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Will Traditional Payment Methods Disappear in the Future?

Will Traditional Payment Methods Disappear in the Future?
Posted: Apr 27, 2016
Comments: 2
Author: Lou Grilli

A common counter argument to the move toward mobile payments is that credit cards are not broken, and that swiping or inserting a credit card works perfectly fine. And those people would be right. Credit cards are not going away anytime soon.  However, subtly and surely, the plastic cards we most closely associate with payments are disappearing. Heck, there is much written about that currency will be a thing of the past in the not so distant future.  Yes, we do carry less cash than we used to, but there still are times we need to have some “real” money in hand.

Who remembers the recent ad campaigns for Amazon Echo, first airing during this year’s Super Bowl starring Dan Marino, Alec Baldwin, and Jason Schwartz? In the first of the series, they are at a party and Alec Baldwin explains to Missy Elliott about his Echo that he can ask questions, stream music, and order things. In the second of the series, “the day after” Alec Baldwin asks Alexa (Amazon’s cloud-based voice service, similar to Apple’s Siri) to purchase new Bresciani socks. No credit card is needed since Alexa has his payment credentials on file.

At the very large Consumer Electronics Show (CES), Samsung showed off the new connected refrigerator. Among many other smart features, the fridge can manage your shopping list, and when you are ready, purchase groceries for delivery. Again, no card needs to be presented to the delivery guy, the payment was made by your fridge (or actually the tokenized wallet associated with your fridge account).

At the Money2020 FinTech tradeshow, Visa showed off its “connected car”. When you drive into a parking garage, the parking app notes the entry time, and when you leave, no need to stop and pay; the car pays only for the exact amount of time that the car was parked. And when getting low on fuel, the car locates the nearest fuel pump that accepts the car’s payment app, and authorizes the exact amount of fuel needed to fill. Again, no need to insert a card, the car paid for it. In other words, existing credit card rail are still being used, but the actual payment transaction is disappearing.

While some of these examples sound futuristic, the disappearance of traditional payments has been taking place for a while. Uber took the friction of payment completely out of the taxi experience, to the point where frequent Uber users who on rare occasion have to take a cab get out at the end of the ride not paying. The “muscle memory” of swiping at the end of the ride is giving away to having payment be an automated, invisible element of the experience.

The Walt Disney Company took this one step further and not only made payment invisible, but actually fun. Visitors to the Walt Disney theme parks get a Magic Band which is used to purchase everything from parking and theme park admission to balloons and fine dining, all by tapping the wearable against a green mickey head. In the background, there’s still a credit or debit card associated with the My Disney Experience account, but once established, that’s purely invisible.

Bringing it back to the argument that mobile payments are not a good replacement for paying with a credit card, what we are seeing is more mobile payments are made in-app as opposed to in-store. If you are in the Best Buy, Ticketmaster, StubHub, Lyft, or ExxonMobil mobile app on your iPhone and it’s time to check-out, just swipe your finger over the sensor to complete an Apple Pay payment. No need to enter payment info. The payment has become invisible.

Is this good or bad for issuers? The branding on the card fades away along with the disappearance of the actual payment transaction. But the interchange remains. With one caveat – if the issuer does not have the BINs enrolled in Visa Checkout, MasterPass, Apple and Samsung Pay, then some other issuer’s card is being used in that invisible transaction!

 

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Lou Grilli

Lou GrilliLou Grilli

Lou is the Director of Payments Strategy at CSCU and is responsible for providing leadership to the organization for emerging payments and industry trends, as well as managing the product portfolio.

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2 comments on article "Will Traditional Payment Methods Disappear in the Future?"

Pavithra Babu, 5/12/2016 10:46 AM

Processing payments have definitely become friction-less today. Not only has there been advancements in technology but there has also been an increase in the number of businesses adopting such cutting edge technologies. In recent times, iBeacon technology has been changing the course of mobile proximity payments like never before. Beacon-enabled payments are not only easy, safe and efficient, they also provide valuable customer analytics to businesses. Here is a post about how 4 leading brands leverage beacons to perfect mobile payments - http://blog.beaconstac.com/2016/05/beacon-based-mobile-payments-4-brands-that-are-doing-it-right/


Lou Grilli, 5/17/2016 11:07 AM

Pavithra Babu

Thanks for sharing the link. Great examples of the use of Bluetooth Low Energy beacons for payments. I think the number of use cases for beacon technology is still limited, but certainly is growing.

Please keep the conversation going.

Lou Grilli

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