Cash Is Dead. Are Credit Cards Next?

Tech start-ups across the country offer new ways for payment, which could make carrying credit cards a thing of the past.

National Journal
Matt Vasilogambros
Nov. 25, 2013, midnight

The fu­ture of money has ar­rived, and it’s called Coin.

It looks like a cred­it card. It’s the size of a cred­it card. It swipes in cred­it card ma­chines. But it holds the in­form­a­tion of up to eight of your deb­it, cred­it, re­wards, or gift cards. And you can switch between cards by simply press­ing a but­ton.

The new product, launched re­cently, prom­ises to change the way con­sumers spend money in a se­cure and ef­fi­cient way.

The key tech­no­logy is a Bluetooth sig­nal. To load in­form­a­tion from your dif­fer­ent cards, just swipe them on a card read­er in­to your Apple or An­droid phone and take a pic­ture of the card. If you’re too far from your card — like, say, you leave it at the res­taur­ant — your phone gets a no­ti­fic­a­tion. And the Coin’s bat­tery lasts up to two years.

So, what does it cost someone to fun­da­ment­ally change the way they pay for din­ner? $100. Pre-or­der­ing has already star­ted (at the re­duced price of $50), and Coin will ship out next sum­mer.

But this San Fran­cisco com­pany is just one of many start-ups across the coun­try that are find­ing new ways of de­vel­op­ing the fu­ture of re­tail.

(Coin)Cash is dead, haven’t you heard?

In re­cent years, Amer­ic­ans have used less and less phys­ic­al money when pur­chas­ing items. Sev­er­al don’t use it in stores, and many more don’t keep bills and coins in their pock­ets. The “cling” of stray pen­nies hit­ting the counter at your loc­al cof­fee shop may soon be­come a dis­tant memory.

Ac­cord­ing to a sur­vey by Walk­er Sands, a Chica­go-based pub­lic re­la­tions firm, nearly 1-in-5 con­sumers do not carry any cash on them. In total, more than 60 per­cent of con­sumers carry $20 or less in cash. Sur­pris­ingly, about 1-in-20 people say they don’t use cash and re­fuse to go to places that ac­cept only phys­ic­al cur­rency. (The sur­vey was con­duc­ted over the last year among 1,046 con­sumers across the United States.)

And oth­er sur­veys show a sim­il­ar trend: Ac­cord­ing to a 2012 study by Javelin Strategy and Re­search, 27 per­cent of pur­chases in 2011 were made with cash. By 2017, the group ex­pects that num­ber to drop to 23 per­cent.

So, yes, we’re headed to­ward a cash­less so­ci­ety. But what about plastic cred­it cards, as well?

The end of the George Cost­anza wal­let is near.

People use cash less. Re­ceipts are re­dund­ant with on­line bank­ing. And products like Coin al­low people to pay di­git­ally, in­stead of with a phys­ic­al cred­it card. Could the George Cost­anza wal­let be a thing of the past?

Christine Pietryla, the seni­or vice pres­id­ent of pub­lic re­la­tions for Walk­er Sands, said she was im­me­di­ately drawn to Coin. It’s a product that fits in­to her firm’s re­search: People want their con­sumer ex­per­i­ence to be sim­pler, easi­er, and more ef­fi­cient.

“It’s def­in­itely a chal­lenge to find an ap­plic­a­tion or a solu­tion that puts everything all in one place,” she said. “This is unique in that it does do that.”

Con­sumers are start­ing to prefer di­git­al op­tions in pay­ments: Ac­cord­ing to the same re­search from Walk­er Sands, 28 per­cent of con­sumers are more likely to use a di­git­al gift card, rather than a plastic gift card. It only makes sense that ser­vices like PayP­al, a busi­ness that al­lows people to make pay­ments and money trans­fers through the In­ter­net, have taken off.

Sim­il­arly, Google Wal­let, launched in 2011, al­lows users to store in­form­a­tion for their deb­it cards, cred­it cards, re­ward cards, or gift cards on their mo­bile phone. For par­ti­cip­at­ing stores, someone can just tap their phone to a Pay­Pass ter­min­al to pay for a product. Google Wal­let users can all send money through Gmail at­tach­ments. Ad­di­tion­ally, Google an­nounced last week that it was in­tro­du­cing pre­paid debt cards that can be used in ATMs.

And in the same sur­vey, 95 per­cent of people say they’ve pur­chased something from Amazon in the last year.

