Financial institutions have been enjoying strong growth over recent years, thanks, in some part, to the move to a cashless society. But Ryan Rackley at Cornerstone Advisors thinks that financial institutions will have to respond to four trends in order to remain successful:
- Comeback of the credit card market: Since 2011, the credit card industry has seen year-over-year growth in the number of cards in circulation, and that number now stands at an impressive 400 million. What’s more, the annual return on assets is holding steady at 4.3 percent, net credit losses stand at an all-time low of 3.9 percent and credit card purchase volume is expected to grow by 10.5 percent annually.
- Slowing pace of debit growth: According to a recent Cornerstone Advisors Payments survey of banks and credit unions, the average annual growth rate of debit transactions stands at 5.89 percent. But with the rise of PINless transactions in retail stores, fewer consumers will feel the need to use their debit cards for such purchases, adn though debit card use will continue to grow, that growth might not be sufficient to outweigh the continued compression of interchange.
- The deployment of EMV: The growth of EMV (which stands for Europay, MasterCard and Visa and refers to the chips in credit cards) in the United States is continuing at a rapid rate, with Visa estimating that at the end of 2015 70 percent of credit cards will be EMV, 41 percent of debit cards will be EMV and 47 percent of terminals will be EMV-activated. Financial institutions planning on deploying EMV later than October 2016 are going to find themselves behind the curve regarding this massively important trend.
- Mobile payment apps: Apple Pay was introduced a year ago, and though Android and Samsung have joined the mobile payment arena, cardholders have been reluctant to adopt the technology. At this point, Apply Pay transactions account for a mere 0.74 percent of all debit transactions where Apple Pay is available. Only increased consumer demand can drive that number upward, and mobile payment apps have not yet matured as a product offering.