Can metal payment cards offer more than good looks?

When the first metal cards came to market more than a year ago, it appeared to be the banks' bid to make their cards seem more compelling than the other bits of plastic in a consumers' wallet. And now that consumers have come to accept metal cards, issuers are looking to do more with the format.

Prior to the EMV migration in the U.S., issuers pushed in the opposite direction, desiring cheap plastic cards due to the expense and frequency at which they need to be replaced. But now that cards are getting more complex — via EMV, NFC, plastic cores or metal construction — issuers want to make the most of their pricier payment cards.

After nearly two years of research and development, the Somerset, N,J.-based card manufacturer CompoSecure says it has produced more than 1 million dual-interface metal cards to handle both the EMV chip and contactless payment technology.

"It is a million cards delivered to clients and those cards are in market, or in the process of being delivered to end customers," said Jon Wilk, CEO of CompoSecure.

Though consumer use of contactless cards varies by market, CompoSecure has a diverse geographic map for the markets covered by the 15 programs that use its metal cards. Those leveraging the new cards are in North America, Asia, Europe, the Middle East and Latin America.

"We saw this as a case of the technology being so commonplace on plastic cards that it needed to be present on our premium cards as well," said Lorenz Jüngling, chief product officer for N26, a Berlin-based bank that operates through most of the Eurozone and has plans to expand into the U.K. in the next year.

It was essential for N26 to find a partner like CompoSecure to "overcome the challenges of making the NFC waves travel through a metal card body and successfully interact with different readers," Jüngling added.

A dual interface card has essentially been commodified in the European market with numerous contactless products and acceptance at most POS terminals, Jüngling said. "There's also been a noticeable increase in the number of self-service POS [devices], such as ATMs, public transportation and parking meters, beginning to accept contactless transactions as well."

CompoSecure is also likely to benefit as more providers and different types of banks seek dual-interface cards for their top customers.

"We are seeing financial disruptors adopting metal cards with the dual interface technology," CompoSecure's Wilk said. "It would be startup banks and online banks leveraging premium cards to deliver a strong brand impression to their customers without using bank branches."

CompoSecure did not divulge the cost of the metal cards compared to plastic counterparts, but stressed the banks are buying into the value proposition that a card with strong rewards and benefits and a differentiated form factor like the metal card can lure more customers, more spending and higher retention.

Generally, issuers offering premium metal cards are confirming that the return on investment for a the pricier card is significant because more customers seek the status of a metal card and its benefits and tend to stay with the issuing bank longer.

Still, the banks have some work to do in terms of keeping the interest level high for users of metal cards, whether they are dual interface or not, said Brian Riley, director of card services for Mercator Advisory Group.

"When you look at [JPMorgan Chase's] Sapphire card, are they offering it for the metal card look and feel, or the flash of the card benefits?" Riley asked. "A lot of things go into that soup."

At some point, the "cool" factor fades away with a metal card, Riley said, leaving the banks with a need for other features and benefits that retain cardholder interest.

"There are plenty of dual interfaces on plastic cards, but it is good to add to a metal card," Riley said. "There may be some benefit with an expanded NFC zone anchored in a metal card, but I'm not sure what that adds to the utility of the card."

CompoSecure filed for a patent on delivering NFC contactless technology through a metal card 10 years ago, and had it granted in 2012. It was not an easy task for the CompoSecure developers to deal with the interference metal could create for a wireless contact.

"The metal is a significant problem in trying to solve the contactless transaction question for these type of premium cards," Wilk said. "It's a technology that incorporates the NFC technology into the metal card and leverages a shielding layer and other proprietary techniques so the transaction can go through."

But the research is not going to end with a dual interface capability on a premium card.

"We are looking at a lot of things in research and development to incorporate other advanced technologies and electronics into the metal card form factor," Wilk said. "We think this is very important, and believe that the metal card is a much better form factor for advanced technologies and electronics to be embedded into a card."

With or without major new developments, CompoSecure feels the dual interface metal card will experience "extraordinary growth" over the next two to three years, Wilk added.