Are digital wallets ready to replace credit cards?
Since magnetic strips were added to credit cards in the 1970s, their uses quickly exploded due to the significant advantages they offered over physical money. Pocket-sized, easily transportable, secure and without intrinsic value, credit cards quickly conquered consumers. But innovations in digital payments can lead to the death of physical debit and credit cards as we know them, giving way to the digital wallet.
A digital wallet, sometimes referred to as a mobile wallet, is simply an electronic replica of the wallet in your pocket, without cash. It may contain credit card information that you can use to pay instantly online or from physical vendors using a contactless payment processing device. It can also give you access to loyalty cards, airline and concert tickets, and just about anything you think you have with you at all times.
Some apps that make it easy for you to transfer your credit cards to your phone include Apply Pay, Google Pay, and Samsung Pay. Fitbit Pay and Garmin Pay are some examples of digital wallets for your smartwatch. Popular money transfer services Paypal and Venmo can also be considered digital wallets.
Current trends suggest digital wallets are the future, trends that have only been amplified by the pandemic and its underlying physical restrictions. According to a recent Chase Bank poll, 47% of those polled said they started or continued to use contactless options in 2021, with âmore convenientâ cited as the main reason.
“In the industry, we are seeing the ‘cardholder’ transforming into the ‘account holder’ as we move more towards a physical world without a card,” noted Jerry Craft, a credit card industry veteran who is now the CEO of Corserv, which empowers banks and fintechs with payment programs.
The trend is clear: physical cards are quickly becoming obsolete, giving way to the digital wallet and reflecting the skyrocketing adoption rate of other fintech innovations, such as digital. payslips.
âDigital wallets are here to stay. Apple, Google, PayPal, Goldman Sachs are investing billions of dollars to make conventional credit and debit cards obsolete. We are already seeing this trend gain ground in India, âsaid Nilesh Mehta, Founder and CEO of Independence Bridge Consulting in Philadelphia. âIt’s not that technology has improved a lot over the past 10 years, it’s that these companies have been able to bundle a lot of popular features into one device – think digital cameras and the iPod. The average American has several credit cards that become a handicap as they often lose them. Even banks recognize that Americans value the convenience these technologies have brought them, and offering consumers the ability to use their credits on mobile apps is one of them. “
Not all consumers, especially older consumers, are comfortable with technology yet. However, there appears to be more interest in the pandemic, and this is translating to fewer cash transactions than ever before. U.S. consumers aged 65 and over paid cash 26% of the time in 2020, down 7% from 2019, according to the Federal Reserve study on consumers’ choice of payment.
But looking even deeper into the rabbit hole, what might the future look like, even beyond digital wallets? The next step in processing payments may be the use of biometric authorization, such as fingerprints, iris scans, and facial recognition. And just as we now shop with internet-connected devices, such as those from Amazon and Google, we may be shopping in cars and even refrigerators (think automatic grocery replenishment based on inventory inside the refrigerator).