Are card machines going to disappear?

But as debit card usage is on the rise, we’re also seeing contactless payments get their place in the race, with contactless accounting for half of debit card transactions in July in 2019. Does that mean that debit and credit cards are soon to disappear? And will card machines be gone too then? With the financial industry possibly moving towards cryptocurrencies and artificial intelligence, it’s likely we’ll see a big change in the way we manage cash flow, payment acceptance and certain financial products. Although debit cards are still highly profitable for banks and specialist companies, the card machine itself may become obsolete. Here’s what we think about it.

What are the alternatives?

Although card machines and debit cards are still widespread, some interesting alternatives have turned up that may be the next popular payment method.

Alternative Card Reader

More and more companies are offering specialist software together with a small handheld device that acts as a card reader to accept payments with ease. These accept NFC payments as well as chip & pin payments. They are not like a traditional POS terminal as they are much smaller, cheaper and easier to handle. However, they still require you to use a piece of hardware in order to accept payments.

Wearables

Wearables are the next step from mobile apps, and completely remove debit and credit cards from the equation. They may include wristbands, glasses and watches, and allow consumers to pay without having to take out their smartphones. Wearables use NFC technology, and are already catching on very quickly thanks to the convenience of usage.  Barclays is an example of a bank that recently launched their wristband called bPay, which allows customers to use the wristband for any kind of contactless payments.

Social Payments

Imagine being able to pay for a product through Tweets or Facebook posts? That’s social payments in a nutshell. As more and more people use social media to connect with brands and purchase products, social media networks are interested in turning themselves into payment processors. This allows retailers to market their products to a larger audience on social media, streamline the payment process and expands opportunities to connect with customers.  

QR Code Payment

This type of payment is similar to using a POS terminal, with the big difference that all you need to accept payments is something you most likely already have: a mobile phone.

The process consists of a barcode-looking image that contains information of the merchant and payment provider. QR codes can be used on digital screens or even printed out and used offline. This kind of technology is incredibly efficient as it completely removes the need for cards, payment terminals and any sort of plastic. It also enhances customer experience as clients can quickly scan the code, insert their card details or use Apple/Google Pay and complete the payment. This can be done in-person and on the go, or online through an email.

The challenges faced

More and more payment alternatives are turning up, many of which are cost-effective, better for the planet and offer an intuitive customer experience. This encourages a strong consumer trend towards a card-less and card terminal-less future. However, as with any kind of innovation, there are still challenges that businesses face before card machines and cards completely can be overtaken as the main payment method.  

User Adoption

The main areas of concern when it comes to card machines are user adoption: how will customers be attracted to alternative payment options? Most mobile payment services and wallets don’t offer enough added value to entice hesitant consumers. For example, most mobile payment methods don’t offer rewards and promotions to those making purchases.

On top of that, nowadays consumers are dealing with decision fatigue: with 5 different ways of making a payment, it’s normal that consumers are a little hesitant before adopting yet another one. At the end of the day, consumers just want something that is simple, intuitive and easy to use – but there are hundreds of companies that say they offer exactly that.

Security

with debit cards being in circulation for 30 years, banks have established systems to deal with fraud and risk. However, a new payment system means new infrastructure for banks to deal with security. Bank breaches and scams are widely reported in the news, meaning everyone is well aware of the dangers that come with digital banking. On top of that, many smartphone users are anxious about the huge amount of data that mobile phones aggregate in general. Adding sensitive financial information means security needs to be made a top priority.

Slow Infrastructure

the last considerable challenge is that mobile payments is still a relatively new industry and payment system. Some shops and merchants are just recently upgrading to digital payment systems with card terminals, and now we’re telling them they need to upgrade to NFC terminals and mobile payments? For some merchants, that’s a process that could take months or even years.

Are card machines going to disappear? Most likely, but it may take some time. It depends on how quickly consumers are willing to adopt a new payment method (see how customers are uncomfortable buying at an Amazon Go store), whether the incentives are in the right place for merchants to see a benefit (it must be cheaper) and whether all stakeholders feel it’s secure enough. At the end of the day, the most convenient option will win, it’s just a matter of time before consumers take the leap.

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