With so many payment options in the market – from NFC devices to wearable bracelets and QR codes – some mobile money managers may wonder if companion cards are a step backwards. To get a better understanding of companion cards and where they fit with mobile money, we interviewed Rob Hood, Merchant Strategy Manager for Youtap.
What is a companion card, and what is it used for?
A mobile money companion card is a debit or pre-paid card linked to an account. According to the GSMA, at least 24 mobile money services across the globe offer companion cards to mobile money users. Companion cards can be used to facilitate certain types of transactions, such as transport payments or online purchases, where mobile payments are not an option.
Some mobile money managers view cards as old-fashioned. What’s your opinion?
Companion Cards are obviously not a new technology and are not where we see the future going in terms of payment forms. But they are ubiquitous and right now the vast majority of the world understands and uses cards for electronic payments, so they do play a role in bridging the transition to other payment technologies. In terms of cost they are also competitive with other payment solutions and this is frequently a key factor in the decision making process. My general perception is that cards will continue to be a complementary payment method for some time to come.
Today, many different form factors can be used for digital payments. So, what are the best use cases for companion cards?
It’s true that NFC tags, wearables, and QR codes are starting to gain acceptance in growth markets. However, there are some cases where using a card makes more sense. For instance, some schools prohibit students from bringing a mobile device onto the school campus, so a companion card is a good alternative for paying school fees. Companion cards can also be used to distribute aid to displaced persons or welfare recipients. An aid organisation can load cards with funds that can be redeemed for essential items. That way, the agency and the recipients don’t have to worry about the security concerns of handling cash. Transport also is good use case for companion cards. Many bus and train stations already have card readers installed. In fact, sometimes the whole transport infrastructure has been set up and optimised for cards. The antenna in a card is larger than that in an NFC tag, and it’s easier for the reader to pick up the signal. So, in our experience, issuing companion cards is an efficient way to integrate mobile money. When it comes to paying road tolls, we have found that many people would rather use a companion card. They’d rather not hold their phone out the car window or hand it over to a taxi driver to pay the toll!
How can mobile money payment operators promote the adoption of companion cards over cash?
Cards are a known form factor. They are relatively inexpensive, and they are widely used and understood. However, cash is like oxygen in many markets. So, the trick is to create value for both merchants and customers. To get people to change their existing behaviour, you must offer a better proposition. The payment experience must be better than cash; otherwise, people won’t be interested. For the use-cases we discussed above – schools, aid, and transport – there’s no question the experience of using a card is superior to using cash. Payment with the card is quick and easy, and it’s not necessary to give change back to the customer.