BankThink

Reports of Plastic Card Extinction Are Greatly Exaggerated

Apple Pay, Google Wallet, Samsung Pay and PayPal are just a few of the solutions which financial technology commentators predict will bring about the downfall of cash and the plastic card.

Others predict cashless and plastic-free societies by 2025. But such prophecies are greatly exaggerated.

This month, the Smart Payment Association published statistics revealing that a staggering 1.5 billion smart payment cards were shipped globally in 2014. With the U.S. migration to EMV and contactless payment technology gaining momentum, this trend is on a steep upward trajectory.

Consider that, in 2014, the U.S. accounted for 185 million shipments, up from 30 million in 2013. In fact, one report projects a compound annual growth rate in the North American smart card market of 18.4% until 2019 so this number is set to grow significantly. On top of this, less than 10% of the cards shipped in the U.S. were contactless. The industry will therefore see organic growth just from greater bank adoption, consumer demand and standard card life-cycle replacement. Once contactless cards are in the hands of end users, the convenience and user experience benefits will be obvious, which will further fuel increasing demand.

Taking this into account, claims of a near-term cashless and plastic-card-free future are unfounded — and this is without even considering new innovations. Bank cards with a mini-computer, LCD screen and digital keyboard can display a one-time password for two-factor authentication, your balance as well as your transaction history. In addition, cards are now in development that will activate an otherwise-latent dynamic magnetic stripe when a password is entered. No password, no payment allowed.

Companies are also working with manufacturers to integrate biometric fingerprint scanners into payment cards. Separately, quantum physicists are bringing forward quantum computing technologies to develop cards that are impossible to counterfeit.

In this industry, history shows that increased consumer confidence and trust breed adoption. Without question, mobile will get more popular. But plastic is simpler, quicker and more secure than any other method.

Payment methods aren't easily killed off. We add to them to increase security, options and convenience. When checks are still in circulation, can we really discuss the demise of cash or plastic?

Payment instruments are symbiotic. We use different methods in different situations. There may come a day when plastic is put out to stud, but that day is far beyond the horizon.

Paul Underwood is managing director of Thames Card Technology.

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