The rise of mobile wallets and in-store payments was once thought to be a way to lessen our dependence on payment cards. Instead, we’re seeing signs that the venerable plastic card isn’t getting relegated to the sidelines anytime soon.
In fact, it’s becoming a prominent component in some mobile and digital payment systems, which had hoped to make them obsolete. It comes down to the race to be available everywhere, which could help determine who the early winners and losers are in this nascent market. It’s also a recognition that while next-generation payment methods like near field communication (NFC) are emerging, there’s still a lot of mileage to be gained from using familiar cards that work anywhere.
Discover becomes a card enabler
PayPal in August signed a deal with Discover Financial Services that will allow its users starting next year to make payments with a pre-paid card at Discover’s 7 million locations in the U.S. PayPal is also tapping Discover’s payment network to enable people to pay at point-of-sale terminals by entering in their phone number and a PIN.
More recently, Discover has reportedly signed a similar deal with Google , which is supposedly creating a Google Wallet card that will accompany its mobile and digital wallet application.
The idea is to allow Google Wallet transactions to happen at many more real-world locations that don’t support NFC, a short-range wireless technology that Google Wallet has relied on for the last year. Google Wallet has been previously been hamstrung by limitations around NFC, such as a lack of support from Verizon, AT&Tand T-Mobile because of the operators’ competing Isis product, and slow progress with banks that didn’t want to load up their cards directly on to Google Wallet.
Shift to digital wallets
The moves by PayPal and Google show both companies are also part of a larger shift as both companies frame their payment systems as digital or cloud wallets, not mobile wallets.
As PayPal’s spokesman Anuj Nayar wrote last month, PayPal doesn’t want to be thought of as a provider of mobile wallets, but rather digital wallets that are independent of any one technology. Google seems to be getting that message too after reportedly rethinking its mobile payment strategy in the spring. It launched a cloud-based approach for Google Wallet in August and is close to finishing Google Wallet 2.0, which will be able to utilize NFC for some but not all payments, said Google vice president of wallet and payments Osama Bedier at the Money 2020 conference last month.
By emphasizing cloud payment platforms, the companies can show that payments manifest themselves in a number of ways, from online transactions to in-store payments using NFC, barcodes, phone numbers and PINs as well as a plastic card attached to the account.
These cards are not just replacements for credit and debit cards. They can be funded from multiple payment sources and can handle personal offers and discounts. But the real benefit is how they can help their companies overcome the fragmented landcape of mobile payments. With so many systems available, but all with limited reach, there’s no tool available currently that promises ubiquitous acceptance. Increasingly, competitors are realizing that a payment system that works everywhere, not just for early adopters but for mainstream consumers, has the inside track on in-store payments.
Cards aren’t ready for retirement
Jennifer Schulz, Global Head of eCommerce at Visa, told me that while Visa is also preparing to adopt NFC and other technologies to facilitate mobile payments as part of its V.me digital wallet, physical cards aren’t going anywhere. She said she’s not surprised to see PayPal and Google integrate with the cards, rather than try to retire them.
“As the market adopts more form factors, it takes a long time to move and transition. We think cards will absolutely will be a form factor that exists for a long time. Even though folks have leapfrogged that form factor and gone ahead to mobile, they’re ahead of where consumers are with adoption,” Schulz said.
But just because some players are turning to plastic to augment their payment systems doesn’t mean that credit and debit cards will enjoy any longer life or that NFC is dead, said David Talach, vice president of strategic partner development at point of sale equipment vendor VeriFone. Cards are just one way to expand payments now while waiting for other technologies and channels to mature.
“This is about smart companies making smart moves to use what exists today, quickly leverage that and bridge to mobile and NFC tomorrow,” he said.
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