The Future of the Credit Card Industry in Canada

by John Stevenson on October 18, 2010

The credit and debit card industry in Canada is going through a hard and testing period. The last couple of years witnessed the industry’s record net losses which were instigated by an ever rising debt and inordinate number of customer bankruptcies. At the same time, the government has increased its regulation over the sector. Companies are faced with serious and difficult questions if they want to stop the rot and return back to their lucrative ways.

In response to emerging and existing market forces, credit card companies are presently considering a variety of options, from redefining their operating models and businesses to exiting altogether, says Pat Daley, Leader of Deloitte Canada’s payments practice. According to an article published on the Deloitte website, new payment patterns will probably emerge from the crucible of our times.  Here are some of the following:

Credit cards will begin to merge with bank accounts

In an attempt to attract thriftier customers, credit card issuers are likely to combine credit with other banking services. In this way, new prepayment or deposit opportunities could be introduced, which would allow customers to receive better credit conditions, e.g. lower interest rates or higher credit limits.   

Social networks and PDAs will be increasingly used for payment transactions

Credit card companies will broaden the possibilities for customers to make payments from social networking sites or via personal digital assistants. Places like Facebook, after the appropriate refashioning, are likely to supersede local payment systems like Interac.

Payments will be made from mobile phones

In places like Japan and Europe, mobile devices are already gaining on popularity over the standard credit cards when it comes to person-to-person transfers and m-commerce. As it is proving a very convenient practice for customers, the payment via mobile phones is likely to enjoy wider acceptance in Canada as well. 

Credit card companies will enjoy greater cooperation with chain stores and other retailers

The majority of Canadians pick a credit card because of the rewards program it offers. These come in the form of rewards points that can be redeemed for train travel, flights, hotel bookings, merchandise, gift cards and certificates, and much more. As a result, credit card issuers will surely strengthen their partnership with retailers in order to provide better and more specifically oriented bonus programs.

Credit card protection features will gain in number

The number of credit card frauds has drastically increased during the recent years. Companies tried to counter this problem by introducing credit cards with chips and requisite PIN code authentication. New features, building on the chip-based system, will be developed and implemented in the near future to protect card holders better.

Consumer education programs will be established

In an attempt to enhance consumer confidence and loyalty as well as prevent debt defaults and bankruptcies, credit card issuers will establish educational programs on the proper payment management for their customers. The Bank of America, for example, has launched a special program, aiming to educate consumers about ATM and credit card fees. The tools employed in this program combine technological innovations with reliable sources that provide access and control over one’s account information. ‘We’re encouraging customers to take control through a variety of industry-leading tools and resources — all of which are free to them,” says Bank of America’s President, Global Consumer & Small Business Banking Liam McGee.

Players in the credit card industry will change

Because of the present difficulties that the industry is facing, some credit card issuers will choose to sign off, while others will have to remodel their current product lines to stay adrift. New companies, such as e-wallet providers and large retailers, will probably enter and/ or augment their involvement in the sector.

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