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Interactive Credit Cards: The Future of Plastic?

 
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January 11, 2013

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You're at the mall buying a new sweater. You pull out your credit card and push a button on the card to choose your reward and pay. A few seconds later, you get a text message with a link that allows you to walk over to a coffee shop and redeem your reward — a free latte. Is this the rewards card of the future?

Interactive credit cards, which allow cardholders to make choices about how to maximize card payments, aren't exactly new, says Dennis Moroney, a research director at the financial services research and advisory firm CEB TowerGroup. However, the technology driving card payment customization continues to evolve.

In 2010, Citi began testing the Citi ThankYou Preferred 2G Card with Request Rewards, a card with a flashing light and two buttons. Customers press one button to use the card as they normally would, and the light flashes blue. Or, they press the other button to use accumulated rewards points at the register and get a statement credit, and the light flashes red. Then, in 2012, MasterCard in Singapore introduced the MasterCard Display Card, which has numbered buttons and a display screen that allow the user to create a one-time password for added security.

In late 2012, the Dynamics ePlate Visa Card, introduced by UMB, debuted. The ePlate card is operated by a tiny battery that lasts for the life of the card (about four years). The card has two buttons that allow cardholders to make choices about how their rewards get applied before making a purchase.

The cardholder can go online or use a mobile app to choose two rewards to earn (a unique experience, for example, or free goods) and then assigns a reward to each of the two buttons on the card. Before making a purchase (while waiting at the register, for example), the customer pushes one of the buttons to count the purchase amount toward that reward.

Cardholders can use the buttons in several different ways, says Jeff Mullen, CEO of Dynamics, the Pittsburgh-based company that created the card. For example, a couple could assign a button to each person, allowing each one to put his or her own purchases toward their own reward.

When it comes to the rewards to assign to the card's buttons, customers can choose from a variety of what the company calls “experiences.” For example, the Skip Barber Racing Experience, named for the retired race car driver, sends the cardholder a racing tip and a photo for every $50 spent. After spending $2,500, the cardholder gets a driving session with an instructor at a racetrack. Other rewards include a Salsa of the Month club from iGourmet.com, which delivers a one-month supply of salsa for every $1,300 spent. Cardholders also can use their rewards to help nonprofit organizations. For example, if you choose The Hunger Site reward, every $112 you spend buys a week of lunches for a child in Africa.

“Instant gratification is the holy grail of rewards,” Mullen says, noting that, with a traditional rewards card, it can take a month or longer to get credit for your reward after you earn it.

However, the downside to a card equipped with buttons and so many choices is that some consumers might see it as too much of a bother. “Is this really something most consumers are going to want to fiddle with?” Moroney says.

But, he adds, “It's a great interim solution. I think it's a fun idea and will stimulate other creative ideas.”

However, cardholders should not expect to be carrying battery-powered cards equipped with buttons too far in the future, he says. Instead, Moroney predicts that the move toward interactivity will happen via mobile phone apps and mobile wallets, some of which already have features that help users keep track of rewards cards and balances.

For example, Moroney says, a text message might pop up to remind you, right before you go to buy a new TV, that “you're only 100 miles away from that trip to Miami you've been wanting,” so you might want to use your United Airlines rewards card.

Most consumers carry their phones with them everywhere, and it will be much simpler to have all of the cards stored virtually in a mobile wallet, he says, than for everyone to have battery-operated credit cards.

“The next evolution will be through the mobile phone,” Moroney says. “That's where this is going.”


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