Business/Finance

Will alternative payments spell the end of credit cards?

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By Martin Bosworth

Originally posted at Private Intelligence. Feel free to comment here or there.

Although American consumers are currently slow to adopt paying bills by mobile, much of Europe and Asia is extremely comfortable with the process, to the point where the mobile phone industry is working on setting up universal operability standards to make mobile credit card payments all over the world. It’s obviously slow going, but the fact that there’s momentum at all is fascinating to behold.

One area where Americans ARE showing lots of interest is in alternative payment services such as PayPal, Google Checkout, Prosper.com, BillMeLater, etc. The amount of growth in these services seemingly isn’t fazing the industry giants, but you can’t believe that to be the case. Between increased regulatory scrutiny from a Democratic Congress, the specter of the interchange fee lawsuits, and the simple truth that consumers are just stretched too thin and can’t take on any more credit, the titans of plastic–Visa, MasterCard, and American Express–are definitely shook.

That’s as it should be. The idea of “buy now, pay later” may be too tightly integrated into our culture to ever get rid of, but we deserve methods of payment that won’t leave us trapped in indentured servitude. Until now, the heavy collusion of card companies and banks has produced an environment far too restricted to compete in. The advent of mobile pay and alternative pay services can only hasten REAL competition for our needs, which may also incite buyers to rethink whether or not it’s worth going into debt for that shiny widget.

It ain’t perfect, but it’s a start.

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3 replies »

  1. Martin, great post – if mobile and alternative payment options will wean us as citizens (note I won’t use the other “c word” that corporations and our government want us to use to refer to ourselves) from credit cards and other forms of what you so beautifully denominate “indentured servitude,” that would be a healthy, healthy change for our country….

    Check cards were a wonderful baby step in the right direction for the U.S., but mobile payments – with, one assumes, the ability to view and manage one’s accounts as part of the service – would be a long stride toward re-equalizing the balance between democracy and its closest enemy/companion – capitalism…. And our country needs that balance restored as fully as possible….

  2. My partners and I keep wondering when the mobile companies here are going to figure this out. Eventually we think they can almost become banks. That would be good in a lot of ways – think about the convenience – but at the same time, is there any way in hell that you could get me, even at gunpoint, to do my banking with AT&T Wireless?

    Nuh-uh. Google? More likely, but probably not.

    Still, you’re right – we need to evolve a model that serves us better. Fingers crossed.

  3. Many Americans have adopted the option of charging services other than long distance to their home phone; however with the decline in landlines, mobile phone operators in the US are still slower to accept non digital services on the phone bill. Wireline billing has been around for a while; in fact placing third party charges onto a telephone bill has been in practice since the time of Bell System Divestiture in 1982. As part of the breakup of the phone company, it was mandated that the regional bell operating companies (RBOCs), and subsequently most phone companies, would allow other providers of telecommunication services to place their third party charges onto the local phone company bill.

    The intent and result was to increase competition in the industry, and then it led to the acceptance of services other than long distance and local service, to enhanced services, like voicemail, Internet dial up, internet access, web hosting, and in 2005, some phone companies expanded their own initiatives and now include IPTV, video on demand and digital content services. So companies, like ILD Teleservices (www.ildteleservices.com) aggregate third party charges for merchants to place on phone bill. It’s a fascinating business and it’s exciting to watch other countries quickly adopt the use of charges for products and services to the mobile phone. We shall see where all of this leads…