If Credit Cards Aren't The Future, What Is?


The use of credit cards to buy things online is declining, and with good reason — there are the constant security risks, not to mention the inefficiency of entering and re-entering all those numbers on your laptop or phone.  But as the rise of mobile shopping turns us against our plastic, what’s going to take its place? A slew of so-called “alternative payments” are on the rise, but aside from known entities like PayPal, they’re still far from the mainstream (have you ever heard of a mobile wallet?  Yeah, neither had we).

The answer is that, right now, there really isn’t a clear alternative to credit cards circling the mobile horizon. Various  “mobile wallet” platforms have been launched — but none of them have really taken off, and a variety of different things fall under the term.  Some mobile payment platforms employ so-called mobile wallets, and some of them ARE mobile wallets.

Meanwhile, the term “mobile payment” itself actually refers to a number of systems for completing transactions both online and not,  all without using a credit card.  For example, you may likely have heard of the Starbucks mobile payment, in which smartphone owners can download a Starbucks card app linked to PayPal or a credit card, and then pay for their coffee with a swipe of their phone (which displays a barcode) at the cash register.

A simpler example of the online wallet is the PayPal app for the iPhone and Android. Among other things, it lets users transfer funds to and from their PayPal accounts by bumping their phones together with other users. Besides being easy to understand, that’s frankly pretty cool.

Right now, most of the alternatives to credit card payments still have a lot of steps — for example, with “pay-by-texting” platforms, you send a payment request via text, have the charge applied to a phone bill or an online wallet (Paypal, Google Checkout, etc.), and then wait for the merchant to be informed of the payment, which can sometimes take hours based on the vagaries of texting. It’s hard to see how all of this really beats just breaking down and entering a credit card number.  You can do all this in a physical store, too, but why not just swipe a credit card instead?  Besides all that, texting payment systems aren’t particularly secure — though they’re getting better.

And text-message payments are already being overtaken by direct mobile billing, which directs charges to a cell phone bill (at least until it’s time for a consumer to pay it, and then it’s back to the credit/debit card or checkbook). Direct mobile billing might be hindered by the fact that it requires a separate step from merchants, who have to provide a mobile billing option at checkout. Then there’s mobile web payment, which directs mobile shoppers to independent pages and/or applications when it comes time to check out. Which means…retailers outsource mobile payments? What’s the security benefit here? To be honest, we’re not sure how this is an improvement.

Beyond all the new technology is the question: Will any of these options actually decrease our dependency on credit cards? It’s hard to see how the answer would be yes — while they may not require a credit card number to make a purchase, all of these platforms can eventually lead to credit cards. A PayPal account can be linked to a credit card, as can a phone bill or Starbucks mobile app. If anything, while these platforms gain traction, their back-end reliance on credit cards means consumers may lean on credit more than ever.

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