PayP­al, in fact, last week just made a deal with an­oth­er di­git­al start-up, Uber — a car ser­vice com­pany that uses a mo­bile ap­plic­a­tion to hail rides.

Oth­er start-ups, like Is­is (which al­lows con­sumers to pay for items in per­son through their smart­phones) or Dy­nam­ics (which cre­ated a sim­il­ar multi-ac­count card like Coin), also have products that of­fer a dif­fer­ent way of pay­ing for goods.

It’s not just how you pay, but how busi­nesses get paid.

(SAUL LOEB/AFP/Getty Im­ages)The fu­ture of re­tail goes well bey­ond Coin or PayP­al. It’s also about how stores are pro­cessing your pay­ments.

Any per­son who works in Wash­ing­ton, New York, or Los Angeles can at­test to the grow­ing num­ber of gour­met food trucks that have popped up on street corners around lunch­time. It’s noon, so why not go to Far­ragut Square and eat at Far East Taco? And for pay­ment, many of these food trucks use the Square Read­er — an easy at­tach­ment that al­lows any­one with an iPhone or iPad to pro­cess a cred­it card pay­ment. Even some big-box stores have check­outs with iPads.

And it’s not just the Square. What about pay­ing for items without ac­tu­ally go­ing to a check­out line? Ac­cord­ing to the same Walk­er Sands study, 59 per­cent of con­sumers said they would be more likely to shop at stores that of­fer self-check­out on mo­bile devices.

Store own­ers are also turn­ing to di­git­al com­pan­ies to get around tra­di­tion­al cred­it card com­pan­ies that charge too much to pro­cess pay­ments. Des Moines, Iowa-based Dwolla is a pay­ment net­work that al­lows people to trans­fer money — either to friends or busi­nesses — more ef­fi­ciently through a mo­bile ap­plic­a­tion and its web­site. And it saves mer­chants money by char­ging only 25 cents for trans­ac­tions over $10 — and char­ging noth­ing if it’s less. Thou­sands of com­pan­ies and con­sumers have already signed up for the ser­vice, which star­ted in 2009. Dwolla has even launched a cred­it fea­ture, which could com­pete with cred­it cards.

This is all well and good, but”¦

Many of these start-ups are just that: start-ups — small out­fits of tech­ies who had a vis­ion of a product that chal­lenges the in­dustry to think dif­fer­ently and move in rad­ic­al dir­ec­tions.

For one, it costs a lot of money to change the game. That’s why com­pan­ies like these rely on crowd-fund­ing. Coin is look­ing to raise $50,000 bey­ond what some of its in­vestors have put in. It can also cost a lot of money to buy these new products. Coin is $100 — not steep, but not cheap. Oth­er mod­ern pay­ment ser­vices, like PayP­al or Google Wal­let, are free.

Ad­di­tion­ally, with any new product, there are risks for se­cur­ity breaches. Coin no­ti­fies con­sumers when they might have left it at a res­taur­ant, but their in­form­a­tion is still just as much at risk as with a plastic cred­it card.

And no product is guar­an­teed to catch on. Most con­sumers are look­ing for three ma­jor qual­it­ies in any product: in­creased se­cur­ity, a tre­mend­ous amount of cus­tom­er ser­vice, and a con­sist­ent visu­al ex­per­i­ence. In oth­er words, con­sumers want to know that when they walk in­to a store or log in to the product’s web­site or mo­bile ap­plic­a­tion, it’s all go­ing to look the same, be easy to use, and be visu­ally ap­peal­ing.

If these start-ups lack these qual­it­ies, con­sumers won’t buy in­to the idea. With Coin, con­sumers will have to re­place their card every two years — short­er than with a nor­mal cred­it card. And lest we for­get a simple truth: Cred­it cards are already easy to use.

Coin is new. It’s un­fa­mil­i­ar. It’s dan­ger­ous, to some. But every idea from a start-up com­pany is at least a little risky.

“Start-ups are there to dis­rupt and be in­nov­at­ive,” Pietryla said. “It’s either go­ing to take off or it’s not.”

Two years ago, people might have thought pay­ing with an iPad was crazy. As the tech­no­logy catches up, con­sumers get more con­fid­ent in it. Coin might be just that.

(Coin)Cash is dead, haven't you heard?

In re­cent years, Amer­ic­ans have used less and less phys­ic­al money when pur­chas­ing items. Sev­er­al don’t use it in stores, and many more don’t keep bills and coins in their pock­ets. The “cling” of stray pen­nies hit­ting the counter at your loc­al cof­fee shop may soon be­come a dis­tant memory.

