Payments Blog • 3 MIN READ

Goodbye to the Credit Card

John Dunne

Written by John Dunne

The entire concept of having a card in your pocket that you use to spend money is rapidly becoming obsolete. It just doesn't make much sense anymore to own a dedicated piece of plastic with an embedded chip or mag strip. We're already capable of making online purchases without using a physical card. Making in-person purchases from a mobile device we already carry with us is where things are headed.

Let's consider some of the alternatives that may eventually replace the physical card. PayPal is one of the first pioneers in the space of cardless transactions. They enabled easy person-to-person funds transfer (even across different currencies). Apple Pay is another interesting example—users scan a picture of their existing credit card to enable mobile payments from either their iPhone or Apple Watch.

There are also companies that arrived in the payment space somewhat unintentionally. Take Amazon Payments for example. Amazon, of course, began by selling books online. They ended up building an amazing payment infrastructure and online platform for cloud computing. Their EC2 infrastructure is now available for other companies to use. Just like using a regular credit card or PayPal, You can now make purchases through Amazon's payment infrastructure at any website that is registered to use Amazon Payments.

As we shift over towards using cardless payment methods like PayPal, Apple Pay, or Amazon Payments, the number one concern is social engineering. Instead of just being concerned about the credit card in your wallet, now you have to be vigilant about your online footprint as well. Has your email address been compromised in any way? Is it protected with a strong password? You would be extremely vulnerable to fraud if someone ever gained unwanted access to your credentials. The malicious user would be able to access any services you're registered to (in addition to signing you up for new services).

We previously discussed the challenges of keeping track of multiple credit card numbers. It's equally important to make sure that we don't make email management overly complicated. Sometimes people will create one email account for business, one for communicating with friends, and another for registering for websites. There are even some email providers that allow users to create customized aliases. Done properly, compartmentalized email accounts will make it easier to determine which emails are phishing schemes and which are valid.

It's going to take a long time before physical credit cards die off completely. During the transitional period, people may choose to have a virtual card only for online purchases and a separate physical card for in-person transactions. Physical cards are still very useful in emerging economies without access to electronic payments or mobile data capabilities (which we often take for granted). For this reason, people who travel around the globe will continue to carry a plastic card in their wallet for many years to come.

However, there's definitely a demographic of people who will prefer to go cardless due to the convenience and protection against fraud. We'll probably see a gradual transition from physical cards to virtual cards or other methods in the next three to five years. It'll definitely fit the lifestyle of millennial and beyond.

Topics: Payments

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