Fraud-fighting numberless credit cards look for a market

David Paul Morris/Bloomberg

Some banks and fintechs are adopting numberless cards to curb fraud, but for others, it remains a hard sell.

Technology giant Apple took the lead several years ago, offering its Apple Card with no visible numbers or codes. Others in the U.S. and other parts of the world have followed suit. Santander Mexico offers a numberless credit card that it says helps reduce the risk of fraud by up to 90%. JPMorgan Chase in the U.K. provides a numberless debit card. And in the U.S., Mesh offers a reloadable prepaid card for commercial customers that's issued by SoFi Bank. Curve also offers numberless credit and debit cards.

The premise behind numberless cards is simple: Since card numbers aren't visible, bad actors can't take advantage if the card is lost or stolen. There can also be advantages to disposing of the cards when they reach end-of-life since there are no numbers. Still, there are roadblocks that can make it more difficult for customers to use the card online or for phone purchases. There is the potential of losing business as a result of the switch. There's also a cost to replace existing cards if a bank decides to make a wholesale switch to the new card variety.

Banks need to ask "is the fraud savings going to be enough to really warrant this change?" said Ben Danner, senior analyst at Javelin Strategy & Research. The analysis is especially important if it's not something customers want, he said.

Here's what banks should know about the numberless card trend.

The Apple Card model

Apple users who are approved for an Apple Card can access it in their Wallet app and also request a physical card, which for some people is important given that contactless payment isn't universally accepted. When customers pay online, they can use Apple Pay, if it's accepted, or they can use a virtual card number that can be found in the Wallet app.

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Other banks could adopt a similar model but to be successful, customers need to be able to easily find their card number or a virtual number, said Itai Sela, an officer on the U.S. Payments Forum's Steering Committee and president and chief executive of B2 Payment Solutions. Otherwise, it becomes a customer-service problem when customers want to check out and can't do so without friction.

If customers must open their banking or wallet app and search for a number, which isn't necessarily a seamless process, they may give up and use a different card. The bank then loses out on this purchase and potentially future ones as well. "There's a risk to the bank that doesn't justify the cost," Sela said.

Other options

Customers who use Santander's numberless card to make purchases in physical stores must enter a PIN at the point-of-sale terminal. When buying online, they use the bank's Super Wallet app and at checkout, the CVV is dynamic so the website where the purchase is made does not store this sensitive information. Customers who want to access their card details can use the Super Wallet app. They need to enter their digital banking credentials and password, select the card and use the reader to scan the QR code on the physical card, according to information on the bank's website. 

With the Chase numberless debit card, U.K. customers don't have to worry about anyone seeing the card details. If they lose the card, they can freeze it in the app and unfreeze it if it's found, according to the bank's website. Customers who are worried about a lost card can get new card details with a few app taps, without having to replace the physical card. If they need the actual number, customers can find their account details in the app.

A trend to watch

Numberless cards may make more sense in time, especially as other payment methods take off for e-commerce. Early Warning Services is slowly gaining traction in the months since it launched Paze, the bank wallet it hopes will someday take hold as widely as Zelle and serve as an alternative to mobile wallets from Apple and Google. Bank of America, one of the founding members of Early Warning Services, recently enabled its credit and debit cards with Paze, and there are some two dozen merchants, including GNC, Party City and United Airlines, signed up for the service.

"Wallets such as Paze will reduce the need to enter the card numbers manually further, so the need to have the number printed on a card will continue to decline," Zil Bareisis, who leads the retail banking and payments practice at Celent, wrote in an email.

For many banks, however, taking a wait-and-see approach may be appropriate. While Visa and Mastercard offer numberless cards as an option, they aren't requiring them and until they do, banks might want to continue to gauge customer demand and fraud patterns to see if the cost justifies action, payments professionals said.

Most banks don't want to be the first to educate the market because they risk losing wallet share, Sela said. "There's no reward there."