Universal Cards 2.0

Will additional embedded features in the new universal cards move them ahead in the age of digital wallets? People may have to forget the failures of the earlier generation first.

Getting consumers to carry more than one credit or debit card has been the goal of most issuers for the simple reason that many cardholders tend to use just one card—the fabled “top-of-wallet” card.

In that quest, an electronic version seems to be the preferred choice. The question is, which electronic version. Digital wallets, especially mobile ones, garner a lot of attention and use from consumers. Merchants like them. Payments companies like them. Issuers like them. Consumers can load multiple cards, including prepaid, loyalty, and gift options in most instances, from a variety of issuers

Then there is the universal card, which retains the familiar shape and form of the decades-old payment card. Universal cards enable consumers to load multiple payment cards, typically using a mobile app to capture the card information. Early incarnations included products like Coin and Stratos, while current ones include an entry from Edge Mobile Payments LLC and Dynamics Inc.’s Wallet Card.

To be blunt, the early entries haven’t fared well. Coin’s assets were sold to wearables-maker Fitbit Inc. in 2016, and CardLab Innovation ApS announced in 2017 it purchased the Stratos card connected platform and ceased the member program.

Yet universal cards, especially in a market like the United States where consumers overwhelmingly prefer using a physical card to make a point-of-sale purchase, continue to have appeal.

‘Half-Baked Technology’

Dynamics announced its Wallet Card in January. In addition to offering digitized and tokenized card credentials stored on the battery-powered device, the Wallet Card’s uniqueness is bolstered by the inclusion of cellular connectivity and messaging capabilities, marking its utility as an Internet of Things device.

The other contender is Edge Mobile Payments, which launched in 2017 following the Santa Cruz, Calif.-based company’s purchase of another universal card contender, Plastc. In a statement, Edge’s founder and chief executive said Plastc “ran out of funding.” Edge offers a color touchscreen, a rechargeable battery, and a card-locator function.

Among the slate of current universal cards, the Dynamics Wallet Card presents a different angle of attack because it is primarily courting issuers, not consumers. Chief among its tactics is talking to financial institutions, which bear the cost of issuing cards, in many instances multiple cards to the same cardholder.

Cheswick, Pa.-based Dynamics is no stranger to the payment card industry. In 2010, it provided the card for a Citigroup Inc. test that enabled users to apply rewards by pressing a button on the card. In 2014, Mastercard was an investor in a $70 million Dynamics funding round. That year, too, Dynamics introduced its first EMV contactless and magnetic-stripe card.

The distinction for the Wallet Card is the cooperative relationship between Dynamics and the payment industry, Jeffrey Mullen, chief executive, tells Digital Transactions. With a focus on selling to issuers, and the connection to the payments industry, the device stands out from its past competitors and known existing ones, he says.

“None of the other imitators had certification,” Mullen says. “They launched half-baked technology directly to consumers without the support of the industry.”

For the Wallet Card, Dynamics garnered the support of Visa Inc., Mastercard Inc., and JCB Co. Ltd., and enlisted four banks as issuers, along with Softbank Group Corp., owner of the Sprint wireless network.

“Banks are the ones distributing these cards for free,” Mullen says. “In most cases, our card will be no different.”

Unlike other universal card devices, the Wallet Card is adopted and branded by a single issuer. These issuers will be attracted to Wallet Card because it will last potentially years longer than conventional plastic cards. That’s important because the device is more expensive than a traditional EMV chip card.

Mullen won’t disclose prices, but he argues the reduction in card mailing and servicing will let issuers recoup their costs. Credit bureau Experian plc says the average U.S. consumer has 3.1 credit cards.

Not only do issuers pay for distribution of conventional cards, they have to service cardholders, too, usually with online Web sites and more expensive-to-operate call centers. And if the card is caught up in a data breach, there is the cost of reissuing, Mullen says. Breaches also may cause attrition.

With the Dynamics Wallet Card, a digitized and tokenized version of a new card number could be issued to the cardholder over the air in case of a breach, minimizing the cost and delay of sending new plastic.

Such a capability may help eliminate an $8 call to a cardholder and a typical $6 cost to replace a card, as well as reducing the potential attrition, Mullen says. “Issuers that buy the Dynamics Wallet Card have been able to see the value,” he says.

‘A More Holistic View’

The cost of issuing may be a deciding factor for some banks, says Thad Peterson, senior analyst at Aite Group LLC, a Boston-based financial-services consultancy. It’s not only the initial issuing costs, but the ongoing management expenses that might make a universal card attractive to issuers, he says.

