Will Credit Cards Become Obsolete?
Not long ago, the most popular payment methods included cash and checks—but when was the last time you saw someone pull out a checkbook at the grocery store? While checks are still in circulation, most people have stopped using them and replaced them with the convenience of paying with a credit card.
Today, nearly everyone has a mobile device with a functioning mobile wallet. Since Apple Pay, Samsung Pay, Android Pay and other mobile wallets are convenient, secure ways to complete transactions, will credit cards become obsolete?
Current Mobile Wallet Usage
On a global scale, credit cards are still preferred to mobile wallets. China and Norway have the highest percentage of mobile wallet use (47% and 42%, respectively), and mobile wallet usage in the United States is only around 17%, according to a 2018 UK study. Taken alone, these numbers indicate credit cards aren’t going anywhere soon, particularly in America.
However, while usage is still relatively low, there is an interest in the technology. According to the same survey, almost half of all users want a mobile wallet on their phone, and one-third are “somewhat or very interested” in using the technology.
What’s Preventing Mobile Wallet Adoption?
While the interest is there, there are a few hurdles to more widespread mobile wallet adoption. First, not all retailers offer this technology. Many Kroger grocery stores, for example, do not accept mobile wallet payments. Since many stores just updated their payment card systems to accommodate EMV chip cards, consumers will need to demand that retailers upgrade their terminals once again to justify the costs associated with purchasing payment terminals that accept mobile wallets. As yet, this demand has not been made.
Another issue is security. While people are intrigued by mobile payments, they are worried about the security of their payment card details on their mobile device. But mobile wallets are relatively safe. After the initial set-up, your payment card details are not transmitted across a payment card network. Instead, transactions are processed using a dynamic payment token. If someone hacks into a store’s payment card system, they will only have access to that token, which will be useless for further transactions. In this way, mobile wallet payments are safer than completing transactions with the magnetic stripe on your credit card.
So Will Credit Cards Become Obsolete?
In the short-term—no, credit cards will not be leaving your physical wallet any time soon. Not all retailers are equipped to handle mobile payments, and until they are, you will need to have plastic with you to pay for your transaction. However, consumers are increasingly enjoying the convenience of paying via their wearable (e.g. Apple watch) or mobile phone, and will eventually stop using stores that do not accept payments from these devices. Once that happens, carrying credit cards may go the way of the checkbook.