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How to improve the payment card activation process

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Banks looking to increase revenues, improve the customer experience, and boost their digital capabilities should take another look at their payment card activation processes

On the face of it, all the data regarding payment cards seems to be moving in the right direction. The total number of debit and credit cards in circulation globally is set to reach 29.3 billion by 2023, up from 22.1 billion in 2018.1 In Europe, expenditure on such cards grew by one-third between 2014 and 2018, reaching €3.9 billion.2 As well as increased adoption, this growth was driven by the rise of contactless and online payments – trends that are expected to continue in light of coronavirus-related changes to consumer behavior and companies’ digital transformation strategies.

The activation rate – how many payment cards are activated as a percentage of the total number issued – is another key industry indicator that’s pointing towards growth in the market. In 2018, 67% of debit cards were activated – an increase of one percentage point from 2017.3 For all types of payment card, global technology company G+D estimates that 20% are not activated.

The net result of these statistics would suggest an increase in banks’ top-line growth: the more cards that are issued and activated, the bigger the increase in customer spending. However, the COVID-19 pandemic has shown that businesses cannot rest on their laurels. Global payments revenue will be roughly 7% lower in 2020, compared with 2019, according to McKinsey.4 While precise data varies by market, there appears to be significant headroom for banks to boost their payment revenues by increasing activation rates.

 

How does the activation process work?

Once a customer opens a new account or applies for a new payment card, they will be issued with the card and a PIN. Typically, card and PIN will both arrive by post, at which point the customer has a number of ways to activate the new card. Depending on the bank, they can call a phone number, visit an ATM or branch, go to a website, or use a mobile app.

While this process sounds simple in theory, the activation rates suggest it can and does go wrong in practice. Customers may change their minds about wanting the card by the time it arrives, the card may get lost in the mail, it may not be obvious to the customer which letter contains the card, or the customer might lose their PIN before they start the activation process.

“Global payments revenue will be roughly 7% lower in 2020, compared with 2019“
2020 McKinsey Global Payments Report

Making the move to digital

Introducing more digital elements to the activation process can help with a number of these issues. Customers get a more flexible, secure, and frictionless experience, while banks can help customers to activate cards more quickly – thereby increasing revenues – and reduce their own costs.

Personalized QR codes printed on the document that contains the card, for example, can reduce the need for call centers. The customer simply scans their unique QR code to activate their card instantly via a dedicated app or website. As well as improving the user experience by removing the need to communicate with interactive voice response technology, this approach can also cut banks’ operating expenditures. 

In-branch activation can also be brought into the digital age by the use of self-service kiosks. Rather than waiting in line to speak to a member of staff, customers can pick up and activate their card from a kiosk for immediate use at a time of their choosing. This merging of physical infrastructure and digital technology also helps banks to embrace the phygital revolution.

Given that the PINs have to be mailed separately from the physical cards, for security reasons, which doubles the chances of them being lost, stolen, or simply mislaid, PINs offer another opportunity to improve activation rates. Digital PINs can be issued via online and mobile banking channels with the added benefit of utilizing existing security technology. As well as ensuring that customers can access their PIN more easily and securely, a digital version also simplifies a bank’s supply chain, cuts costs, and reduces the environmental footprint.

Introducing the Convego® family

G+D has developed a range of solutions to meet the growing need for digital-first payment card activation. Convego® Activate speeds up the issuance process by creating instant activation codes for a more digital and secure customer journey that cuts costs and improves revenues. Convego® Activate ePIN is a faster, simpler, and safer way for customers to begin to use their cards by leveraging banks’ existing channels to deliver digital PINs.

Given that McKinsey’s latest Global Payments Report notes that change in the market is happening four to five times faster than before the pandemic, banks need look at how they can improve their operations at every level. “This [change] puts all actors on the payments landscape under pressure to transform and adapt in order to preserve their positions and results,” McKinsey notes.5

Digitalizing the card activation process is one way that banks can evolve and help to capture as much value as possible from the growth in payment cards and associated consumer expenditure.

  1. Number of credit, debit and prepaid cards in circulation worldwide in 2018, with a forecast for 2023, Statista, 2021

  2. Europeans spend €4 trillion per year on payment cards, RBR, 2020

  3. Top Five Findings from the 2019 Debit Issuer Study, PULSE, 2020

  4. The 2020 McKinsey Global Payments Report, McKinsey, 2020

  5. The 2020 McKinsey Global Payments Report, McKinsey, 2020

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