Seven ways to use card on file to reach top of digital wallet

Ecommerce sales are projected to grow from $4.2 trillion worldwide in 2020 to $5.4 trillion in 2022.¹ In North America, card-not-present transactions (excluding travel) have grown as much as 30 percent.² These shifts and ecommerce growth trends are creating an undeniable need for businesses and financial institutions to think digital.

Card-on-file (COF) adoption or, storing your payment credentials with a merchant to easily process future transactions, is an essential way to benefit from this rapid growth and succeed in a digital-first world. There are now more than 500 million Apple Pay users,³ 207 million Netflix subscribers⁴ and 200 million Amazon Prime members worldwide, with countless other subscription and on-demand services. Each of these players require customers to save a COF for one-time and recurring purchases.⁵ A recent research study in Canada identified that 7 in 10 Amazon shoppers have saved their credit card on file to make future purchases even more convenient.⁶

But how do issuers ensure their card is the one their customers will choose first in implementing COF? Reaching this top of “digital” wallet status requires the issuer to take actionable steps to influence that decision, one that benefits the consumers with efficiency (no need to enter card credentials every time they want to make a purchase with, ease (automates monthly bill pay and helps avoid late fees), and convenience (eliminates need to carry a physical card).

In a U.S. research study, 48 percent of consumers mentioned that they save their card information on websites / apps for shopping.⁷ In Canada, an analysis of VisaNet data identified that 90 percent of all Visa credit cards that had at least one transaction in the past year were used for a COF transaction.⁸

Now is the time to pay close attention to the COF customer experience to drive card primacy and help increase transaction volume.

Becoming a COF influencer

There are three key areas where consumers can use COF: online shopping (storing the payment credentials on a merchant website or app like Amazon.com); subscription services and bill payments (automatic scheduled payments for subscription services like Netflix, or utilities or phone bills); and digital and virtual wallets (such as Apple Pay, Microsoft Store or PayPal).

Financial institutions looking to enhance the COF experience for consumers and drive COF activation can achieve all three of the above areas in the following ways:

Engage and educate early:

1. Take advantage of the first 90 days after a card has been issued to a cardholder, when consumers are excited to use their new card, and educate them on the convenience of storing the COF. A cardholder’s overall engagement has been shown to increase after activating COF: 1.5x increase in number of total card transactions over the six months after the first COF transaction.¹⁰ Educate cardholders on how to load their card at popular merchants (e.g., Amazon) and on digital wallets through interactive media, such as online videos and tutorials. New features like instant issuance and virtual cards are reducing the wait time for a consumer to receive a new card from days to a few hours, helping to promote digital spend behavior.
2. Use email and mobile notifications to ensure your early-month-on-book programs have a strong emphasis on COF activation. Research has shown that consumers who do not adopt COF actively in the first six months don’t tend to be top of wallet or highly engaged with the card over the long-term.¹¹
3. Many issuers drive this behavior by using tiered offers (e.g., store your card at three merchants and get $10 in rewards). This is driven by the understanding that many cardholders have multiple subscription services (more than four on average, with music and entertainment being the most popular categories)¹² that require members to store their card on file. For example, Chase recently partnered with Lyft to provide its members 10X points and 15 percent off ride shares as incentive to use their card as the app’s default payment method.¹³

Lead the way:

1. Many cardholders default to subscription services to enable COF for recurring bill payments. However, educating customers on categories where COF is evolving, and highlighting rewards can further accelerate penetration. For instance, Visa payment analytics data in Canada revealed that some cardholders use COF at retail goods or utilities merchants whereas more digitally mature cardholders have adopted COF across many categories, such as food and grocery to home improvement providers.¹⁴
2. Issuers are also utilizing merchant relationships and forming new partnerships to enhance the offering – mixing rewards on the card with loyalty rewards at the merchant to strengthen the COF value proposition. For example, Canadian Imperial Bank of Commerce (CIBC) partnered with Amazon to launch “CIBC Deals Day” where customers were provided a one-time $10 discount, when they purchased a product on Amazon’s curated store with a CIBC credit card.¹⁵

Measure, monitor and win-back:

1. Proactive retention management is also a key factor to ensure top-of-digital-wallet status. Many digital-savvy customers are quick to flock to the best value or reward. Discount and additional point offers may motivate many of them to change their mobile pay COF. In one study, at least eight-out-of-ten mobile pay users say they would be very/somewhat motivated to change the card they use in their Mobile Pay wallet for an offer such as a purchase discount, 2X points per dollar or additional credit card points.¹⁶ Additionally, having measures that trigger incentives or notifications when a card issuer ‘detects’ that a COF was lost or moved off their card can reduce leakage.
2. Tenured cardholders tend to be more passive than digital-savvy ones. Recent Visa research¹⁷ explored incentives that could drive behavior and showed that a $5 incentive is optimal to motivate customers to use their debit card. In the study, approximately 75 percent of consumers said they would probably use their debit card at Amazon, 83 percent would use their card to make a cellphone bill payment and 50 percent would load their card onto a digital wallet.