In Defense of Plastic

Over the past several months I have been writing a lot about mobile payments.  That’s because it’s a hot topic with plenty of excitement and news.  I’m certain that all the relevant search terms have increased traffic to my blog.  But are we taking this all a little too far?  What if mobile payments don’t live up to all the hype?  While I am pretty sure that won’t happen and that this technology will play a major role in the future, I am not convinced plastic will disappear anytime soon.  For one, I know that Payoneer continues to grow at a phenomenal rate.  The market for prepaid cards – especially for specialty markets – is also growing.

What’s got me thinking is a number of stories and reports I have read over the past several weeks.  According to an article in Bloomberg, “Google Inc. is weighing changes aimed at improving its Google Wallet mobile-payment system following slow adoption . . .”  In another article I found on intomobile.com, American Express articulated views that mobile payments were four to six years away from the “tipping point.”  Finally, a recent report from the DRF stated that, “a majority of retailers, 63% of the respondents, indicated that only 2% or less of their sales are generated from a mobile device.”  These stories definitely have a different tone than most of the news we’ve seen lately.

So, what if it turns out that people simply don’t want to use their phones or other smart devices to make payments?  It’s not an unreasonable position to take.  For example, I believe that many people will find waving their phone no more convenient than tapping their PayPass-enabled MasterCard.  In fact, the phone is much heavier.  And with some mobile solutions, you’ll also have to navigate through some phone menus or enter a PIN.  In the early days of the Internet, people were afraid to use their credit cards, and terrified to use their debit cards.  I feel that some people will be similarly afraid to use their phones as payment devices.  They can be lost or stolen just as easily as a credit card.  How many people will drop their phones when making payments at the POS?

Mobile pundits should remember that credit and debit cards have become so ubiquitous because they are so convenient and have a great form factor.  Also, cardholders rarely have any liability with fraud or lost or stolen cards.  In order for consumers to adopt mobile technology en masse, I think that the solutions will have to be much more convenient than plastic.  And that has yet to be seen.