Google Pay, PayPal Checkout and Apple Pay let you pick a default card to store on file. As people increasingly pay on mobile phones, they’re less likely to stop and think about which card has the most rewards. Some say they’ll go with what’s easiest.
Banks are battling to get consumers using their credit cards for holiday shopping. But faster mobile payment options are making that more difficult.
As consumers shop on their phones, analysts say they may end up using whichever card is automatically stored instead instead of considering rewards.
Gerard du Toit, banking consultant at Bain, said smartphone shopping “changes the equation” for credit card habits — it takes something “dramatically better” to unseat people from their default payment method.
“When you’re carrying your wallet, you make conscience decisions about which card to use,” he said. “With mobile you have a registered card on file, and you’re going to stick with that card in perpetuity unless something happens to jolt you out of using that card.”
To get people on board, banks have historically offered rewards and cash-back, which can be a short-term loss leader. J.P. Morgan’s popular Chase Sapphire Card resulted in a $330 million charge last year after credit-card customers redeemed points faster than anticipated. Capital One, American Express, and Citi also compete on attractive cash-back and rewards programs.
Holidays are typically a key time for banks to sign people up for these offers. This year, 23% of consumers say they planned to open a new credit card during the holidays, according to a recent Experian survey. Retail card balances are now up to $90 billion -a 7% increase from five years ago.
While smaller every-day purchases like groceries or gas drive interchange revenue as someone swipes a card, bigger-ticket year-end gifts can bring larger recurring interest revenue.
“This is the time of year people go into debt,” said Ben Sabloff, AQN Strategies founder and CEO. “For the banks, being in your wallet this time of year is helpful for driving interest.”
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