Will mobile payments be the death of plastic cards?

A couple of weeks ago I posted an article by Brett King (author of Banking 2.0) on the LinkedIn Mobile Payment Strategy group. The article generated a lot of interesting comment from industry players around the world that I thought would be worth sharing on this blog. The link to the article and the LinkedIn group is here.

The article’s premise was that rather than being a threat to Cash payments, Mobile Payments are more likely to result in the Death of Plastic Cards.  The recent Starbucks / Square deal demonstrated that payments can be made simpler with the use of mobile, without the fraud issues currently plaguing mag-stripe cards in particular.  Brett stated that customers will flock to adopt the new payment technology to “a much simpler, better informed payments interaction, plastic just looks dumb, insecure and outmoded.”

I agree with Brett in that disruption in payments is not going to come from the incumbents (Amex, Visa and MasterCard), but from new players like Square, PayPal and Apple – its already started and will lead to fundamental changes in the Payment Card industry, eventually leading to the “Death of Plastic”.

Generally the comments on the article agreed that Mobile Payments will be disruptive leading to significant changes for both Cards and Cash usage for payments.  Some key points that were also brought out included:

  • Apple launching the new iPhone 5 with NFC will drive a lot of the adoption of NFC based mobile payments (see my earlier post on this topic here).
  • Merchants will be the primary benefactors of the death of plastic with lower processing costs / merchant fees as new players come into the market with better value propositions (as per the Square / Starbucks deal).
  • More convenience for the consumer including the  bundling of coupons, offers, loyalty cards, receipts, etc automatically into the payment transaction and generating all the appropriate discounts.



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