I recognise that my latest Celent report on cards has a somewhat unusual title. I will talk more about the report and the strategic issues around cards in a minute, but if you could bear with me, I’d like to start with a backstory.
Like most people in the democratic world, I received the news of the war in Ukraine with a sense of astonishment, disbelief, anger, fear, and sadness. I couldn’t believe this was happening in 2022; it felt like somebody turned the clock backwards by thirty plus years.
It was just past midnight on Sunday, January 13th, 1991, when I was woken up by a knock on the door of my dormitory room. I was still in Lithuania at the time, studying at the university in Kaunas, the second largest city. Nine months earlier, on March 11th, 1990, Lithuania declared it was restoring its independence and breaking away from the Soviet Union, the first of the 15 republics that made up the USSR to do so. Not surprisingly, the USSR government refused to acknowledge it and was putting significant economic pressure on Lithuania, including by turning off oil and gas supplies for a few months. By January 1991, the situation was getting very tense with Soviet military forces visibly increasing their presence around the key cities.
That Sunday morning, my uncle decided it was time to pick me up from my student accommodation. As we raced in his car towards the outskirts of town where his apartment was, on the parallel street we saw Soviet tanks rolling in the opposite direction towards the centre. We spent the night glued to the radio and then later, TV, trying to follow what’s going on. The Soviet military stormed and took over the national TV tower in Vilnius so that they could start broadcasting their own propaganda. A large crowd of civilians was around the tower at the time and 14 people were killed that night.
Large meetings and demonstrations broke out in multiple parts of the Soviet Union, including Kyiv, where 25,000 people gathered in support of Lithuania. Finally, the Soviets decided to retreat, and after the failed coup in Moscow, on July 29th, the Russian Federation signed a treaty recognising Lithuanian independence. Turns out, that fateful Sunday night was one of the last convulsions of the dying beast that was the USSR.
The following year, in 1992, Francis Fukuyama, an American political scientist, published an essay and a book called The End of History and the Last Man. Having seen the fall of the Berlin Wall and the collapse of the Soviet Union, he thought that liberal democratic values and free-market capitalism had demonstrated their superiority once and for all, hence the “end of history” – various events will continue to happen, but the world has found its optimal socio-political setup.
As you can imagine, such bold claims left a lasting impression on my student mind, and I found myself thinking about them during many historic events since, such as the Balkan war, 9/11, and many others. Occasionally, I would even ponder if there can be parallels in a business setting.
Which in a somewhat long and roundabout way brings me to my latest report: Is This the “End of History” Moment for Bank Card Issuers? Leading in the Disruptive World of Cards. It’s true that the cards and payments world is more dynamic than ever with so much innovation and disruption taking place. Yet, much of it today seems to be driven by fintechs and non-banks, or by the acceptance side, as merchants and their payment service providers continue to innovate around the customer’s buying experience. As long as the bank issuers can tokenise their cards and support those experiences, are they destined to just watch from the sidelines while others innovate?
In the report, I take a closer look at how the cards world has changed over the last 10+ years. I also argue that despite the significant disruption, issuing banks can continue to innovate and play a major role going forward. They may need to take a hard look at their technology estate and may need to break down internal organisational silos. But there are certainly opportunities to be captured by working with commercial clients around embedded finance, or by looking at where the friction is in their customers’ payment experience and how it can be addressed (see figure below). While the risks are real, today’s disruption doesn’t have to be the “end of history” moment for bank issuers.