I don’t know whom to quote, but someone said that “payments are the plumbing of commerce.” Like actual plumbing, most people don’t spend a lot of time thinking about payments, but life would be very different without the ability to pay.

Every week I discuss the latest development in credit and debit cards in this newsletter. With recent announcements around the FedNow Real Time Payments service, and fundraising for many payments startups, it seemed like a good time to dig into why cards dominate consumer (and increasingly business) payments, despite the many complaints people have.

Success in payments is about acceptance of a payment method and ubiquity of that acceptance. While credit cards are less than 100-years old, they are, at this point, accepted at virtually every business. Even for businesses that don’t accept cards, there is a simple workaround, such as Melio, Plastiq, or even consumer apps like Venmo or Square Cash that enable users to pay with cards (sometimes with a fee).

Mastercard and Visa have tens of millions of acceptance points worldwide. American Express and Discover (through networks like JCB and UnionPay) are not far behind. The value of people thinking a product is “accepted everywhere” is evident to this day in the negative perception that stores don’t take Discover or American Express, even when most places do.

With the advent of the leap forward in contactless acceptance because of the COVID-19 pandemic, we are at or near the peak of universal card payment acceptance. They are easy to use. They are universally accepted. There are many varieties of products supporting the cards (debit, credit, etc.) and they are supported with protections against fraud, liability, and many other benefits. Plus, there are so many rewards.

Some consumers have a strong preference for either a debit card or a credit card, but they are still using a card. It remains the fastest and lowest-risk method for both consumers and businesses to exchange value. Cards -- for the win.

In my everyday life, I make a variety of payments for my company and for my personal life. More than ever, I am able to pay with cards. I prefer paying by card because it provides a layer of protection on top of my bank account. It provides real-time assurance of the payment being made. It allows me to budget the card payment. It’s easy to track my spending and many cards include spend breakdowns, categorization, and more.

There are certainly detractors who don’t like cards, especially credit cards. Many merchants are frustrated with merchant acceptance fees. Some of these merchants are paying more than they should for their acceptance of card payments and the industry has done itself no favors over the past decades with complex pricing and layers of resellers and independent sales organizations charging markups. These merchants often discuss a preference for check or cash, but I find once a merchant has had a big check bounce or a robbery occur, they shift their perspective.

Cash and checks aren’t free either, which large businesses know. It is expensive to have an armored car pick up your cash and it increases risk of robbery. Checks and ACHs both can have reversal or clearance problems and are harder to process.

This high point for cards may be passing. With the advent of new push payments and real-time bank-to-bank payments, such as the upcoming FedNow system, there will be new, easier ways to pay. While the statistics will tell you that many billions more dollars are transacted with ACH and wires than cards (mostly in business-to-business payments or loan payments), the business of everyday purchasing is done with cards.

While we wait to see if the ways people pay every day changes, we’ll continue to see innovation in the cards space with more new debit and credit cards, basically every week.

No Waiting for More Card Concepts

I struggle with how and whether to cover cards with waitlists. There are many startups out that don’t yet have an issuer or a clear path to an issuer. They may fizzle before ever launching. My companies have been in this situation before. One launched a card and one never did. In the spirit of encouraging innovation, I will continue to share new cards I hear about with public waitlists.

First up this week, Carbon Zero, a card for the environment. We’ve talked about these before with products like wooden debit cards. I am also reminded of these every morning on NPR when I hear an ad for neobank Aspiration, which plants trees when you swipe. I’ve been approached by other teams about a card that has an environmental focus and Commerce Bank issued a card like this a few years back that didn’t survive. (Forgive me, I can’t recall the name.) There is a market here, I think; we’ll need to see if it comes together.

Next up is Sincere, a debit card for people who own pets. I’ve been thinking a lot about a pet owner credit card lately (perhaps because I recently added a new dog to the house). I think the economics will be very challenging with a debit card product, but there is a market here of many tens of millions of pet owners who would love to get discounts and rewards for their pet purchases.

Both products are in waitlist mode and don’t appear to have issuers, but we’ll see what happens in the months to come! Please let me know if you hear of a challenger credit card headed to market.

CardsFTW

Thanks for reading CardsFTW, a weekly newsletter about all things debit and credit. CardsFTW is written and curated by Matthew Goldman, Founder, and CEO at Vertical Finance, a challenger credit card startup. If you’re looking for insights into everyday payments beyond deal blogs, please subscribe for free at cardsftw.substack.com. If you enjoyed this, please share it with a friend! Follow me on Twitter @magoldman.