Tangible bank cards are still among the most popular consumer financial products on the market, used for online and offline purchases, and offering incentives ranging from cash back to interest-free borrowing.
However, the advent of fintech solutions like crypto debit cards, digital wallets, and virtual debit cards is shifting the global payment paradigm.
Credit Cards - The Evolution
Credit cards first launched in 1958, with BankAmericard in the U.S. and it revolutionized the financial world. It included revolving credit, which is a line of credit that can be drawn upon and then repaid regularly: standard in today’s world, but innovative in the 1950s.
BankAmericard would go on to become Visa in 1976 and the company is responsible for issuing more than half of all credit cards in the U.S.
American Express, Mastercard, Discover, and some other big players followed suit, constantly expanding their palette of services and industries they’re used in.
Now we can see people paying with their cards in brick-and-mortar stores and online platforms alike. Users can book their flights using credit cards, but at e-commerce stores, and carry out real-time online money transfers. What’s more, credit cards have also become a popular means of payment on gaming and iGaming websites. Hence, (i)Gamers buy their online games or fund their Visa casino accounts using this or any other accepted card payment method.
These options provide convenience and common, traditional compliance. Still, fintech innovations are bringing some different benefits to the table.
What Is Fintech?
Fintech, or financial technology, is the use of modern and innovative technology within the financial sector. It has included technologies including online wallets, like PayPal, and, more recently, incorporates cryptocurrencies like Bitcoin and blockchain financial solutions.
More recently, Artificial Intelligence or AI has also become an integral part of some fintech solutions. While it is sometimes billed as being a competitor to traditional banking, including credit cards, the truth is that many traditional banking companies integrate elements of fintech into their own products and services.
Mobile Banking
Mobile banking was one of the first recent fintech innovations, enabling people to manage their bank accounts and credit cards online. As a result of the rise of mobile banking, many high street bank branches have closed their doors, as the majority of daily activities can be conducted on mobile phones or home computers.
Contactless Payments
The last few years have seen a considerable increase in the use of contactless payments. They are quick and convenient, and thanks to mobile wallets on cell phones and even wearable devices, they negate the need to carry credit and bank cards. Limits have increased and while there has been some return to cash payments recently, contactless payments are standard in most stores and other venues.
Digital Cards
With the advent and increased popularity of contactless payments has come the introduction of digital or virtual cards. Whereas contactless payments are associated with a physical card, virtual cards have no physical equivalent. They work in the same way, and are managed in the same way, but account holders can set up new card details with every payment and can make secure online and in-person payments.
Alternative Funding
Today, the term fintech is commonly used to apply to Bitcoin and cryptocurrencies. These digital currencies do not have any physical equivalent and are, essentially, entries on a digital ledger called blockchain. Payments are virtually anonymous and secure, and they can be sent across the world in a matter of seconds and typically for a few cents per transaction.
Faster Transactions
But it isn’t just cryptocurrencies that are embracing blockchain. Its speed, security, and reduced fees make it an appealing technology for traditional financial companies too. And banks like Goldman Sachs and JP Morgan have started to use blockchain technology for a variety of purposes including foreign exchange transfers and cross-border payments. Users don’t even know that their payments are being dealt with on blockchain, except that fees might be lower and transaction times quicker.
Cheaper Transactions
Blockchain payments do not involve financial institutions as they are decentralized. This greatly reduces the transaction fees. This benefits consumers who use blockchain payment systems because it means they can send virtually any amount of money anywhere around the world for minimal fees. It has also seen financial companies employ the technology to help reduce their own costs, although it is unclear whether these savings have been directly passed on to customers yet.
Fintech Cards
Visa, Mastercard, and other card issuers have embraced some elements of fintech themselves. Crypto Visa cards are available that enable users to connect their cards directly to their cryptocurrency wallets. When they use their card, the crypto is directly converted to fiat currency and then used to make payments. This enables crypto holders to spend their holdings as they would normal currency, without retailers and merchants ever having to deal with the volatility of Bitcoin and other cryptos.
How Are Credit Cards Faring?
Fintech solutions have been embraced by credit card companies and some banking institutions. And, while Bitcoin was once dubbed a future replacement for traditional currencies, it remains somewhat obscure and has become more of an investment than a true currency.
As such, credit cards have benefited from fintech solutions by enjoying lower costs and quicker transactions while offering their customers improved experiences and greater functionality. For now, at least, credit cards are not really suffering at the hands of cryptocurrency, with Visa and Mastercard still dominating the marketplace, although that may change in the future, if any crypto becomes more mainstream.
Conclusion
Fintech, or financial technology, is any technology that is used to advance or improve the financial market. It is commonly used to refer to innovations like blockchain and cryptocurrency, but contactless payments, online banking, and virtual credit cards all represent forms of fintech implementation, too. And credit card companies have not only benefited from their introduction but have been the driving forces behind some of those innovations.
Related Content
Comments