Tag: Credit Cards

For generations – quite literally – credit cards have ruled the non-cash payments world, but it’s now time to start saying goodbye to the ‘plastic’.

At the time of their introduction (way back in the late 1950’s early 60’s) they were a fantastic innovation, and they have rightly had their decades in the sun. Until now, there has been nothing to replace them, nothing anywhere near as widespread, ubiquitous, incredibly versatile, and still growing as a market.

Now there is.

I am talking of course about the mobile phone, but as I will try to demonstrate here, I’m convinced that this is just a reactive and brief stepping stone, and it will not be 60 more years before that next transition comes about.  Actually, it’s already happening.

The table below represents my thoughts on the next steps, and are not based on anything resembling research, known statistics, and maybe even reality. This is just a visual representation of what I believe;

Screen Shot 2014-03-20 at 10.27.12

Credit Cards – Began way back when, and have enjoyed an enormous growth over the years. However, the up-front nature of the card itself has required a massively expensive infrastructure to accommodate it, leaving half the planet un-covered and un-banked. Beginning this decade we will see a rapid decline in their use as consumer choices expand, and issuer’s profits drop.

Mobile Phone – Enormous and unprecedented growth and owned by more people than any electronic product in history. Anyone who believes that the inherent insecurity and inconvenience of battery life will prevent the transition of payments onto this platform is going to be left behind. Nevertheless, these limitations WILL ensure that the transition to what’s next in payments comes much faster than the move from plastic. Rapid advances in battery technology and OS security will maintain the trend for a few years.

Non-Invasive Biometrics – As I’m calling it, but I basically mean wearables and anything else that comes up that starts doing away with the keyboard and begins the process of identity management through non-static authentication (passwords, secret information), and learning the wearer’s physical profile to effect the majority the functionality. Voice at first I assume.

Invasive Biometrics – Implants in other words. There will be those who say this is a ridiculous concept, that it will never take off, but I believe that the next generations will not see this as outrageous, and WILL see the mobile phone as antiquated and inconvenient. Anyone who has seen the 2012 version of Total Recall and the phone implanted into Colin Farrell’s hand either said “NO WAY!”, or like me said “I WANT ONE!”. Batteries will always be a limitation, but the human body IS a battery (of sorts), and it will be harnessed accordingly (hopefully not like in The Matrix).

Cumulative Identity Profiling – Again, this is what I’m calling it, but it’s basically the culmination of the trend toward a totally different idea of privacy, and one that I cannot see clearly because I’m not of this yet-to-be-born generation. Anyone who is the parent of a teenager knows that their kids have never NOT had a mobile  phone, and that almost their entire life is recorded online. The are never unplugged. We are horrified for them, but that’s our judgement, not theirs, and theirs will win. Identity Management and authentication will be a sum total of your life’s experiences, and therefore almost impossible to fake, or duplicate. The whole concept of privacy will be turned on its head.

There are those who say that this can only happen in industrialised nations, those with the money to afford such things, and yes, there will always be a portion of the population who will be out of the loop for a while. However, Mozilla (for example) are releasing a $25 smartphone, and it is estimated that within a few years Africa with have a 50% smartphone adoption. This trend will cover almost everyone, eventually.

The innovation involved with payments is really at the beginning of its evolution, and I’ll probably look back on this post in 5 years time and laugh at my naivety. Nevertheless, the card brands know its coming (hence NFC, HCE etc.), the terminal manufacturers know its coming (hence the rise of phone based mPOS), and the retailers know its coming (hence the push back on EMV), so the only thing left is for the consumer to start making demands and there will be no looking back.

The average consumer will forgo security for convenience, it will be up to the payments innovators to make sure enough security is built in to protect people from themselves. Which I think is unfortunate, but it’s that or educate 7 billion people.

Anyone who has read my blogs knows that I am very critical of credit cards and EMV as payment technologies. I am also equally critical of the card brands themselves for attempting to spread their use when there are so many other more convenient, safer, cheaper , and future-proofed options out there. With mobile applications, e-wallets, and whatever comes next, the piece of plastic with which we are all so familiar will die in its current form.

Then two products come along and I find myself having to adjust my thinking …somewhat. I still think the card brands are wrong, but I have reached my own internal compromise based on one difficult truth; I have become so enamoured with innovation, that I have lost touch with the only question that’s relevant;

Is it functional?

To me, there is no innovation without practical application, and no function without benefit and use. In other words, innovation is great, but if it’s not adopted, AND makes things better, it’s just a fad.

The two products that caused this revelation are pinCode and Coin:

pinCode is an awesome little product that covers a gamut of authentication mechanisms in a credit card sized token, and Coin allows you to load multiple credit / debit cards on – you guessed it – a credit card sized token.

Each has a fundamental flaw; pinCode cannot replace multiple cards, Coin does not authenticate payments.

Now imagine if you could combine the two.

You would no longer need multiple pieces of plastic you would have just one. Whether you load your credit cards, debit cards, branded, non-branded, or any other form of electronic payment information, it would now all be in one place, with authentication mechanisms built in that would cover every provider.  No more chip and PIN, pinCode takes care of that, and no more thick wallets, Coin takes care of that.

Added benefits;

  1. The bluetooth technology in Coin could be adapted for non-NFC contactless payments, as well as its existing security feature of alerting you if the card is more than x feet away
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  2. Backwards compatibility with magnetic stripe only terminals, but each bank could add authentication mechanisms with the pinCode functionality
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  3. Continued use of existing credit accounts, but now without the need to issue credit cards. The information contained on a credit card magnetic stripe or the EMV integrated circuit (IC) can just as easily be sent or downloaded as long as the authentication is sound
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  4. Chip and PIN would be unnecessary globally. Therefore no requirement for expensive payment terminals, leading to a massive expansion of payment technology to emerging markets / micro-merchants
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  5. Every bank can be its own payments scheme and neither the cards, payment terminals, or back-end systems are tied to any particular card brand or region
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  6. Your ‘credit card’ can now be used for multiple authentication requirements; from a physical security pass, to 2 factor authentication, to call centre mutual authentication
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  7. Carrying a ‘spare’ credit card is now so much simpler. As a frequent traveller, I not only have a spare credit card, I have FOUR spare credit cards just in case (Visa Credit, Visa Debit, MasterCard, Amex). Being able to replace all the credit cards with a vastly improved one, as well as not having to worry about it being stolen makes me drool

However, and back to my original point, this MAY end up prolonging the life of the card brands, but even I can’t deny that there are literally hundreds of millions of people who are already used to carrying little pieces of plastic. As long as this ‘interim innovation’ can instil more security, greater functionality, and perhaps a little more competition, then so be it.

Mobile applications and smartphones will rule the day eventually, and the combination described above will actually begin the process of educating people that electronic payments and phones will no longer be as separate as they are now.

This is the perfect gap-filler between present and future, and it all points back to where it began; authentication.