The Future of Credit Cards

Posted on June 20th, 2022

The credit card industry has been in business for the past 75 years. Today, more than 400 million credit card users operate in the US alone. After having witnessed impressive numbers, the customers of this industry are starting to explore and move into different branches of fintech, resulting in a gradual decline in the popularity of credit cards. 

Alternatives, such as, UPI, virtual accounts, cryptocurrencies, and other e-payment channels are rapidly gaining momentum in the present age. In the past decade, there has been an evident shift in the habits of consumers, where people have gradually transitioned to a more digital setup. This change has led to an upsurge in the adoption of fintech media, resulting in the decline of the popularity of credit cards.

Reasons Behind the Decline of the Credit Card Age

Debt Risks

Not all credit card users are adept in handling their finances. People have had agonizing experiences vis-à-vis credit cards, which have prompted people to form a negative opinion of this industry. Credit cards can be used almost everywhere, making it easy for people to fall into debt. This has been one of the biggest concerns of customers. The negative impact that lands on the creditworthiness of credit card users for late or failed payments, can damage their credit scores, making it an unrewarding experience. 


Extravagant Fees & Interest Rates

The credit card industry has thrived on charging a high fee from its customers. Not only the fees, but the interest rates applied on late payments, or used amounts are extravagant. It is for these reasons that the credit card industry has been known to serve mostly high-end customers, limiting its customer spectrum. 


Fast & Easier Options

With digitalization penetrating the financial industry so rapidly, there are countless options being made available to customers frequently. People have the option to conduct transactions, make international transfers with ease, sitting in the comfort of their homes. The pandemic has played an impartial role as a catalyst for the quick spread of fintech services, increasing its popularity even further.

Competitive Rates and Services in Primary Bank Accounts

With the disruption in the finance industry due to fintech, traditional banks have also had to match pace with the changing environment of fintech. The banking sector has started offering competitive rates and services, making it a much more efficient and reliable industry when compared to the credit card industry. 


The Role of Generation Z

One of the most influential factors in the decline of credit cards and the popularity of other fintech services is the role played by the Generation Z. The credit card industry spread like wildfire among Millennials but fintech has predominated most financial activities with the newer generation. The concurrence of the emergence and existence of both fintech and Generation Z has led to the stupendous growth of fintech and decline of credit cards.


Future of Credit Cards

The onset of fintech started with credit cards substituting cash. This replacement resulted in their usage growth. With e-payment solutions like open banking, QR codes, and e-wallets becoming more and more prominent, the credit card industry is bound to feel slightly neglected. The shift in customer habits and preferences, has already impacted credit cards, where authorities noticed a 9% fall in the total spendable amounts offered by credit card companies in the US alone. Such figures and trends suggest a bleak future for credit cards.

However, according to some reports, credit cards are not losing ground completely, and in fact, they are here to stay. The reach and benefits of the credit card industry is incomparable. Let’s find out the what the future entails for this industry.


Artificial Intelligence & Cryptocurrencies

Credit cards companies have already realized the importance of incorporating artificial intelligence practices in this industry. Collating customer data and information to study trends and habits can provide a crucial leverage to credit card companies, where the companies can then offer personalized suggestions to their customers by offering discounts on items that the customer would need in the near future. 

With the evolution of payment systems, the current restrictions imposed by governments and regulatory bodies will eventually subside, giving way to a more prevalent set up of credit cards merging with cryptocurrency technologies. This collaboration would enable quick and reliable cross-border transfers between businesses, customers and even peer-to-peer.


Digital or Virtual Cards

With more and more people jumping on to the bandwagon of going cashless, the use of physical cards has also declined. This shift has resulted in the emergence of digital and virtual cards. These cards use similar technologies as credit cards, where they have a 16-digit number along with an expiration date and CVV, but they exist only virtually or digitally. This technology is like an amalgamation of e-wallets and credit cards, where the system exists online, but the presence is in the form of a card. These virtual cards are gaining traction and are said to be the future of credit cards.


Wider Acceptance

Even though the popularity of fintech services has grown manifold, the reach of credit cards still remains unmatched. With such a wide acceptance, it is almost improbable that the credit card industry would die out.


Gamification

The rewarding system offered by credit card companies faces very mild competition from fintech services. This original gamification has been an endearing factor for most credit card users. Because of the reliability of the entire system, the credit card companies are able to enjoy a different niche.


Parting Thoughts

As the concern surrounding the future of credit cards grows, the unmarked niche of credit cards brings hope. There is no doubt that the entire spectrum of fintech has disrupted the way our financial industry functions. But, with newer technologies making their way into the cosmos, the credit card industry is also incorporating rapid changes to challenge other alternatives. 

By using artificial intelligence, the credit card industry can extend an impartial focus on its customers by reading their trends and behaviors to suggest more personalized rewards. Such practices and integrations would only help enhance the reach of credit cards, uplifting their popularity immensely.  

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