With mobile-payment technology advancing quickly, the demise of plastic payment cards might seem near. But that’s not so, experts agree.
With the U.S. Census Bureau estimating 183 million credit cardholders and 188 million debit cardholders in the U.S. alone in 2011, it’s easy to understand why most experts can’t envision an end to such a standard.
“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 ISO&Agent Weekly.
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, consumers may not have to have a plastic card in hand, but the important factor remains the transaction itself. And it will boil down to what consumera want 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.”
Executives don’t spend much time contemplating an end to the plastic card mainly because they are 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.”
Still, it wouldn’t be wild speculation to predict about when plastic cards will become less noticeable.
Dominic Keen, CEO of MoBank Group, a London-based mobile-payments provider, agrees with Epperson’s comparison to checkbooks.
“We see that plastic cards will start to coexist with mobile, virtual cards for the next 10 years,” Keen tells ISO&Agent Weekly.
After that, 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 believe something else offers more value plastic cards before the industry writes the card’s obituary.
If mobile payments don’t grasp the consumers’ imagination, plastic cards could be with us for the foreseeable future, Brian Riley, senior research director and analyst with Needham, Mass.-based TowerGroup, tells ISO&Agent Weekly.
“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 optimistic reports about mobile-payment acceptance, which may influence clear thinking, he says. “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 consumers have with technology is such that mobile payments could get some traction and consumers would then see real value and benefits, Riley says. “It could scoot along like a puck on a hockey stick,” he adds.
And how do plastic cards stand up in terms of staying power with other technological developments?
Zil Bareisis, a London-based senior analyst for research firm Celent, suggests that the advancement of payments technology will not differ from other technologies, and that bodes well for plastic cards.