Digital cards saw a significant boost in adoption during the pandemic, initially driven by necessity. However, it quickly became clear that hygiene was just one of many benefits—and not even the most compelling one. Both consumers and retailers have found digital to be faster, more cost-effective, and more efficient than traditional physical options.

In a PaymentsJournal podcast, Fiserv’s Wesley Suter, Senior Director of Product, and Kush Patel, Senior Product Advisor, as well as Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed the advantages digital cards offer over their physical counterparts, and how banks can tap into those strengths.

Post-pandemic, the world has shifted from predominantly card-present to card-not-present transactions. Consumers can now order groceries from the comfort of their couch, then drive to the store where someone loads them into the car. There’s also been growth in digital acceptance at the point of sale, as merchants adopt tap-to-pay systems.

“Roughly 30% of in-person transactions are click-to-pay or digital wallet transactions, and that’s going to grow to over 50% in the next couple of years,” said Patel. “Anecdotally speaking, I live in a neighborhood where our restaurant association has gone completely cashless. Tap-to-pay and digital wallet transactions are very important to cardholders, not just at home but when they’re shopping in stores and at restaurants.”

Beyond shopping, businesses are working to make it easier for cardholders to digitally complete tasks that were traditionally done through human interaction. That can include something as simple as activating a card or more complex and curated experiences like disputing a transaction.

Ultimately, it’s not just about making cardholders’ lives easier, but making it easier for them to do business with issuers. Engaging customers to the point where incorporating digital tools becomes a part of their routine sets the stage for stickier relationships, cross-selling opportunities, and deeper engagement.

“When you see the throughput that the integrated experience has with the debit and credit card portfolios, you start to think about the foundational aspects of card management,” said Suter. “How do we get those cards not only in their hands, but active and used. With the integrated model, we have seen digital banking platforms increase 5% to 7% month over month in activation and usage.”

One area in which digital platforms have made a difference is in integrating credit and debit accounts. Issuers used to treat debit card holders differently from credit card holders. They might ask a debit card holder to download an app to manage their card, but if that same user had a credit card from the issuer, they could be directed to a third-party website to make a payment or view statements.

“It’s not the consumer’s problem how the silos might exist in different companies,” said Riley. “To them, it’s a card that they want to use to conduct a transaction. Whether they want the money to come out of a bank account with a debit card or to use a credit line, making that whole process seamless is important.”  

By unifying debit and credit accounts, digital platforms make it easier for cardholders to do business with their issuer. It also better positions the bank to cross-sell between the two accounts.

Another advantage for issuers is that cardholders who can quickly access their funds tend to transact more frequently than those who are less digitally engaged. Credit card transactions were once primarily for big-ticket items, but thanks to digital cards, we’re now seeing an increase in smaller transactions across debit and credit. This results in greater engagement in terms of transaction volume and overall portfolio spend.

They also give cardholders more uninterrupted access to their funds. When a card is lost or stolen and not promptly replaced, 40% of affected cardholders are likely to switch to another issuer or card, leaving the original one behind.

Similar to merchant-specific cards hosted on their own portals, issuers are now beginning to offer digital-only solutions as well, like the Apple Card. Additionally, virtual cards are being rapidly adopted by commercial and small businesses to enable better expense management, faster transaction settlement, and greater control over overall spend.

This trend may also carry into the consumer space as online transactions become more common. Increased online activity exposes cardholders to higher risk and privacy concerns, prompting consumers to adopt virtual cards—whether one-time or merchant-specific—as a way to protect themselves.

Digital transaction also makes it easier to fight fraud. Fiserv’s technology, for instance, can provide contextual evidence around the purchase transaction. Issuers that have adopted this technology at a rate of 75% or higher have seen a reduction in fraud of over 20%. Those with lower levels of engagement are seeing a more modest 5% to 6% reduction in fraud.

“I can tell a layman cardholder right off the street that this is where your transaction was conducted, how much it was for, and where the message came from,” said Suter. “They immediately understand whether it is a legitimate transaction or potentially illegitimate. That deputizes the cardholder, allowing them to understand with pure context whether they performed that transaction or not.”

Behind the scenes, Fiserv leverages neural networks, insights and machine learning not only to fight fraud but also accelerate customization—such as personalized offers based on geolocation. These elements can drive increased spend on those cards.

We live in a digital-first ecosystem. We can manage our thermostats, do our grocery shopping, and call a rideshare—all from our phones. Our digital banking and finance experiences are a natural extension of that. It’s important to have digitally integrated engagements that accommodate the shift in how consumers interact with their financial institutions.

“Over half of consumers would like to engage with their banking institutions via digital channels rather than going into a branch,” said Patel. “Younger generations expect this at a much higher rate, but more than half of baby boomers and Gen Xers also expect to engage via their mobile channels.”

Every consumer is at a different stage in their lifecycle. Fiserv continues to iterate on its platform to help guide both consumers and businesses in tokenizing their cards into digital wallets.

“Anything that I can do on the phone or in branch now needs to be steered towards that digital component, from disputing a transaction to more engaged relationships around rewards and fulfillment,” said Suter. “At some point the card has to be reissued or replaced. True digital card management is the ability to manage the entire lifecycle relationship of that card and that consumer.”