Will smartphones soon replace wallets as people use their mobile devices like credit cards?
Maybe, but if they do, it won’t be because consumers want them, according to Michael Katz, an economics professor at the University of California (Berkley), who told the Senate Banking Committee on Tuesday that “cool technology” will not be enough to win over many consumers.
He argued that current electronic payment systems, such as magnetic cards, have the benefit of widespread adoption, and in many cases, mobile devices don’t offer much improvement. In addition, he said, as long as people have to carry other items such as drivers' licenses, phones won’t be replacing traditional wallets anytime soon.
“In order for new payment services based on smartphones and tablets to compete successfully, these services will have to offer merchants and consumers additional value in comparison with current options,” Katz said. “Cool technology alone will not be enough.”
If the much-buzzed-about mobile payment apps and services aren’t enough to excite consumers, he said, adoption of the technology will likely be driven by companies hungry for the personal data that can be collected when somebody uses a phone instead of a credit card.
“The widespread adoption of smartphones and other mobile devices with increasing capabilities has made it possible to collect detailed data about where consumers are and what they are doing,” Katz told the panel. “The ability to predict consumer behavior and send such targeted messages is a very powerful marketing tool that will be worth tens of billions of dollars annually to merchants.”
Given the worries about privacy and security sparked by such data collection, Katz said, regulations may need to be implemented or streamlined to reassure consumers and provide certainty for businesses.
DON'T MISS TODAY'S TOP STORIES