Are Mobile Payments Set To Supplant Credit Card Payments?

Considering the Millennials preferred inclination toward mobile payments, you would have thought that they would soon surpass American consumers using credit cards. Though it may soon become a reality in the future, credit cards still rule the roost.

Finder.com – the personal finance website, predicts that by 2018, people using credit cards would reach “record highs” with almost 500 million cards in circulation. When you consider credit card use all over the country, that’s the high point, closely followed by 496 million active cards in the second quarter of 2008 just before the U.S. economy got hit by the Great Recession.

Since 2008, the number of active credit cards has declined. The third quarter of 2010 saw the numbers drop by 118.2 million, which experts believe were a mark of recessionary fluctuations. Despite the prediction of increasing credit cards use, too many in circulation would be bad for the U.S. economy as they may cause excessive bad debt from which consumers fail to get out of. With steep interest rates that could be as high as almost 25%, consumers could be wasting a lot of money if they fail to pay their balance each month.

Consumers in their 20’s and 30’s are increasingly using new financial/technology tools like wearable products, which support predictions of mobile usage activity overtaking that of credit cards. Creator of Credit Card Insider, John Ganotis believes mobile to win, especially as an increasing number of wearable devices come loaded with compatible mobile payment systems like Android Pay, Apple Pay and Samsung Pay. He illustrates this by talking of the ease with which users can pay via Apple Pay on an Apple Watch rather than an iPhone since there’s an extra step of passcode or Touch ID verification for every transaction on an iPhone. Paying through wearable products attached to the user is easier and faster too since one doesn’t need to bring the smartphone out of a pocket or purse and risk dropping it.

Driven by customer habit and convenience, credit cards still rule the roost. Low awareness and lack of marketing is also a big factor. Smartphone users are often unaware of mobile payments that can be made with their devices, or are yet to set up the payment features. Absence of clear indicators for mobile payments in PoS terminals also contributes toward the popularity and usage of credit cards.

According to Giacomo Balli, a San Francisco based mobile technology consultant, the wide acceptance of credit cards and the ease with which the benefit can be enjoyed by others (just like Balli who booked an airline ticket using his mother’s credit card) make the plastic going strong. Coupled with strong security and protection for customers, these make it unlikely for mobile payments to surpass the plastic sometime soon.

In the battle of plastic vs. mobile payment, a key role is played by generational demographics too. Baby Boomers support and prefer the plastic, which is a key reason for credit cards still being so popular, says Gino Pascucci, LA based Premier Trust’s business development specialist. However, for Millennials who find online payments the norm and prefer mobile/digital payments, the consumer economy in the long-term is bound to change to make credit cards redundant as the Millennials surpass the Baby Boomers and Generation X that still loves to hold onto their plastic.