive behind the software to reach the masses.
Official monitoring of instantly
issued credit and debit cards would be a start to enable the
benefits of the technology to become highlighted to industry
players.
At the moment, cold hard data is hard to come by. Until this
changes, instant issuance runs the risk of never quite living up to
its potential.
