PITTSBURGH-One company has developed what it believes is the next wave of magnetic stripe payments technology, allowing consumers to link to multiple accounts off the same card.
Dynamics Inc. has introduced the MultiAccount card and the Redemption card that let consumers punch buttons on the front of the plastic and rewrite mag stripe data on the fly, allowing the cards to point to more than one account. The MultiAccount card could be used to point to credit and debit, while the Redemption card permits consumers to use one piece of plastic to pay for a purchase with either rewards points or credit. The credit/rewards points card is being implemented by Citi with its upcoming 2G card, said Dynamics Founder and CEO Jeff Mullen, who noted several other large U.S. banks are piloting the company's cards but did not disclose names.
Mullen called the innovation "card 2.0 technology" and stressed convenience is the consumer appeal. "That pushes the cards to top of wallet, reducing card clutter and shifting more share to the issuer."
Winning Best of Show at the 2011 BAI Retail Delivery Conference, the Redemption and MultiAccount cards incorporate an entire computing architecture with more than 70 electrical components into the space of a credit card, said Mullen. "That allows the cards to change any one of the 1,200 bits of information on the magnetic stripe."
The Redemption card could prove to be very attractive as an added benefit to credit card rewards programs that are being beefed up by issuers across the U.S. Depending on how the issuer sets up its rewards program, Mullen said rewards points can be used just like credit. "Right now rewards redemptions occur online, and are limited to a select set of merchants and items. With these new cards you can walk into any store in the world and use it to purchase any item." The merchant sees the purchase as credit and then on the back end the issuer sees the purchase as coming from rewards points.
Mullen argued that issuers will also like the cards because as purchases are made in-store they avoid paying fulfillment costs for online rewards buys.
Cost May Be An Issue
Jeff Russell, senior advisor for The Members Group in Des Moines, Iowa, who agreed the MultiAccount card is very convenient, suggested what may prevent the technology from being widely used is cost. "A challenge for these types of hybrid cards is that they tend to be expensive to produce. So the financial institution using them has to have scale to keep cost of the card down. Maybe someone like Citi can do this."
Mullen would not disclose pricing, saying only that Dynamics charges based on the amount of additional revenue the cards generate and save. He argued that when a bank or credit union issues a standard mag stripe card, that card costs the institution money to put it into the hands of the consumer. He said the Dynamics card, by generating additional business due to consumers using it more, offsets any cost for the high-tech plastic. "It turns the card itself from a cost center to a revenue generator," Mullen said.
Russell views the MultiAccount card as a bridge, primarily, between mag stripe and the day when mobile payments consolidate many of the cards people carry. But Mullen said Dynamics, which is also working on EMV, RFID, and mobile payments solutions, believes mag stripe will be around for a long time. He pointed to the lack of acceptance of mobile payments in Japan.
"That country has been the leader in mobile and have had mobile payment for seven years. Yet today, mobile represents less than 1% of all payments transactions in Japan."
