New disruptions and innovations in mobile banking are changing the payment experience altogether. And it is highly likely that the days of these plastic credit card is numbered. Several new fin-tech firms have come up recently like Dwolla, Venmo and Square. And they are changing the realm of payments and facilitating the use of your mobile devices to check balances on-the-go. The advent of geo-fencing technology has made it possible for apps loaded on your smart phone to communicate with the payment systems of retail stores, eliminating the need to stand in queues to make a payments. So will the ease of app based payments kill the $2 trillion credit card industry entirely?
According to a recent report by WIRE, some of these financial start-ups are already disrupting the hegemony of the big credit card players. By making the payment process as quick, flexible and as smooth as possible, these financial upstarts can reduce the fees levied to merchants. So does that mean that the banks and credit cards undergoing the Kodak Movement? May be not yet but if they do not adapt to the fast changing financial sector, they might suffer a severe blow soon.
Following the country wide demonetization and the promotion of a cashless economy by the government, the use of traditional banking has already been witnessing a slow down. With easy and instant money transfer, major players like Google, Flipkart, Amazon, PayTM etc have been running digital wallets successfully in major metropolitan cities. Today, there are multiple mobile apps at a user’s disposal that facilitate online payment – PayTM, PhonePe, Tez, and UPI.
Even the shopping trends is changing- both, online & offline. Startups like Snapmint are offering microloans at 0% interest with easy & flexi payment plans in collaboration with eCommerce partners like Amazon, Flipkart, as well as retail partners like Kaya, Croma & Vijay Sales. Thus, more and more customers are opting for EMI payment options when buying laptops, mobile phones and other electronic appliances.
Internationally, one startup that is scaring even giant credit card companies right now is Square, launched by Twitter co-founder Jack Dorsey. Square enables everyone – not just an official credit card merchant – to accept credit card payments with a mobile device in exchange for a 2.75% transaction cost (perhaps not optimal, but still lower than the standard 3.5% rate of banking institutions). The latest innovation from Square is Card Case, which enables anyone to walk into a retail location and pay just by saying his or her name aloud thus eliminating the need to pull a credit card out of your wallet altogether.
Nearly every day brings examples of how fin-tech startups are creating great experiences around payments that don’t involve taking a piece of plastic out of your wallet. At metro cities, we already live in a somewhat cashless society where nobody carries around too much cash in their wallets. The next evolution is toward a cardless society as well, where nobody carries around credit/debit cards and all the payment information is stored digitally on your mobile device.