The Credit Card Is the New App Platform
Credit and debit cards are ubiquitous, but they’re mostly pretty dumb. That’s about to change. Over 170 million people in the U.S. have credit cards, and the average card holder has 3.5 of them. And those totals are not even counting debit cards, which are roughly 40% of the total market and growing. That’s a crap load of plastic! In spite of the promise of mobile payments, plastic cards are not going away any time soon.
We’re at the early stages of a massive wave of innovation in the payment industry. It’s like when Apple launched the iOS platform for mobile developers. The platform in this case is the payment network. Software developers will add new capabilities to cards by programming the payment network to link online applications to specific payment events. Consumers will be able to effectively “drag and drop” apps to their smart cards in the same way that they add apps to their smart phones today.
We’re big believers at Greylock in the future of “online to offline” commerce, and we’re seeing a ton of innovation in this space. One of our portfolio companies, CardSpring, announced a major partnership with First Data earlier this week. We’ve invested in several other “online to offline” commerce companies including Coupons.com, Groupon, Shopkick, Swipely, TrialPay and Wrapp. And there are many other companies innovating in the space, including startups like Square, and established companies like Google, American Express and Visa.
For all of the attention focused on online commerce, the market opportunity for ‘online to offline’ commerce is way bigger. Online commerce is now a $200 billion industry, but it’s still small compared to offline transactions. Up to 70% of consumer spending is influenced by Web and mobile research, but over 90% of actual transactions are still conducted in the physical world. Several major industries are motivated to see this new app developer ecosystem take flight. Retail marketers know they can advertise more efficiently if they can actually track and close the redemption loop from online browsing to offline buying. Major consumer internet and financial services companies are also highly motivated, as they see a path to greater advertising and promotion-based revenue if they can demonstrate more marketing value through closing the loop. Online budgets that are directed at social ad campaigns will further expand as consumers share experiences connected to their offline card transactions, including reviews and gifting. So what will be the impact of this emerging app platform on the card carrying public?