CHICAGO — Chicago Mercantile Exchange (CMX) is expected to announce a new credit card offering that would give its small cardholders a greater say in the way they use their credit cards, according to people familiar with the matter.
The cardholder-driven program is expected by the Chicago-based company to be available for new credit cards this year.
The cards would be offered by local retailers, with some limited to a limited number of cardholders.
The new card offering is being developed by Chicago-headquartered Cardman Advisors LLC, the people said, asking not to be identified because the discussions are private.
The Cardman program is one of several new card offerings announced by the card issuer this year, including a new card that will offer a $100 annual fee and a $500 annual fee for existing cardholders, and a card that could charge fees for customers who sign up for its $10 monthly fee plan.
The companies that have been testing the new cards are seeking to raise more than $1 billion by the end of the year.
Cardman declined to comment.
“Cardman is committed to building on our existing credit card offerings and expanding the scope of our card program to provide consumers with greater control and flexibility to spend money on purchases and services,” said the company’s chief executive officer, John W. Hargrove, in a statement to The Associated Press.
The Chicago-born company has been experimenting with cardless, card-based card systems for some time.
Last year, Cardman announced that it was testing a new way to pay bills and that it planned to expand its card program beyond small-dollar-store customers.
Card owners who sign-up for a Cardman card can pay with a debit card, but the cardholder must also have a card on file with the company and provide a photo identification, including driver’s license, passport or military ID.
Cardholders who want to purchase goods or services must pay the fees.
Cardholder payments, which are processed through a network of third-party processors, could be a new form of payment for consumers who use their card for nonessential purchases such as groceries or small-business-related services.
The company’s initial card offers could cost between $50 and $60 per cardholder per month, and could include a variety of options for cardholders including credit cards and other debit cards.
The average annual fee of a credit cardholder with a $50 annual fee would be about $1,700, the sources said.
The $1.1 billion card program has been testing for about a year in some markets, including in New York and San Francisco.
Card-based payments have been around for years, but they have generally been limited to small- and medium-sized businesses and consumers who regularly use their cards.
However, Cardmen’s cardless card offerings are likely to be seen as a departure from traditional cardholders’ experience with card payments, where they pay fees in a single transaction.
Card transactions are typically limited to the purchase of a few items such as a meal, rent or a gift.
The expansion of Cardman’s card-less card programs has sparked debate among some merchants.
Many merchants are concerned that Cardman will force them to charge higher fees for small-to-medium-sized merchants that have already established relationships with the card company.
“There is concern that by offering Cardman customers the ability to use their own card, Cardmans decision to provide a cardless payment option will create a ‘pay as you go’ model that is not only not desirable but will actually cause greater friction in the card system,” said Kevin Lee, a partner at consulting firm Lee & Hargobson in San Francisco, which specializes in merchant payment systems.
But Cardman has defended its cardless payments as a cost-saving measure that will allow its customers to pay their bills faster and with less stress, as well as providing an option for customers to save money.
The current card payments process can take days to process and costs merchants between $5,000 and $20,000 per month for the fees, the source said.
Cardmen also recently introduced a mobile payment option that would allow merchants to pay by phone or tablet with the use of a smartphone app.
Cardmans cardless cards are not new to the card market, either.
In 2015, Cardmntrust launched its Cardmantrust card-only program.
Cardmintrust is a subsidiary of American Express that has been expanding its card-first business model in recent years, including offering a card-free payment option for its cardholders and making it easier for merchants to accept debit cards, which they can use at restaurants, stores and other points of sale.
Cardmintrust, which also has a subsidiary called American Express Card Solutions, also offers cardless applications for merchants, which have also been a popular option for merchants looking to boost revenue.
The American Express card