Men have sat lopsided for years, one hip pocket bulging with their wallets. Wallets stuffed with every ID, credit card and membership card they have ever owned, along with forgotten laundry lists and faded credit card receipts from who knows how long ago. Chiropractors have probably even built their practices on this phenomenon, but they may not be able to much longer.
Google has recently come out with Google Wallet, Visa has invested in Square, PayPal just bought Zong for $240 million – all of them aiming to replace your wallet with your phone. In fact, Paypal has gone so far as to predict that “the wallet will be dead by 2015.”
Google Wallet is an Android app that will allow users to simply tap their phone to pay, using near field communication (NFC)* technology. Google Wallet is currently connected only to Citi’s Mastercard or Google’s own prepaid card, but future plans include being compatible with other phones and being able to store thousands of other payment and loyalty cards. Of course it already syncs up with Google Offers (which is good only if you live in one of a few cities where Google Offers are offered), so that you can carry your electronic coupons in your electronic wallet.
PayPal’s Zong allows users to pay for merchandise with their cell phone number as verification, and the charge shows up on their phone bills. Zong claims to reach 3.2 billion users through 250+ carriers, while PayPal “expects to transact $3 billion in mobile payments this year.”
Square may be the most interesting, because they seem to have come up with an alternative to the whole sales transaction system. Card Case is an app that not only allows you to set up accounts at local merchants to pay with your phone, but then the store can then email you a receipt instead of printing one out. What I find really intriguing is that Square has also developed a way to collect payments with your phone that is a cheap alternative to costly credit card terminals.
Square will send you a free, small credit card swiper that plugs into the audio port of your phone / iPad, and they charge everyone a flat 2.75% of every purchase with no minimums or monthly fees. Square launched last October, and is even sold in Apple stores (but for some reason Apple charges you $10 for it, then rebates $10 with activation, while you can get it free from Square??). Anyway, this little device is likely to open the door for many small business to accept credit cards, so I’m guessing that you will start to see a lot more art fair booths, food trucks and street vendors taking plastic soon.
Of course it appears there are things that still need to be worked out – such as convincing the public their information is safe on phones they sometimes leave lying around; that no one will be able to figure out how to game the NFC technology even though hackers seem to be hacking everything just for the “Lulz”; plus, how do you store other pieces of identification on a phone such as a Driver’s License; and by the way, do I really want my phone carrier to also be my credit carrier?
For me, I doubt that my wallet is going away as fast as PayPal believes, which means my chiropractor will stay happy for awhile.
But what does all this mean for credit unions? I suppose if one or two brands can gain a dramatic market share, or monopolize like AT&T did with Apple’s iPhone, it could mean a reduction in CU branded plastic and income. But, if it grows across phone carriers and card companies as most believe it will, it may mean each CU will be needing a new, branded phone app instead.
*(BTW, If you are intrigued about this idea of mobile payments through NFC, and who the major players are so far, check out this infographic from G+.)