Ac­cord­ing to a sur­vey by Walk­er Sands, a Chica­go-based pub­lic re­la­tions firm, nearly 1-in-5 con­sumers do not carry any cash on them. In total, more than 60 per­cent of con­sumers carry $20 or less in cash. Sur­pris­ingly, about 1-in-20 people say they don’t use cash and re­fuse to go to places that ac­cept only phys­ic­al cur­rency. (The sur­vey was con­duc­ted over the last year among 1,046 con­sumers across the United States.)

And oth­er sur­veys show a sim­il­ar trend: Ac­cord­ing to a 2012 study by Javelin Strategy and Re­search, 27 per­cent of pur­chases in 2011 were made with cash. By 2017, the group ex­pects that num­ber to drop to 23 per­cent.

So, yes, we’re headed to­ward a cash­less so­ci­ety. But what about plastic cred­it cards, as well?

The end of the George Costanza wallet is near.

People use cash less. Re­ceipts are re­dund­ant with on­line bank­ing. And products like Coin al­low people to pay di­git­ally, in­stead of with a phys­ic­al cred­it card. Could the George Cost­anza wal­let be a thing of the past?

Christine Pietryla, the seni­or vice pres­id­ent of pub­lic re­la­tions for Walk­er Sands, said she was im­me­di­ately drawn to Coin. It’s a product that fits in­to her firm’s re­search: People want their con­sumer ex­per­i­ence to be sim­pler, easi­er, and more ef­fi­cient.

“It’s def­in­itely a chal­lenge to find an ap­plic­a­tion or a solu­tion that puts everything all in one place,” she said. “This is unique in that it does do that.”

Con­sumers are start­ing to prefer di­git­al op­tions in pay­ments: Ac­cord­ing to the same re­search from Walk­er Sands, 28 per­cent of con­sumers are more likely to use a di­git­al gift card, rather than a plastic gift card. It only makes sense that ser­vices like PayP­al, a busi­ness that al­lows people to make pay­ments and money trans­fers through the In­ter­net, have taken off.

Sim­il­arly, Google Wal­let, launched in 2011, al­lows users to store in­form­a­tion for their deb­it cards, cred­it cards, re­ward cards, or gift cards on their mo­bile phone. For par­ti­cip­at­ing stores, someone can just tap their phone to a Pay­Pass ter­min­al to pay for a product. Google Wal­let users can all send money through Gmail at­tach­ments. Ad­di­tion­ally, Google an­nounced last week that it was in­tro­du­cing pre­paid debt cards that can be used in ATMs.

And in the same sur­vey, 95 per­cent of people say they’ve pur­chased something from Amazon in the last year.

PayP­al, in fact, last week just made a deal with an­oth­er di­git­al start-up, Uber — a car ser­vice com­pany that uses a mo­bile ap­plic­a­tion to hail rides.

Oth­er start-ups, like Is­is (which al­lows con­sumers to pay for items in per­son through their smart­phones) or Dy­nam­ics (which cre­ated a sim­il­ar multi-ac­count card like Coin), also have products that of­fer a dif­fer­ent way of pay­ing for goods.

It's not just how you pay, but how businesses get paid.

(SAUL LOEB/AFP/Getty Im­ages)The fu­ture of re­tail goes well bey­ond Coin or PayP­al. It’s also about how stores are pro­cessing your pay­ments.

Any per­son who works in Wash­ing­ton, New York, or Los Angeles can at­test to the grow­ing num­ber of gour­met food trucks that have popped up on street corners around lunch­time. It’s noon, so why not go to Far­ragut Square and eat at Far East Taco? And for pay­ment, many of these food trucks use the Square Read­er — an easy at­tach­ment that al­lows any­one with an iPhone or iPad to pro­cess a cred­it card pay­ment. Even some big-box stores have check­outs with iPads.

And it’s not just the Square. What about pay­ing for items without ac­tu­ally go­ing to a check­out line? Ac­cord­ing to the same Walk­er Sands study, 59 per­cent of con­sumers said they would be more likely to shop at stores that of­fer self-check­out on mo­bile devices.

