Why Plastic Cards are

HERE TO STAY...at least for the foreseeable future

INTRODUCTION

The payments industry had high hopes for a quick adoption of mobilepayment technology, especially after several "game changers" entered thering - Apple & Google, just to name a few. However, what was supposedto be a digital "revolution" has really turned out to be an "evolution".Adoption of digital payment solutions by both merchants and consumersis progressing at a slow rate, which has prolonged the use of plasticcards. With several roadblocks in the way, it looks like plastic cards arehere to stay...at least for a while to come.

INTRODUCTION

A 50+ YEAR INFRASTRUCTURESince the Diners' Club card began to gain popularity in the early 1950's, consumers have had alove affair with their credit cards. Most Americans cannot remember a time without plastic cardsin their wallets. And even with digital technology, some find it hard to give up the "security" thatcomes with a physical card. Besides that, the infrastructure is very costly, which is difficult to castaside.

old habits arehard to break

IT'S A THINGGENERATIONALWhile Millennials were born looking at cell phones, the BabyBoomers were not. And although many baby boomers have takento using cell phones and tablets for communication and socialmedia purposes, many have not explored the world of electronicpayments. Why? Because they feel more comfortable using theplastic cards they have known all of their lives.

25%Baby boomers account for

nearly a quarter of theU.S. population*

*U.S. Census Bureau, April 2014

NOT EVERYONE OWNS ASMART PHONE

*Icon made by Freepik from www.flaticon.com

In order to use electronic cards or digital apps, one must own a smartphone,however, there is still a large part of the U.S. population that does not.Financial constraints are a major reason why more than a quarter of Americansdon't own smart phones...meanwhile, plastic cards remain "free" to consumers.

Only 64% of U.S. adults owna smartphone

Smart phone ownership is highestamong young adults & those withhigh income & education levels.

THE PACE OF TECHNOLOGYis faster than

Image courtesy of Gallup.com

Of those Americans that own a smart phone, only13% of U.S. adults have a digital wallet on their device*

9 out of 10 consumers that don't havea digital wallet are very unlikely orunlikely to start using one in thenext 12 months.

Of those that have a digital wallet, 76%have never used it or used it very little

*Source: Gallup.com, "No One Is Winning the Battle for Digital Wallet Customers" July 2015

adoption rates

PLASTIC IS FASTER AND EASIER TO USE

Reaching for and swiping a plastic card is lesscumbersome than finding the right app or digital walleton your phone, plain and simple. The likelihood of aplastic card failing is slim, but with a cell phone, therecould be a number of problems: dead battery, lost/stolenphone, device malfunction, or a technical glitch. And inthe case of digital failure, a plastic companion card isrequired as backup (just another reason plastic is going tostick around for a while).

75%of consumers that don't use digitalwallets said it is easier to pay withcash or a plastic card*

*Federal Reserve study of 2,900 consumers (2015)

NO CLEAR DIGITAL WINNER Although there are several digital players in the game, none of them are rising to the top tobecome the true "winner." Merchants who want to accept mobile payments cannot commit to allavailable technologies, so until a few rise to the top, consumers will continue to rely on theirplastic cards.

CONSUMERS NEED TO BE EDUCATED

CONSUMERS are confused by the number of choices availableCONSUMERS do not know which retailers accept digital payments -and which of the payment systems they accept

CONSUMERS do not know that older smartphones are not equippedwith NFC (near field communications) technology and cannot be used withsome mobile payment systems

However, they do know that plastic cardsare accepted everywhere

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PEOPLE PREFER PHYSICAL GIFT CARDS People prefer to give their friends and family physical gift cards vs.digital gift cards. Many feel like digital gift cards are like a "cashtransfer" whereas physical gift cards provide the recipient withsomething to open. Also, digital gift cards can be easily forgotten bythe recipient and never used.

In a recent survey of athousand U.S. shoppers, theRetail Gift Card Association

found that 79% actuallypreferred to give a physical

card as a gift, as opposed to adigital card.

PLASTIC CARDS ARE BETTER FOR BRANDING

Out of sight, out of mind. Digitalcards get buried in the deep recessesof one's inbox and before you know it,

they are forgotten.

Physical gift cards, however, are touched,moved and noticed in the wallet. Plus,there is a nice bit of billboard space onthe card to reinforce your brand imageand remind the gift recipient to shop at

your store.

INTRODUCTION

As you can see, there are several reasons why plastic cards remain apopular payment choice. For some it is convenience or habit...for others itis a better sense of security. And for these reasons, the life expectancy ofplastic cards is likely to exceed 10+ years. So, even if it appears thatthere is a great digital revolution happening, plastic cards are still here tostay...at least for the foreseeable future.

IN CONCLUSION

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