Will Credit Cards Ever Be Obsolete?

Twenty years ago when we looked forward to 2018 we might have envisioned flying cars, robots, or maybe even cities in the sky being a reality. While we’re not quite “there” yet on all of those advances, we have witnessed a great many advancements and seen many old technologies and amenities become obsolete.

Credit card payments are among those things that have been through the most iterations. While our cards used to be placed into a clunky metal machine and imaged onto a carbon copy, or numbers were manually entered into a computer, those methods gave way to more modern, seamless processes.

Credit cards were embedded with magentic stripes, where they could be swiped to capture information. Fast-forward to 2010, and one need only have a tiny Square credit card processor attached to the headphone jack of their smartphone to accept a credit card payment.

Today, credit cards all contain smart chips and magnetic strips. And now more and more people aren’t carrying physical cards at all, but instead carrying credit card or debit card information digitally via mobile wallets. This allows consumers to avoid using a physical plastic card to make purchases, and to instead pay with a smartphone, tablet, or smartwatch. Apple Pay is perhaps the most well-known, and most trusted mobile wallet. Among those who have tried using a mobile wallet, 24 percent of those used Apple Pay as of September 2017.

Is the credit card on its way out?

With all of these advancements in the ways physical credit cards are used and transactions are made, it seems the demise of plastic may be imminent as an increasing number of transactions are made via smartphone. So, are credit cards on their way out? The short answer is: yes and no.

Research firm, Gartner, projects that 50 percent of consumers will use smartphones or wearable devices for mobile payments this year. But majority of American consumers — 70 percent — still carry at least one credit card. As of 2015, the average is 2.24 cards per person, and 16 percent of Americans carry five or more cards. With this in mind, it’s worth considering how eliminating the day-to-day use of physical cards might help to protect consumers’ identity and credit score.

This is an issue that’s on the minds of both consumers and banks, and big players are helping to enable the transition. Google, PayPal, Square and most of the major credit card companies including American Express and MasterCcard have all developed some type of mobile payment platform. This means increasing pressure on traditional banks to follow suit. While mobile and digital payments will mean less profit from associated fees, banks cannot afford to lose customers by resisting this transition.

Furthermore, the stage has already been set and consumers expect and demand the convenience of paying via smartphones. And, as the threat of identity theft ramps up — just look at the Equifax data breach last fall, which impacted 145 million Americans — consumers are increasingly looking for ways to safeguard their credit information. American consumers are learning that it’s easier to protect their credit than to find themselves in need of fixing credit after their information has already been compromised

So, although plastic credit cards aren’t going to disappear today or tomorrow, technology and evolving consumer habits mean these cards — at least as we know them — will likely become obsolete in the future.

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