Are Credit Cards Evolving Toward All-Purpose Financial Services Accounts

By Ashish Sherlekar . August 30, 2023 . Blogs

For decades, credit cards have represented a territory of financial empowerment that has helped people transform their spending into rewarding experiences with the luxury of holding onto their liquid money till the billing dates. 

There are flipsides as well because credit cards are also widely considered a debt trap for consumers with poor financial discipline. For example, the second quarter of 2023 witnessed the US credit card indebtedness breach the USD 1 trillion mark for the first time. 

Surely, the debates on pros and cons are not settling anytime soon, but the credit card industry is witnessing other recent transformative changes.


The Catalysts for Change

Today, credit cards are evolving into all-purpose financial services accounts that offer a new playground for issuers and customers alike. The traditional concept of offering consumers just a credit line is not really helping banks and credit card companies pull off impressive transaction figures. This has led to the diversification of business models that revolve around new digital experiences consumers increasingly chase in their day-to-day lives.

Smartphones have become a more prominent carry-on asset for customers than their physical wallet or card pouch. A new era of fintech companies that have cashed in on financial empowerment via smartphone apps is slowly eating into the share of lenders in the credit card space. They leverage schemes like Buy Now Pay Later, Zero Interest EMI, etc., in partnership with merchants to bring exciting experiences for customers. 

Credit card issuers and banks are refusing to let their glory be taken over so soon as they have hopped into transformative initiatives to compete with new-gen players.


Treading New Paths

Let us explore the top four ways in which credit cards are evolving from being a line of credit into a powerful all-purpose financial instrument today:

Comparison Advisory

Today, almost all credit card issuers offer a wide range of calculators and comparison tools on their website. Potential card applicants can use them to find out the exact card they need. Some providers go as far as giving comparisons with not just their range of cards but also competing brands in the same categories. 

Side-by-side comparisons don’t just include a listing of features but offer a comprehensive 360-degree view on things like reward point redemption schemes (like points to cash across different partner brands), privileges across partner businesses, eligibility criteria, markup fees on foreign transactions, etc.

Expanding the Reward Ecosystem

One of the major attractions for credit cards, in addition to borrowing, is the redemption of reward points. For long, credit cards have been associated with popular consumer spending categories like travel, fuel, hotels, and dining while striking loyalty point redemption partnerships. 

But today, they are expanding the horizon of partners to include more categories where customers can trade in their points for purchases. E-commerce vouchers, utility payments, discounted trading accounts, or even direct cashback rewards are some major avenues gaining popularity today among credit card customers. 

Credit card issuers are onboarding new partners, especially in the digital space where customers can securely transact with points from the comfort of their smartphones.

Related Reading: Future of Credit Card Rewards

App-Based Ecosystem

Fintech companies have plowed the field, paving the way for an app-centric experience for consumer finances. Credit cards are also heading in the same direction as several top card issuers now do not require their customers to carry physical cards with them. Instead, they can securely store their credit card on their smartphone and leverage its benefits via a connected app. 

Some have gone ahead and even launched dedicated tap and pay options via smartwatches. In countries like India, the renowned peer-to-peer real-time payment mechanism UPI is now allowing consumers to make payments directly from credit cards presently affiliated with their in-house RUPAY card processing vendor. 

The app-based experience allows banks and card providers to seamlessly explore new opportunities and launch credit-card-linked programs and products effortlessly into the market.

Self-Service Options

If you look at all the above trends that credit cards have diversified into, the common theme underlying them is the way that consumers are empowered to avail services on their own. Be it reward redemption to technical support, bill payments, split payments, or even converting outstanding credit into an actual personal loan with zero paperwork, credit card providers are going above and beyond to provide consumers with hassle-free self-service experiences. 

The best part about this is that all these privileges can be availed in just a matter of seconds with a few clicks on a smartphone app.


The Right Partnership Can Make a Difference

Credit cards are undergoing significant changes in their operational workflows. The major change is the shift to self-service, app-based experiences that take center stage today when compared to the POS swipe experience that dominated the past.  However, exploring this and several new-age financial services options takes work. It requires credit card providers to have access to resilient digital infrastructures that support their ambitious diversification plans. This is where a technology partner like Verinite can make a major difference. Get in touch with us to know more.

Ashish Sherlekar

Ashish is a Principal Consultant at Verinite. He is Certified Scrum Master and SAFe Agilist with a demonstrated history of providing service in Retail and Commercial banking domain at various geographical locations. He is passionate about Music and loves singing. He believes in “You must be the change you wish to see in the world.

Want to get in touch with us?

Got Questions? We got you covered just contact us for further assistance