New technology has been spinning into obsolescence faster than consumers can buy it. Cassette tapes spring to mind, along with floppy disks and Palm Pilots and other innovations that fall to the wayside to make room for their newer, sleeker counterparts. Could credit and debit cards be next?
Mobile payment is taking over the market, to the point that millennial have turned Paypal’s popular mobile payment into a verb, throwing around phrases like “Venmo me” the same way their parents said “Bill me.”
Many consumers still go shopping with card-packed wallets, but Gartner Research expects mobile payments to hit $720 billion a year in the US by 2017, compared to $235 billion in 2013. These numbers have every finance business from stone-and-mortar banks to web services like Amazon and Google scrambling for a piece of the mobile payment pie.
Mobile payment platforms are currently available from companies like Google, Paypal, Square, and most major credit suppliers, and it’s rumored that Apple will jump into the game in the next year or two with its own mobile wallet services.
Traditional banks have been a little slower to invest, which might cost them if their own payment services are edged out by competing mobile platforms. They’ve got a major advantage if they do decide to cash in on mobile payment: they still own their customers’ accounts and can make payments even more directly, and public trust is still in their favor when it comes to handling private data.
Even businesses like Wendy’s, Burger King and Starbucks are cashing in. US Starbucks uses it’s loyalty card to capture one third of its revenue. 14% comes from the Starbucks mobile app. Wendy’s and Burger King are now allowing customers to pay with their smartphones.
“As more merchants and business’ accept mobile payments, and the use of mobile wallets, the more the consumer base will begin to sway towards this technology as a primary payment method,” says Jordan Rinaldo of BNA Smart Payment Systems Ltd.“Credit cards will by no means fade into the darkness any time soon, but the continued increase in payment options, as well as the convenience factor, show no signs of slowing down for mobile wallet apps and mobile payments, posing a threat to the traditional credit card systems.”
Many card companies are compromising with the new trend by investing in digital wallet solutions that integrate user’s physical card while offering the convenience of mobile payments.
These efforts still may not be enough to keep up with consumers who expect their smartphones to make their lives simpler, especially with a new generation of consumers who grew up with apps.