Will payment technologies ever replace our plastic?
You can buy cosmetics with bitcoin, antiques with PayPal and split your bills with Venmo. If you’re in the US or UK, you can even attach payments to your emails. Innovative new technologies like digital wallets, peer-to-peer payments and cryptocurrencies are changing the way we pay, but will they ever take plastic's place?
The future of plastic certainly looks shaky. MasterCard data from 2013 reports 85% of purchases worldwide were made with cash, showing the surprisingly low impact plastic payments have had since their appearance in the '50s.
In countries like Nigeria, Indonesia and India, where at least 98% of transactions are still cash-based, card payment infrastructures are lacking. It's easy to see how new, more flexible technologies could become the most popular way to send money. Communications have already seen a similar trend, with most developing countries bypassing landlines, instead going straight to more infrastructure-light mobile phones.
The ubiquity of the mobile is also helping new payment technologies overtake plastic. Over 2013 in Kenya, $24bn (an amount equivalent to over half the country's GDP) was transferred through mobiles. This system is still rooted in cash, and has been considered more secure than some of the country's banks. In developing countries, plastic's relatively unwieldy nature means it can't rival the economic empowerment flexible technologies provide.
The situation's a little different in developed countries. In Singapore and the Netherlands, at least 60% of purchases are made using cashless methods. Regulatory systems, designed to prevent money laundering, are a major barrier for new payment technologies trying to enter the marketplace in such countries. Consumer confidence is also an issue, as cybercrime is a common concern.
However, there is a relationship between payment tech and plastic. Popular banking alternatives like PayPal and Neteller still need to use the card providers' infrastructure. Using a customer's debit or credit card information, they transfer data to and from bank accounts. That said, some do show potential to replace banks’ services. PayPal, for example, allows users to hold money in its accounts, which could develop into an alternative current account.
Traditional debit and credit card companies aren’t blind to these developments, which is why Visa and MasterCard are inviting the innovators in. They’re combining their infrastructure and reputation with new technologies to access untapped areas, like the 84% of Spanish purchases that are still made with cash. Take Payoneer, for example. This global online money transfer service also provides customers with a MasterCard, so they can withdraw funds straight from an ATM. By making payments increasingly fluid, tech is effectively removing the barrier between on and offline transactions.
So, while plastic isn’t over yet, its fate could be divided in two. For developing countries there’s a very real chance that plastic could be completely overlooked in favour of mobile payment systems. For developed countries, this could be the beginning of borderless, remarkably flexible ways to pay entering the mainstream.