Differentiating Through Metal Cards in Developed Markets

Across the globe, the pandemic accelerated the development of new products and breakthrough services for physical and digital payment services, especially within emerging markets. But even in more established markets, the competition heated up, now offering consumers more payment choices than ever. As a result, financial institutions are now looking for ways to stand out and differentiate their offerings to existing customers, while attracting new customers.  

Payment Cards Stayed in the Hands of the Consumers

The pandemic had an undeniable influence on consumer payment preferences worldwide, but even with the rise of e-commerce and digital services in established markets, payment cards remained the most used point of sale payment method.

In the U.S., payment cards accounted for 55% of all transactions last year, while payment cards transactions rose to 60% in Canada. Similarly in European countries, card payments accounted for 47% of all transactions last year and the number of payment cards issued increased by 6.5% to 609 million, representing around 1.8 payment cards per European inhabitant. There are 6 payment cards per individual in the U.S., the highest penetration globally, compared to similar mature card markets like Canada (5.5), the UK (3), Germany (3.2), Italy (2.2), and France (1.7).

The latest “Growth of Premium Metal Cards” report by Edgar, Dunn & Company showed a surprising 7X preference toward physical payment cards over digital wallets primarily in North America and Europe when transacting in person:

• U.S. (66% vs. 10%)
• France (76% vs. 7%)
• Canada (73% vs. 8%)
• Poland (74% vs. 10%)
• Italy (67% vs. 10%)
• UK (65% vs. 11%)

Increasing Competition for Customers

Competition from fintechs has heated up and traditional financial institutions in established markets in North America and Europe look for ways to create stronger connections with customers. Financial institutions and fintechs are competing for young and wealthy consumers, who value quality and tend to be more selective and carry fewer and better products.

The research showed that financial institutions can better target sought-after young and wealthy customers by offering a premium metal payment card solution, which is seen as a sign of status and luxury around the world. According to the survey, metal cards were the card of choice (80%) for affluent consumers worldwide, if the benefits and rewards were equal to plastic options. Most wealthy customers worldwide (62%) also would be more willing to switch their bank for one offering a metal card. The preference for metal cards spiked to 77% among millennials (ages 25-34) across all the regions and customer awareness has grown 7%, providing a tremendous opportunity.

Overall, younger (25-45) and wealthier respondents in North America and Europe showed higher awareness of the offering of metal cards from their banks and are more likely to make decisions based on this premium, luxury offering. As these mature markets continue to see a rise in new generations making purchasing decisions, there is an increased push for financial institutions to differentiate themselves, and metal cards are a great way to do so.

Here are the highlights from the survey on established markets:

North America:

• United States: Nearly half (45%) of US consumers were aware of metal cards due to the abundance of metal card programs available. This creates a growing demand of 64% of respondents who would choose a metal card over a plastic card if all rewards and benefits were equal, an 8% increase from the previous study three years ago. A quarter of respondents would change banks for one offering a metal card and about half of the respondents (47%) would feel more positive about their banks because they offer metal cards.
• Canada: Payment cards were the predominant payment method used by Canadian consumers both in-store and online. But because of its low population density, the awareness of metal cards was only 21%, but up 4% from the previous study. Half of Canadian respondents (51%) preferred a metal card over plastic and 33% of Canadians felt more positive about their banks for offering metal cards.

Europe:

• UK: Despite low awareness (34%) of metal cards, preference for metal cards increased 8% to more than half (56%) of UK consumers. This leads to a large growth opportunity in this region.
• France: Metal cards are not currently offered by many large traditional issuers in France, but awareness of metal cards grew 11% from three years ago. The desire for metal cards increased 6% to 61% of French respondents preferring a metal card over plastic.
• Germany: The percentage of respondents that would likely select a metal card slightly increased to over half (52%) with 36% associating metal cards with having an innovative design with exclusivity and luxury.
• Italy: The metal cards market is still under development with Italy being a traditionally cash-driven economy, but there is opportunity for growth. 68% of Italians would choose a metal card over plastic. Currently, metal cards offered in Italy are primarily targeted at high-net-worth individuals, adding a solid value of luxury and exclusivity.
• Poland: One of the key countries in Central and Eastern Europe that has the largest metal card growth potential of any country in Europe. It had the lowest awareness of metal cards at just 26%, which is up 8% from three years ago. Yet, it led all other European countries in its preference for metal cards (73%), as well as seeing banks that offer a metal card positively (63%).

Charging Forward

The competition for consumer attention remains fierce. While banks and financial institutions can pursue various options to stand out in today’s market, many challenger fintechs are generating success with consumers by providing premium offerings such as metal payment cards. Challenger banks and traditional banks can excel above the competition by leaning into the consumer desire for luxury and exclusivity with innovative and new premium offerings.

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