With mobile-payment technology advancing seemingly at the speed of a mobile payment itself, one has to wonder how long it might be before consumers wouldn’t need, or even possess, plastic cards to conduct transactions.
It will be a long time, if ever, experts agree.
Payments executives and analysts have debated the prospect of an eventual end to plastic cards in a physical wallet more often in the past year because of mobile-payment technological advancements from established firms and numerous startups (see story).
But with the U.S. Census Bureau projecting 183 million credit cardholders and 188 million debit cardholders in the U.S. alone in 2011, it gets easier to understand why most experts can’t envision an end to such a payment standard worldwide. After all, that equates to 585 million debit cards and 1.3 billion credit cards in circulation in the U.S., according to the census.
No matter which estimates observers tabulate or consider accurate, the general view is that about 5 billion credit cards and about half as many debit cards circulate globally. That’s a lot of plastic.
Still, wouldn’t bank executives start contemplating how the future of mobile payments would translate to issuing plastic cards?
“I have never heard any widespread discussion amongst bankers about looking to reduce plastic card issuing in the future,” Steve Kenneally, American Bankers Association spokesperson, tells PaymentsSource.
Bankers may not express concern about a plastic card’s holding power because they think in terms of credit accounts instead of credit cards, says Kenneally, who works with the Washington, D.C.-based association’s payments systems task force.
“The account is what is essential because an account is still linked to the payment, whether it is from a plastic card or a mobile device,” he adds.
In the future, it may not be necessary for a consumer to have a plastic card in hand, but the important factor remains the transaction itself. And it will boil down to what the consumer wants to use for that transaction, Kenneally suggests.
“If you were talking about no more plastic in that picture, then you’d be talking long, long term,” he adds. “The payments industry is good at inventing new payments methods, but bad at retiring old ones.”
The changing face of a checking account with electronic-payment options represents a good example of what may occur with plastic cards, says Teresa Epperson, financial services managing director for AlixPartners LLP, a Southfield, Mich.-based global business advisory firm.
Plastic debit cards represent the same dynamic as checking accounts, Epperson suggests. “With the rise in mobile wallets, the consumer may be asked which ‘card’ he wants to use, even though there is no plastic card,” she says. “It’s the same as asking which checking account you want to use, even though your are not using physical checks any longer.”
Bank executives likely don’t spend much time contemplating an end to the plastic card mainly because they are heavily into a research mode in trying to keep up with the dizzying pace of mobile-payment technology, Epperson contends.
“Everyone in the industry is hedging their bets on technology and cutting deals with providers in trying different things,” she adds. “It’s an unprecedented level of technological change, and it is forcing banks to stretch way beyond their own comfort zone of taking plenty of time to make a decision.”
Still, it wouldn’t be considered wild speculation to predict about how much longer before plastic cards at least become less noticeable.
Dominic Keen, CEO of MoBank Group, a London-based mobile-payments provider, agrees with Epperson’s comparison to the checkbook evolution. But he puts a timetable of another decade on plastic cards before consumers start to notice they are not as readily available, or even needed.
“We see that plastic cards will start to coexist with mobile, virtual cards for the next 10 years,” Keen tells PaymentsSource.
After that time period, MoBank predicts banks will cut back plastic card issuing almost by default, in the same manner they no longer issue checkbooks unless requested to do so, Keen says.
But consumers will have to desire something they believe has more value and benefit than a plastic card before the industry starts writing the card’s obituary.
If mobile payments don’t grasp the imagination of the consumer in the same manner they do the technology developers, plastic cards could be with us for the unforeseeable future, Brian Riley, senior research director and analyst with Needham, Mass.-based TowerGroup, tells PaymentsSource.
“There is a lot of hype around the industry in general about mobile payments, and many stakeholders are pushing their own agendas,” Riley contends.
The hype leads to incredibly optimistic reports about mobile-payment acceptance, which may influence clear thinking on the topic, he adds. “The truth is, mobile pay is not socialized yet,” Riley says. “Until you can pay the babysitter with your phone, it may not resonate with consumers.”
Though a huge person-to-person payments market exists and mobile payments could serve that and other market segments well, the technology “is not ready for prime time” and remains plagued by pricing and security issues, Riley suggests.
However, the love-hate relationship between consumers and technology is such that if mobile payments could get some traction and consumers see real value and benefits, “it could scoot along like a puck on a hockey stick,” Riley adds.
And how do plastic cards stand up in terms of staying power with other important technological developments that have changed our daily lives?
Zil Bareisis, a London-based senior analyst for research firm Celent, suggests that the advancement of payments technology will be no different from any other technology of the past, and that bodes well for plastic cards to be with us for a much longer time.
“I am a firm believer that technology progress is by and large an additive rather than a replacement process,” Bareisis tells PaymentsSource. “As new technologies are introduced, many old technologies do not necessarily disappear, especially if they work well today. TV did not kill radio.”
Ultimately, mobile payments will give consumers more choices instead of provide a reason to replace plastic cards, Bareisis suggests. In payments, despite decades of the “war on cash,” the market is still nowhere near eradicating it, he adds.
“I remain very skeptical whenever I hear announcements that cards will disappear and be replaced by mobile,” Bareisis notes. “I am convinced that mobile payments will be huge but also believe cards will be around with us for a long, long time.”
A key question, it seems, would center on who would dictate when it would be time to leave the plastic cards behind.
Any type of race to develop mobile-payment technology is not likely to have banks leading the way, Kenneally surmises. “Banks are not known for split-second technology development without contemplating the risk factor,” he says.
Banks are prudent because they have a lot of capital at risk and have to answer to many regulatory bodies, Kenneally adds. “Three 20-year-old kids developing a payments application in a garage don’t have as much of a downside to consider as the banks,” he suggests.
That, as much as anything else, could leave plastic cards in consumer pockets for years to come.
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