A new study from Juniper Research has found that the number of credit cards issued via digital card issuance platforms will exceed 321 million globally by 2027, from 120 million in 2023.

This growth of almost 170% reflects the use of new advanced digital capabilities, such as digital loyalty schemes and instant issuance, as card issuers aim to combat competition, including buy now pay later.

Digital card issuance platforms allow card issuers to create cards using an API-driven approach; enabling cards to be delivered instantly to digital wallets, with the option for a physical card; boosting flexibility significantly.

Digital Issuance Critical to Addressing $9.7 Trillion Opportunity

The new report, Credit Cards Strategies: Innovation Analysis, Digital Transformation & Market Forecasts 2023-2027, found that credit cards will account for over $9.7 trillion in spend globally by 2027. This represents a significant opportunity for card issuers to drive revenue growth by choosing the optimal credit card strategy. It found that rising affluence in emerging markets will be a significant driver of credit card adoption. As such, digital card issuance platforms are critical to delivering credit offerings in these mobile wallet-dominated markets.

Research co-author Nick Maynard explained further: “In emerging markets, the ability to instantly issue digital cards will be a key factor in users choosing credit cards over other payment methods. Card issuance platform vendors must ensure localisation to enable cards to be quickly pushed to the wallets popular in each market.”

Loyalty Rewards Critical to Credit Card Popularity

The research predicts that by 2027, the monetary value of rewards for users from credit card use will reach $103 billion globally, driving overall adoption. It recommends that card issuers focus on app-based loyalty to maximise the appeal of these rewards; partnering with well-connected digital loyalty programme providers to maximise their appeal. If issuers fail to do this, they will lose out to better-connected vendors in a highly competitive credit cards market.

As the decline in macroeconomic factors persists globally, consumer spending via payment giant Mastercard has continued to decline along with the company’s shares.

The company shares slipped 1.1% to $378.35 yesterday morning in New York trading after it warned revenue growth would slow faster than expected in the first quarter (Q1), noting that the high cost of inflation has impacted consumer spending.

It further disclosed that spending on its cards increased by 11% to $1.73 trillion in the fourth quarter, missing the $1.77 trillion average estimated by analysts.

Net revenue for the fourth quarter (Q4) jumped  12% to $5.82 billion, in line with the $5.8 billion average analyst estimate. The company reported earnings of $2.53 billion for the final quarter of the year, at a share price of $2.62.

MasterCard expressed concern that its revenue for the first quarter (Q1) would climb by a percentage in the high end of the high single digits, meanwhile analysts predict it would increase by 10%.

Speaking about the impact of the Macroeconomic factors on its card usage, Mastercard CEO Michael Miebach said in a statement, “While Macroeconomic and geopolitical uncertainty persists, consumer spending has been remarkably resilient. We are well prepared to adjust our investment profile quickly if needed”.

“Meanwhile if we look at the broader economy, we see a continued recovery of cross-border travel, with volumes up 59% versus a year ago and were encouraged by Asia opening up further”.

Investors King understands that Mastercard and its rival Visa Inc. have disclosed that so far, the surging inflation hasn’t affected consumers’ overall spending patterns, instead card customers have shifted their spending to lower-cost items or generic brands.

Meanwhile, consumer spending is proving to be resilient in the face of surging inflation in the U.S., but spending on goods, led by food and beverages, gasoline and motor vehicles, declined in the third quarter of last year.

According to MasterCard SpendingPulse, which measures in-store and online retail sales across all forms of payment, U.S. retail spending excluding automotive increased +11.2% year-over-year during the holiday season last year, running from November 1 through December 24.

The global spend on B2B cross-border payments will exceed $40 trillion by the end of 2024; increasing from $37 trillion in 2022.

This growth of $3 trillion (9%) will be driven by the rising popularity of eCommerce marketplaces, where eCommerce merchants are based in international locations; selling goods internationally via locally based eCommerce services.

A cross-border B2B payment is any payment between businesses for goods or services made internationally; irrespective of the different payment methods involved.

Instant Payments Improve the B2B Cross-border Experience

Cross-border transactions have typically been slow, expensive and difficult to track, a problem that has been exacerbated by the complex accounts payable processes common with larger enterprises. However, the rise of cross-border instant payments, where payments are transacted in 10 seconds or under, is significantly improving this difficult situation. Currently, instant payments are restricted to certain cross-border destinations.

Research co-author Nick Maynard explained further: “While cross-border instant payments are not yet widespread, only accounting for 8% of cross-border transactions by value globally in 2024, significant progress is being made in linking up national instant payment schemes. This can unlock substantial improvements for B2B transactions. B2B payment vendors must be driving further integration of the instant payment rails they support on a national level to solve the difficult challenges with legacy payment channels.”

Marketplace Model Promising, but Creates Challenges

The research found that the marketplace model within eCommerce is driving growth within both cross-border B2B payments and the eCommerce payments market. However, given the marketplace model involves multiple different vendors, all paying each other at different times in different ways, this creates considerable complexity and difficulties in reconciliation, FX (Foreign Exchange) and fraud prevention.

As such, the report recommends that B2B payment vendors offer features such as integrated virtual cards and virtual IBANs (International Bank Account Numbers) for local payments, to correctly address these challenges.