By Ronnie Hart, President of Nitecrest
Whilst physical production is most definitely not dead, I will admit that things are changing in the world of card manufacturing. If we want to continue to grow and prosper then we need to adapt to the needs of the current market, whilst also predicting what the future will look like.
There was already a marked trend towards exploring eco-friendly, recyclable solutions. And yes, it took some time, but we’ve witnessed a huge changeover from plastic to paperboard this year. Now that it’s a little more mainstream and can in some cases be more cost-effective to produce paperboards, hundreds of retailers will likely convert their gift card solution to follow this sustainable approach.
The transition to eco-friendlier practises
Thinking about how we can support the fight against environmental issues, it’s been widely recognised that manufacturers should become FSC certified. This ensures the regeneration of woodland and forestry and makes sure that materials are supplied by companies and papermills that are concerned with sustainability.
It remains challenging for every type of card to be printed on paperboard. The material is currently only really suitable for lower-use cards that do not have a requirement for long-lasting durability.
Multi-use cards may take longer to change over, given the complexity of the way that they work, but there’s an industry vision to meet this challenge. We’ll need to make sure that our facilities can continually adapt to the concerns of buyers and retailers.
Going into next year there are going to be fewer pieces of plastic in certain sectors of the card industry (in comparison to recent years). It’s not just the cards themselves. It’s the way in which they are wrapped and distributed. We (collectively) collate plastic cards into packs of 10 or 20, wrapped in a further layer of plastic. There is now a drive to eradicate this practice and use biodegradable wrapping and a large investment into transforming how products are boxed up for transportation.
We’ve also seen growing demand for Chip and PIN multi-use cards. These plastic cards are reloadable and valid for three years. This trend stems from businesses wanting to accommodate higher load values and ultimately be more sustainable and more agile in their reward and incentive mechanisms because reloading is done digitally onto the card and the same card can be used over and over again. TagNitecrest came to market with these more complex cards around 18 months ago, and it has been another growth area for the business.
Whilst Chip and PIN cards are consumed by mainly B2B audiences, there is some evidence of these now being used for gifting purposes for B2C, It’s a slower adoption, but a good option for those who want to give gift cards with a higher load value.
The decaying future of loyalty cards
Gift cards may have heavily shifted towards paperboard, but loyalty cards have largely remained plastic. However, rather than making a mass change over to paperboard in the years to come, I see the future of physical loyalty cards declining.
Easily made digital with QR codes and bar codes scanned at POS, loyalty card schemes are naturally digitalising faster than other products, which has been undoubtedly accelerated by the effects of COVID-19 and the development of smartphones. Back in the day, you would pick up a physical card from the side of the till – there is less and less opportunity to do this now. Many programmes ask you to apply online and then consciously opt into ordering a physical card. And then even when you get said card, you’re encouraged to add it to your digital wallet. Digitalisation is the lower cost and more sustainable way to take this sector forward.
A growing trend towards premium substrates
There is a third solution in the form of metal cards. Perhaps surprisingly, they’ve become a big market. They’re more expensive to produce but have a much more premium look and feel.
Too extravagant for gift and loyalty cards, metal cards are generally used in the financial sector, with banks making back the high production costs by charging for extra services.
Within premium or private banking, it’s become a way to show prestige. A subscription-style account with linked services such as airport lounges, car parking, and insurances provides higher value benefits that customers can justify the payment for. The fact they get a nice card with it heightens the experience. We see this market continuing to grow.
The move to a digital world
TagNitecrest focus as well on the digitalisation itself, many of our customers are utilising app technologies to complement the physical cards that we produce by having the facility to add them to digital wallets.
There is a trend for us to get more involved in the digital side. The wider group vision is to find areas of technology that we can offer to our clients as the complete online and offline package. We’re already transforming some areas of the business, with a big IT infrastructure now in place. When we set up in new regions, we now ensure our capabilities are parallel with the digital advances of that function.
We see this investment as pivotal to the business. It means we provide extra value as a manufacturer if we are able to offer both physical and digital solutions.
The next generation of card security
One area of huge investment for our wider group is the opportunity in biometric products. With calls for payments to become more secure, there is an elevated need to prove individual identities. This takes us beyond the realms of Chip and PIN and mag tape strips. The only truly unique identifier is to use human fingerprints.
Already, biometric technology has a big part to play in providing secure access to buildings. And many personal devices already utilise fingerprint technology and even facial recognition. But your phone can still be used by others (with or without permission) via the use of passcodes.
The invention of the contactless payment card certainly aids everyday life but does mean that anyone could potentially spend 100’s of pounds if a card is lost or stolen. When it comes to securing payments, biometrics will be the best way to guarantee it is you.
Companies and banks are looking for an added layer of security given that many forms of fraud and theft often has to be covered by them. And whilst the digitalisation of so many other things will eradicate the physical, banking cards are still required by the mass market as an alternative to digital wallets – used when phones are out of battery/faulty, lost and stolen or contactless technology fails at POS. They are the go-to as a backup and for many remain the primary payment tool.
And it’s not just banks who want to feel better secured. Research shows that over 60% of consumers would choose a fingerprint product. Because fears of lost cards and hacked devices are no longer valid when it’s your individual fingerprint alone that controls your account.
People have been talking about biometric cards for some time now and our board is unanimous that this is the future of the payment card market. The technology has been developed and there are live trials out there. It’s costly, but there’s a question over whether banks would make this a paid service. Younger generations are much more inclined to sign up to subscription-based services, and even non-native generations are adapting.
2023 will see schemes moving over to biometric cards. Up to now, there have been small batch runs, supplied on a card-by-card basis. It’s a slow manufacturing process and the industry is only just starting to industrialise towards this technology.
The machinery to produce these types of cards in large quantities has only been available on the market in the past six months. Tag group has the first machines released in 2022.
VISA and Mastercard are beginning to certify the products and manufacturers. We’re proud to be one of the very first businesses to have been certified. Following successful pilots, we’re beginning production for a select number of our clients. It’s a premium product that offers so many benefits to the consumer and also the issuing banks. It’s going to be the next big thing in secure cards.
Conclusion
My belief is that plastic banking cards will stick around for a long time. If nothing else, they will continue to work as a backup device that will be difficult to remove from the market in a short-term period.
Gift cards remain relevant for presentation-style gifting and rewarding. And whilst they may slowly decline in popularity long-term, physical gift cards will adapt thanks to the move over to more sustainable substrates. However, as more retailers accept digital codes/scans alongside the physical version, the decline may become relative to how quickly humans opt to only use their digital wallet.
Physical loyalty cards could fade away more quickly. The ease of converting a loyalty programme to a digital experience will accelerate this change over the coming years but we will adapt and continue to build our digital strategy to complement this change.
Biometric capabilities will come to the fore. There won’t be mass rollout for some time yet – small initial runs, with opt-in and likely an additional payment. I can see that challenger banks may adapt to this new technology more quickly as an incentive to compete with the more traditional banks. Incorporating biometrics to protect new and growing currencies will become vital.
So, to loop back to my opening statement, physical production is not dead. But it IS a rapidly changing landscape that propels manufacturers to keep a close eye on the trends that are starting to form. Our digital capabilities will complement our physical services and our expertise will develop to support our industry to stay relevant for many years to come.
To find out more about Nitecrest, Tag group and the wider AustriaCard Holdings group, please visit www.austriacard.com.
