Heads Up, Issuers: Time to Address Lost Opportunities

Categories: Bank Issuers,Banks,blog,Commerce,EMV-enabled,Fraud

Posted on March 11, 2018 by

A technology startup called Switch Inc. believes it has a solution to the headaches faced by cardholders and merchants when issuers issue replacement credit and debit cards. This could well be the case, but news of the solution’s debut also sheds light on another hot issue pertaining to lost issuer opportunities.

Let’s step back a moment. The new card numbers, expiration dates, and/or three or four-digit card verification values (CVVs) that appear on replacement cards offer a benefit in that they can help to keep fraud at bay when cards are lost or stolen. But there is a flip side. For one thing, a change in customers’ card number can catch merchants unaware—especially recurring billers and online services attempting to process transactions using cards on file. Should cardholders forget to update his or her information, there is, of course, the inability to successfully complete their transaction.

Then, there is the migration to chip cards to support compliance with the EMV payment technology standard. Issuers have, for the most part, attempted to keep card numbers the same when sending cardholders chip cards to replace their old magnetic stripe ones. However, moves of this type often come with an upgrade to a premium card and a change of card number, leading to failed transactions when merchants have not been informed about the change and attempt to process recurring payments. Complicating matters even more, chip card issuance is widespread, with Visa recently releasing data indicating that two-thirds of Visa cards now in the market are, indeed, chip cards.

As for Switch’s solution to these problems, it’s called CardSavr, and it’s an API that kicks in when cardholders receive and are activating a new card. It asks cardholders whether they want to add the new card on the websites they normally visit, allowing merchants to keep updated cards on file. Officials from Switch have publicly noted that CardSavr currently supports 12,000 e-commerce sites, but to date has disclosed neither the number of issuers that have jumped on the CardSavr bandwagon nor the price issuers pay to integrate the API.

Now, our take on the issue all of this brings to the forefront: The concept of CardSavr is an interesting one. The API is a solution to a real problem, and that problem is not only the headaches mentioned above, but also issuers’ inability to track cardholders from the time they receive their cards until they die—in other words, throughout the customer lifecycle. Card brands need to fix that inability. Why? Because if consumers close one account and open another and cannot be tracked as a result, issuers miss out on opportunities to truly cross-sell to these customers and to see a potential fraud indicator.

Obviously, legacy systems cannot properly accommodate card number changes, but the card brands do acknowledge that the ability to use a compromised or expired card and link it to a new card account is important to consumer satisfaction. Issuers need to look for ways to circumvent the “new card problem”—whether through an API or otherwise. Neglecting to effect change is a true impediment to growth.

Author: E&S Consulting