By Ray Birch
ALBANY, N.Y.–Digital card issuance could be here by the end of the year, and it will bring with it some big benefits for issuers and digital wallets as well, a number of people believe.
Digital issuance is when an issuer provisions a new card number directly into a user’s mobile wallet. The service will likely get its greatest usage following a data breach that forces issuers to mass reissue cards. Instead of telling members their card has been deactivated to protect them while they then wait a week for a new one or stop by the branch for instant-issue, FIs can now say a new card is now in a person’s wallet and they are able to go on spending uninterrupted.
Graig Furlong, director of deposit and card operations at CAP COM FCU here, said his shop is anxious to begin providing digital issuance to its cardholder base.
“When you have to freeze someone’s card, the ability to immediately issue them a new card number through their digital wallet with a token is huge,” said Furlong. “There is basically no downtime when you reissue and you keep the credit union’s card top of wallet.”
Furlong, as well as other experts who spoke with CUToday.info, believe that digital issuance makes it easier to make the difficult decision to mass reissue—does the CU protect members but upset them, or does it keep things status quo and risk fraud activity on members’ cards?
“This alleviates a lot of that concern,” said Furlong.
Rock & A Hard Place
Brian Scott, SVP of sales and solutions consulting at PSCU, agrees, saying digital issuance can help address the rock and hard place many issuers find themselves between when their users' cards are compromised in a breach.
However, Scott noted that digital issuance does not completely prevent the issuer from inconveniencing members when they block cards.
“While provisioning of the card is nearly instant into a digital wallet, the member still has to change their card number in all of their recurring payments, such with their Amazon account, their phone bill…”
A Boon for Members
Lou Grilli, director of payments strategy at Trellance, also believes digital issuance will be a boon for members.
“This is a very good thing if instant-issue is not available, or for members who don’t want to come into a branch to pick up a replacement card,” Grilli said. “Instant issue has greater value, since the card number can be used just like the virtual card, but obviously can also be also used at brick and mortar stores that don’t accept NFC.”
Sources told CUToday.info that digital payments are not accepted at all merchants, which would limit members’ ability to spend without a new plastic card.
Help, I’ve Lost My Card
Where digital provisioning may have its biggest impact for credit unions, insisted Scott, is when members lose their cards.
“I lost my card and I’m travelling on vacation, the member tells the credit union. In these instances the credit union can get their card back to a member very quickly, wherever they are travelling,” said Scott, who also thinks digital issuance can be promoted to members as an added benefit of doing business with the CU. “You can let members know you have this capability. So when a new member joins they can walk right out of the credit union with a new credit card in their phone.”
Grilli said the right time to let members know about digital issuance is when they call in—or chat—to report their card is lost or stolen.
“But, of course, promoting this on the website, in the online banking pages, in branch . . . would be a great promotion as well,” Grilli said.
Scott noted that issuers will have to communicate clearly that the new card is digital only and that the old plastic no longer works.
Scott also pointed out that digital issuance does not eliminate the cost for new plastic, which must at some point be sent to members. He said he was uncertain of the costs around digital issuance itself, saying there is likely some software needed and there could be charges related to mobile providers to provision the new card number into a digital wallet.
Potential For Cost Increase
Both Grilli and Scott see digital issuance driving up the use of mobile wallets. The experts believe that consumers will see digital issuance as another—possibly big—reason to use their mobile wallet.
“I have not heard that any studies have been done to show that issuing virtual card numbers increases mobile payments usage, although the logic behind this premise is viable,” said Grilli. “However for those members who already use apps like Uber and Lyft, Starbucks mobile wallet, Sam's Club Scan & Go app, Apple Pay . . . this certainly goes along way with that segment.”
One of the biggest reasons mobile wallet adoption has been slow, numerous experts have suggested, is that consumers in large numbers have yet to see the advantage of pulling out their phone over using their plastic. That slow adoption of mobile wallets has not prompted merchants to universally set up tap-and-go payment terminals. But Scott thinks digital issuance could nudge them along.
“Merchants will follow what people want to pay with. Merchants start seeing more consumers pulling out their phones and they will start enabling NFC on more terminals,” said Scott, who added that PSCU plans to offer a digital issuance service to its member credit unions soon.
CO-OP Working With Partners
Amy MacMullen, financial services senior product manager at CO-OP Financial Services, said CO-OP is working closely with each of its partners, including Visa and Mastercard and its online and mobile app providers, to bring a secure and streamlined digital issuance product to the industry. She suggested that credit unions begin talking to members more about mobile wallets.
“Digital card issuance holds little value for consumers who do not use digital wallets,” MacMullen reminded. “So for a credit union to realize the full potential of the strategy, they would want to dedicate some resources to increasing the number of members enrolled in and actively using digital wallets in their day-to-day lives. If digital issuance is something the credit union wants to add down the road, it would be wise to begin promoting digital wallet use now.”
MacMullen added that digital issuance has yet to be standardized of fully developed as a product or service.
“The only way to achieve it today is through direct coding to the third-party wallet, which is a capability many credit unions do not have in-house,” she said.