Death of the card: is it cards for plastic cards?

As technology transforms payments, we ask: will plastic cards be left behind?

For decades the plastic card has been a payment staple. Fuelled by online shopping, contactless payments and government initiative to promote financial inclusion, spending on cards globally grew 4% to $44 trillion in 2023, datos insights found. But as new payment technologies gain ground, we examine whether the cards are stacked against plastic cards.

Cash is out, digital is in

Cash is in long-term decline. Global cash usage now stands at 80% of 2019 levels and continues to decrease at 4% a year, according to McKinsey data.

Higher prices and better card acceptance mean that those in the eurozone are carrying less cash. In 2019, the average European carried €76 in their wallet. By 2023, that figure had shrunk to €59, according to the European Central Bank.

It’s a similar story in the UK. Cash as a percentage of all payments has been in long-term decline. Cash payments fell from 61% in 2007 to 54% in 2012, 34% in 2017, 14% in 2022 and are expected to be 6% in 2033, says UK Finance.

But with cash in decline, how are people paying? The answer: it depends where you start from.

New card form factors

In a card-loving country like the UK, the main winner from the decline in cash usage has been debit cards and contactless cards in general. Debit cards account for half of all payments in the UK. And almost four-in-ten (38%) of all payments made during 2023 were contactless (debit and credit).

Innovation in card-loving countries will likely be around the form factor. Plastic cards will gradually lose ground to mobile devices and wearables. That’s already happening as in 2023, the last year for which figures are available, 34% of Brits were using mobile contactless payments at least once a month, says UK Finance.

Irrespective of the form fator, the funding source remains cards. Apple Pay and Google Pay users load a digital version of their payment card into their mobile phone. Various technologies, including tokenization, allow users to prevent fraud and make payment over the £100 contactless limit.

In card-loving countries, plastic cards will not so much die. Rather, they will regenerate into a new incarnation – into a different body with different mannerisms and behavior.

New ways to connect

But what about countries that don’t love cards as much as the UK, US and Australia? Cashless payments are not always card payments in those countries today – and so it will continue.

People will still use their bank account as a funding source. Innovation will be around providers looking for new ways to connect people to their money.

For example, Swish is a Swedish mobile wallet that links the user’s mobile phone to their bank account. It has 8.6 million users out of a population of 10 million, who made more than 1 billion payments in 2024.

Swish launched three new services in 2024 – self-scan in-store, recurring and contactless payments – to expand the Swish proposition and capture a bigger share of user spending.

Meanwhile in the Netherlands, iDEAL is an online payment method that allows consumers to pay via their bank.

New QR and mobile payment functionality and the tie-up with the European Payments Initiative (EPI) will broaden the appeal and acceptance of iDEAL within Europe.

Cards: good but could be better

Back to cards. The overall proposition is strong. So is the investment made in card technology, rules and interoperability over the last 50 years. Cards are great but they’re not perfect.

Just as there’s no universal way to pay, so there’s no winner-takes-all payment method. One size simply doesn’t fit all payment use cases, channels, purchase values and so on.

The three main problems with cards are costs, cashflow and customer experience.

• Costs

Accepting cards is an expensive business. Card interchange fees are frequently calculated as a percentage of the transaction value, which makes cards less attractive for high-value payments.

Card acceptance also comes with the considerable burden of data security (PCI DSS). Naturally, this has a knock-on cost impact for businesses who accept cards. There’s also the $31 billion-a-year problem of chargebacks, disputed cards payments.

• Cashflow

Time is money when it comes to getting paid. While card payments are authorized in milliseconds, settlement of funds is much slower.

Businesses who accept card payments can wait days to get paid. This clearly isn’t great for cashflow and working capital management.

That’s because card payment systems tend to be built on older-style batch technology, where authorizations are real time, yet settlement relies on correspondent banking which is not real time.

• Customer experience

Contactless payment in-store or in-app can be quick and slick. But sometimes the card CX is neither quick nor slick.

Typing in card details on the tiny keyboard of a mobile device, anyone? Topping up wallets? Logging into online banking and manually completing the payment process step by step?

Nowadays, there are quicker, slicker and safer ways to pay. Often direct from a bank account.

It pays to consider the alternatives

Businesses that accept cards may wish fees were cheaper and settlement faster. Customers may wish they could use cards at more places, more easily and borrow on them more cheaply.

But in the main, cards work well enough. That’s why reports of the death of cards have been greatly exaggerated.

Plastic cards will gradually lose ground to other form factors. And card payment will gradually be eroded by cheaper, faster and more convenient ways to pay and be paid.

That’s especially as newer payment providers, like Inpay, have built alternative networks to SWIFT and an alternative rail to cards.

This makes payment, particularly cross-border payments, as quick, simple and cost-effective as a domestic bank transfer.