“They don’t have to replace the plastic every two years,” Peterson says. “You have to look at the overall cost of the plastics of the customer over time.” Issuers also save costs because there is no need to integrate a new system, unlike the case with mobile wallets, Mullen says.

But that doesn’t mean banks won’t continue to pursue participation in mobile-payment services, like Apple Pay, Google Pay, and Samsung Pay, sometimes known as the “Pays.”

“At a high level, the Pays have helped what I call multiproduct relationships,” Mullen says. One result of that is a combined Web site where banking customers manage their checking and savings accounts, as well as their credit card accounts. This used to be done via two separate Web sites in many instances, Mullen says. “The Pays have a created a more holistic view within the bank portfolios,” he adds, which helped create data-reporting systems based on all the products a customer uses.

Mobile wallets are nowhere near replacing physical payment cards as the primary instrument at the point of sale, but that doesn’t mean banks will ignore them. They can’t, Mullen says, because of the branding swagger they engender, especially Apple Pay. But cards are not going anywhere either, Mullen says. They’ll be necessary to load into a mobile wallet.

The Dynamics Wallet Card, with its non-consumer sales focus, may be on to something different, and potentially, with merit, Peterson says. “Up to now, the [universal] cards that have been out there have been consumer-facing cards. In essence, they have been a replacement for a wallet.”

Consumers had to pay annual fees to use these other cards, and neither issuers nor processors were involved. “It wasn’t much of a value proposition,” he says. “With this card, this is clearly an issuer-side sale, simply because the dynamics of it allows the issuer to give me a single card for multiple accounts.”

Mobile wallets, however, do have something in their favor. The incremental expense is minimal, Peterson says. “The value-proposition issue remains with mobile wallets. It doesn’t cost me anything, nor my bank or my processor. It’s a much easier hurdle from a value-proposition perspective.”

‘All Your Cards Available’

For Frank Sandeløv, chief executive of the Denmark-based CardLab, which bought the Stratos assets, the universal card concept has a lot of merit. Stratos, in particular, has a strong patent portfolio around connecting the card and an app, which is closely related to the CardLab patent portfolio. Sandeløv intends to return the card platform to the market when it finds the “right partner for it,” he says.

“The platform is intended to be updated and offered [to] banks, payment institutions, and others as a hosted platform,” Sandeløv says in an email to Digital Transactions. This will enable banks to create additional revenue streams and add CardLab’s mag-stripe tokenization technology, which Sandeløv says is more secure than the EMV chip solution in the United States.

He makes that argument because the Stratos mag stripe is dynamic and can be rewritten as necessary. “The platform also gives the bank the option to replace blocked cards within minutes by issuing a virtual card that can be used physically via the connected card to the app,” he says.

“You have to remember that mag-stripe cards still are the only universally accepted payment solution and the tokenization furthermore is an open standard that does not require paying fees to big payment-system providers,” he continues. These “big” providers, he says, include Visa and Mastercard.

Sandeløv says the annual-fee model has merit, too. Because the card can hold offers, gift, and loyalty cards in addition to payment cards, consumers can always have a discount option with them at purchase.

“Studies have shown that most people leave the major part of their cards at home in a drawer and quite often miss bonus points, rebates etc. as they are not able to show their card,” Sandeløv says.

“Almost all gift cards, loyalty cards and membership cards are cheap mag-stripe cards, and left in the drawer they represent no value,” he adds. “Now you have the opportunity to have one phone and one card and have all your cards available, making sure that you redeem the rebates, bonuses, and [so on] that you are entitled to.”

And, as geolocation can make offers and advertisements available just as the consumer is near a merchant, she will be able to save money, he says.

Optimistic Outlook

Mullen’s and Sandeløv’s optimistic outlook for their universal card programs is likely realistic. “Mobile is going to come, but it’s not coming as quickly as anticipated,” says Peterson. “We’re all carrying two to three cards.”

The challenge, and what the Dynamics Wallet Card is bypassing, is persuading consumers to opt in, and pay for the service, Peterson says. With banks sending a Wallet Card, consumers may be more likely to use its capabilities. “If I’m a consumer and I get one of these cards, I quickly understand it can be a credit or debit or loyalty card,” he says.

Now time will tell if he’s right, and the new entries can avoid the fate of the older ones.