Why Cards Still?

Day zero of Sparkle, we knew one thing. We were going to be a fully digital, online platform. No paper, no public-facing property, and importantly, no cards. We were a mobile-first digital finance platform. We were going to leverage digital to build a platform around our customers to provide them with a simple, transparent experience that would be difficult for traditional platforms to do.

So, why no more cards? To the Sparkle team, they felt clumsy and unnecessary; multiple accounts = multiple cards, which is essentially just more life admin and more to carry around. They are also a costly system for transaction processors, merchants don’t like them and they are also open to higher instances of fraud through physical transactions — an unnecessary additional overhead borne by users and merchants.

Yet, we find ourselves about to launch a physical Sparkle card. Why? Even though we felt the use cases against issuing out cards were pretty strong, we are also fully aware that changing users’ habits is actually pretty hard — and requires gradual change. As we work to transition people away from traditional financial services and support, that tend to be in-person and physical, we realised that we cannot make this change too volatile for them. Cards continue to represent a physical manifestation of money; our research shows that those who are testing the waters when it comes to non-cash transactions still want something to touch, to remind them of the physicality of cash. Too much change can feel like risk; and rish is what people don’t want when it comes to handling their money; they demand security as they are trusting you. So we need to take our users on a habitual change process of acceptance.

Virtual cash transactions are the obvious next step for them. But this is a generational change we are working towards though.It won’t happen overnight. Take, for example, the advent of Oyster cards for London’s underground. First rolled out in 2003, it is only really in the last couple of years where mass adoption has been achieved. The contactless card system was a precursor for contactless payments, as the use case and effectiveness of a contactless touch-and-go system was tested out by millions on the Tube every day. Interestingly, in a market such as the UK today, with a mature infrastructure for contactless and digital payments, more than half of payments made in 2019 were made by card and contactless methods, with contactless payments rising 16 per cent to £8.6bn. 17 years since Oyster cards were introduced, the UK is still not entirely contactless; this is what I mean by a generational change. But the likes of Apple Pay and traditional banks’ contactless systems are helping to drive change in the payments sector, not just through innovation, but also acceptance through mass adoption. But change is hard — for the affluent and the poor alike.

COVID-19 has helped the move towards contactless transactions and is responsible for accelerating change, as people seek out ways to come into less contact with physical objects and accept the different options available to them. Covid reinforced the use case for cashless in a very abrupt and violent manner, by demonstrating how convenient payments can actually be — if you apply technology and innovation.

Innovation is central to all habitual and generational change and acceptance. In emerging markets — this is even more critical, using innovative approaches to working with the unique challenges of each market. For example, we see technology such as QR codes being rolled out in payments infrastructure, especially where literacy levels are generally lower, because they go beyond what the incumbents have failed to do, which is to innovate and build products that are better, more appropriate alternatives to what is already out there. Much more of this is needed if we are to scale access to financial systems for millions more people.

The world is in the process of going contactless. Contactless and going cardless is safer and more secure, and therefore more cost effective, and requires fewer logistics, in terms of receiving them [no need for post or having to go and collect them or restock lost or stolen cards]. But whilst the world is headed in this direction, and we are seeing greater adoption and acceptance, we are not there yet. This is why Sparkle decided to row back on our initial decision of being cardless, and work with the market, rather than working against it.

There is a cost to the broader market to transition, and that is the issuing of physical cards, as we spend time educating the market, growing acceptance rates [in terms of acceptance of a virtual world + trust], whilst we also build even more innovation and interoperability into our platform. Our first priority is to inspire mass adoption of digital financial transactions, by developing a community of users who trust our service implicitly, love what we do for them, and will therefore be even more willing to take the leap to going fully digital once they have tried and tested Sparkle. We know that day-to-day usage and interaction with our features and add-ons, which are all digital-first, will be the hand holding they need to go cardless. This is a medium to long term play. So whilst we are adopting physical cards at Sparkle, conversely we are also planning for them to be obsolete in years to come. They are a part of the cash ecosystem’s transition from physical to digital — they are not the end goal.

That’s my transition story — what’s yours?