As concerns about a global recession continue into 2023, increased inflation and higher interest rates are hitting consumers hard and greatly impacting the landscape of digital payments. Card issuers, in particular, are expected to respond to these tougher economic conditions, adapting their card programs to appeal to consumers amidst increased competition and encroaching regulatory scrutiny. As businesses seek to develop their own card issuing services, it’s helpful to keep pace with some of the upcoming card issuing trends in 2023.

Card issuing trends in 2023

Card issuers will adapt to the anticipated downturn in economic growth by hiking credit card interest rates and adhering to more stringent credit requirements. For consumers, this means that card issuers will adopt more conservative lending practices, such as higher credit scores to qualify for a credit card and limited availability of balance transfer offers.

As observers expect interest rate hikes to continue in 2023, cardholders burdened with higher credit card debt will actively look for lower-interest or interest-free options. These options include the skyrocketing popularity of interest-free options such as buy now, pay later (BNPL), a financing option that allows consumers to purchase goods or services and pay for them later, usually in interest-free installments over time. To rival the growing number of BNPL providers, card issuing providers must be able to offer built-in BNPL features with their cards— a competitive option for consumers who are considering third-party BNPL companies like Affirm and Klarna instead. Further, the opportunity to link BNPL programs to card issuers will appeal to consumers who want to earn rewards, benefit from purchase protection, and access interest-free borrowing.

These trends are not only responding to the future of digital payments amidst the expected economic downturn. Card issuers are aware of consumers’ needs and spending habits and are appealing to them in inventive, new ways.

Stand out in the card (issuing) crowd

In 2023, issuers must adapt and update their rewards programs and security features to appeal to a new or existing customer base. These features include:

  1. Card security: As data breaches and cyber threats become increasingly common, card issuers are likely to focus on improving the security features of their cards. Enhanced security measures could involve incorporating new technologies such as biometrics, tokens, or encryption to reduce the risk of fraud. Biometric identification also makes payments safer, faster and easier.
  2. Contactless payments: In the wake of the global pandemic, consumers overwhelmingly preferred contactless payments as the safer payment option. However, as digital wallets increase in usage, contactless payments are likely to be the majority option moving into 2023. Card issuers will look to meet this demand by offering contactless-enabled cards, allowing consumers to make convenient payments simply by tapping their card on a terminal.
  3. Updated rewards programs: card issuers are tweaking their offerings to meet the shopping habits of their cardholders, especially as they look to save on everyday expenses. Savvy cardholders can get money back in their pocket by utilizing their rewards for travel, lifestyle perks and cashback.
  4. Changing consumer taste: card issuers who offer greater flexibility and agility around reward offerings and customer service will retain customer loyalty and repeat usage. Better offerings could include more personalized products and services or using detailed datasets to adapt card programs to customer needs better.
  5. Digital currency options: as digital currencies like Bitcoin and Ethereum are becoming mainstream, card issuers may look to incorporate these currencies into their offerings or develop their own.

In addition to customer needs and preferences, card issuers should also understand how regulatory scrutiny from government agencies may impact their consumer base. In the US, the Consumer Financial Protection Bureau (CFPB) may require issuers to securely share consumer data with other providers at customers’ request—helping consumers to change to other issuers with better service or terms.

Card issuers that stay on top of these developments and quickly adapt to new technologies and consumer preferences are best positioned for long-term success. Star’s financial technology services consulting is well-acquainted with the complexities of navigating the payments ecosystem—their cross-industry team of strategists, designers and engineers harness user-centric technology solutions to help you launch the best card issuance options for your institution.