By Ray Birch
TAMPA, Fla.—When Apple rolls out its new credit card this summer, it won’t feature the traditional card number–and that’s expected to affect both the future of card design and costs for other issuers, payments experts told CUToday.info.
The impact will likely be felt first by issuers whose cards target the upper-income, tech savvy consumers that are a prime demographic for the new card, and then be felt over the coming years by other issuers. The new Apple card signals a move to virtual card numbers is certainly coming, sources say.
“As we know, the card numbers for the Apple Card are not going away, but rather they are not being printed on the card,” noted Lou Grilli, AVP of product development and thought leadership at Trellance. “If the Apple user needs a card number to book their Southwest Airlines tickets, they go into the Apple Wallet on their iPhone to obtain a 16-digit number and CVV to use.”
Grilli believes Apple’s strategy will increase security slightly, but its most lasting effect may be that it’s a “really cool looking card.”
“The type of consumer who would apply for the Apple Card issued by Goldman Sachs is statistically more tech-savvy, has a higher propensity to use mobile payments, and is a bigger spender in general, in my opinion, After all, they bought an expensive iPhone,” observed Grilli.
Digital First Payment
Grilli noted the Apple Card is being promoted as a digital-first payment.
“That is, if approved, the cardholder is instant-issued a virtual ‘card,’ which is pushed into their Apple Wallet on their phone or watch, and available immediately for use wherever Apple Pay is accepted—still somewhat limited due to merchant acceptance,” he said. “The physical card—the laser-etched titanium card with no PAN, no expiry, no signature block—can be requested.”
Grilli pointed out that since Apple Pay is accepted in the Uber and Lyft apps, the Best Buy app, ParkMobile, and many other apps, not having a card number—or even not having a card—will not be a problem in many cases.
“I can envision some of the bigger issuers creating a similar product to compete,” he said. “Chase with their Chase Pay app, which is available on both iPhone and Android and thereby open to a larger potential market, could do something like that, with no card number printed on the card.”
But while Grilli and others believe the numberless Apple Card will impact other issuers’ decisions in coming years, there is a downside to Apple’s new card that could keep some from following suit.
“Online purchasing is on the rise, and most online vendors and apps require a card number to be typed in,” Grilli said. “The two big kahunas, Amazon and Walmart, do not accept Apple Pay. Not having a card number printed on the card, requiring the user to unlock the phone, go into the wallet, obtain a card number, adds friction. If the cardholder has another card handy, one with the PAN, expiry and CVV printed, that is just more convenient.”
If other issuers follow, said Grilli, it will more likely be with a special card.
“Possibly with a separate card product to appeal to a limited market,” he said.
Change is Coming
Bill Hardekopf, CEO of LowCards.com, is among those who believes Apple’s card is a signal change is coming.
“Credit card issuers will likely always have an account number for your specific account, but I think more and more will move to virtual numbers,” said Hardekopf. “These are randomly generated numbers assigned to a specific transaction and never used again. So, if a hacker steals your credit card number from a particular transaction, it is basically worthless. This significantly decreases the risk of card fraud. Since credit card issuers are usually responsible for fraudulent transactions, there is a financial incentive for them to move to these virtual numbers.”
Few Changes in Near Term
Brian Scott, chief growth officer at PSCU, believes any big changes resulting from issuers moving away from printed numbers will not happen in the near term. He emphasized cards without numbers will cause too much friction for consumers who have options to use other plastic.
“Buying anything online now, you need a card number,” said Scott. “I realize there are technologies that exist to make the card number not necessary to use online, but ubiquity will be key. Until those technologies become ubiquitous, there is not a big change coming in the short term.”
Designs on Design
Yvonne Stelpflug, group owner, payments products at CO-OP Financial Services, belives the most immediate effect will be on issuer’s card designs.
“I think the trend is limited at this point. I don’t think the environment is ready to embrace that big of a change,” she said. “I do think the card design will continue to evolve, including it being less important that the number be front and center. There will be adoption of inputting credentials on the back, and keeping the front design more sleek and clean.”
Tim Kolk, principal at TRK Advisors, agreed.
“I expect this will continue escalating the card looks and materials costs and smaller issuers may be burdened a little more to keep up with the big dogs,” Kolk said.