In order for firms to maximise their audience, it’s pivotal they think beyond the card duopoly, according to Alex Reddish, the MD of Tribe Payments, who maps out the key benefits for Payment Expert.
Thinking about a payments world without cards is smart. We’re clearly heading in that direction—digital identity and payment expert David Birch has pointed to the fact that mobile wallet payments are today more popular worldwide than card payments, suggesting we might be close to or have even passed “peak card”. That is, the future is fewer and fewer card-based payments.
There’s also the acquisitions that the two big card schemes have made, the likes of Finicity, Aiia and Tink. All fintechs looking to either enable or enhance API-based payments. At least some of the moves the card giants have made are a hedge against the future—if we are at peak card, it’s best to invest in the future.
But that future is exactly that: the future. It’s important to look towards it and make plans but the simple fact is, cards are going to be with us for some time. There may come a tipping point when a slow decline becomes a fast one, and those who have invested in that future will be glad they did. According to payments analysts Nilson, however, there will be 265bn more transactions made using card rails in 2027 over 2022—an increase of more than 42%. Our flexible (and virtual) friends have a lot of life left in them yet.
The card market is not a duopoly
For UK businesses, there are really only two types of debit and credit cards—Mastercard and Visa. There are others, but acceptance can be hit-and-miss. Anyone walking into a store that will take cards can feel pretty sure that the Mastercard or Visa in their pocket will work. Meanwhile there are websites dedicated to which businesses are happy to accept American Express.
Why so? Many would point to the higher fees for accepting American Express, but this is just part of the reason. If accepting two cards is acceptable for almost every customer that walks in or browses an online store, there’s no real need to expand what your offer, not unless people demand it.
The pandemic showed just how quickly demand could change, and could be met. Suddenly cards, and especially contactless, were essential in an environment where as little contact as possible was desired. Businesses that once only took cash suddenly went card-only. Others moved online and made their businesses contactless in a whole other sense. This means that there are many businesses that only entered the “new” world of payments in the last few years, a time when their audience was limited by a worldwide pandemic.
At that time, a quick-fix solution made sense: get it working and keep customers happy. But now businesses need to realise that the card market is not a duopoly, and that their payment solutions may be holding back their businesses.
Less than half of the market
Post-pandemic restrictions, the world is once again smaller than it was. International commerce and tourism are once again a big part of the economy, and as such businesses should have a closer look at what their international audience demands.
Relying again on the experts at Nilsen, we know that there were 4.2bn Visa cards in circulation in 2022, and 2.7bn Mastercards—a total of 6.9bn. UnionPay can boast 9.31bn cards, dwarfing this “duopoly”. While the overwhelming majority of UnionPay transactions take place in China, the scheme is expanding, offering cards in Vietnam, Australia, the Philippines, Pakistan and now in Europe. UnionPay is a huge and growing card scheme and while its use in the west is limited, this could well change.
There are also cards with much smaller user bases but it may be a mistake to ignore them. Discover is used by 57 million cardholders in the USA and is rapidly expanding in Europe and the UK. JCB boasts 140 million cardholders. RuPay has over 560 million cardholders. While these are not quite the behemoths of the big three, this is still a substantial number of potential customers.
Card schemes are often parochial by nature, capturing a national audience and struggling to make headway outside of that nation. By limiting acceptance to only Visa and Mastercard, businesses are limiting their audience, potentially cutting out entire nations because they only accept what they see as “the big two”.
But what of demand? Demand during the pandemic was obvious thanks to national news stories on the shift to card usage, and it was obvious wherever people looked. The demand to use other cards is far less obvious, and customers are unlikely to complain if they can’t pay, especially online—they will just pay elsewhere.
International audiences essentially disappeared for a while. Now that they are back, it is up to businesses to educate themselves, and for payment providers to educate businesses on the need for multischeme acceptance, and the risk of quietly losing business if they do not. Restricting card payments to just Visa and Mastercard means limiting who can pay for your services at a time when businesses should be striving to maximise their reach.