Store own­ers are also turn­ing to di­git­al com­pan­ies to get around tra­di­tion­al cred­it card com­pan­ies that charge too much to pro­cess pay­ments. Des Moines, Iowa-based Dwolla is a pay­ment net­work that al­lows people to trans­fer money — either to friends or busi­nesses — more ef­fi­ciently through a mo­bile ap­plic­a­tion and its web­site. And it saves mer­chants money by char­ging only 25 cents for trans­ac­tions over $10 — and char­ging noth­ing if it’s less. Thou­sands of com­pan­ies and con­sumers have already signed up for the ser­vice, which star­ted in 2009. Dwolla has even launched a cred­it fea­ture, which could com­pete with cred­it cards.

This is all well and good, but"¦

Many of these start-ups are just that: start-ups — small out­fits of tech­ies who had a vis­ion of a product that chal­lenges the in­dustry to think dif­fer­ently and move in rad­ic­al dir­ec­tions.

For one, it costs a lot of money to change the game. That’s why com­pan­ies like these rely on crowd-fund­ing. Coin is look­ing to raise $50,000 bey­ond what some of its in­vestors have put in. It can also cost a lot of money to buy these new products. Coin is $100 — not steep, but not cheap. Oth­er mod­ern pay­ment ser­vices, like PayP­al or Google Wal­let, are free.

Ad­di­tion­ally, with any new product, there are risks for se­cur­ity breaches. Coin no­ti­fies con­sumers when they might have left it at a res­taur­ant, but their in­form­a­tion is still just as much at risk as with a plastic cred­it card.

And no product is guar­an­teed to catch on. Most con­sumers are look­ing for three ma­jor qual­it­ies in any product: in­creased se­cur­ity, a tre­mend­ous amount of cus­tom­er ser­vice, and a con­sist­ent visu­al ex­per­i­ence. In oth­er words, con­sumers want to know that when they walk in­to a store or log in to the product’s web­site or mo­bile ap­plic­a­tion, it’s all go­ing to look the same, be easy to use, and be visu­ally ap­peal­ing.

If these start-ups lack these qual­it­ies, con­sumers won’t buy in­to the idea. With Coin, con­sumers will have to re­place their card every two years — short­er than with a nor­mal cred­it card. And lest we for­get a simple truth: Cred­it cards are already easy to use.

Coin is new. It’s un­fa­mil­i­ar. It’s dan­ger­ous, to some. But every idea from a start-up com­pany is at least a little risky.

“Start-ups are there to dis­rupt and be in­nov­at­ive,” Pietryla said. “It’s either go­ing to take off or it’s not.”

Two years ago, people might have thought pay­ing with an iPad was crazy. As the tech­no­logy catches up, con­sumers get more con­fid­ent in it. Coin might be just that.

What We're Following See More »
A DARK CLOUD OVER TRUMP?
Snowstorm Could Impact Primary Turnout
2 days ago
THE LATEST

A snowstorm is supposed to hit New Hampshire today and “linger into Primary Tuesday.” GOP consultant Ron Kaufman said lower turnout should help candidates who have spent a lot of time in the state tending to retail politicking. Donald Trump “has acknowledged that he needs to step up his ground-game, and a heavy snowfall could depress his figures relative to more organized candidates.”

Source:
IN CASE OF EMERGENCY
A Shake-Up in the Offing in the Clinton Camp?
2 days ago
THE DETAILS

Anticipating a primary loss in New Hampshire on Tuesday, Hillary and Bill Clinton “are considering staffing and strategy changes” to their campaign. Sources tell Politico that the Clintons are likely to layer over top officials with experienced talent, rather than fire their staff en masse.

Source:
THE LAST ROUND OF NEW HAMPSHIRE POLLS
Trump Is Still Ahead, but Who’s in Second?
1 days ago
THE LATEST

We may not be talking about New Hampshire primary polls for another three-and-a-half years, so here goes:

  • American Research Group’s tracking poll has Donald Trump in the lead with 30% support, followed by Marco Rubio and John Kasich tying for second place at 16%. On the Democratic side, Bernie Sanders leads Hillary Clinton 53%-41%.
  • The 7 News/UMass Lowell tracking poll has Trump way out front with 34%, followed by Rubio and Ted Cruz with 13% apiece. Among the Democrats, Sanders is in front 56%-40%.
  • A Gravis poll puts Trump ahead with 28%, followed by Kasich with 17% and Rubio with 15%.
IT’S ALL ABOUT SECOND PLACE
CNN Calls the Primary for Sanders and Trump
1 days ago
THE LATEST

Well that didn’t take long. CNN has already declared Bernie Sanders and Donald Trump the winners of the New Hampshire primary, leaving the rest of the candidates to fight for the scraps. Five minutes later, the Associated Press echoed CNN’s call.

Source:
×