At TheStreet's Investor Boot Camp Conference, held last week, PayPal CEO Dan Schulman noted that he believes credit cards will be largely obsolete in 20 years. Schulman thinks they'll be replaced by more convenient digital methods, like contactless or QR code-based payments, and that customers will still need a funding instrument, but will focus more on front-end benefits than back-end logistics when choosing how to pay.
Schulman's comments come at a time when card payments are actually on the rise.
Customers love cards more than ever. Debit and credit cards remain far and away users' most popular payment method, according to a TSYS study. And a Fed study released late last year found that card usage in the US is on the rise across the board, thanks predominantly to an increase in credit card usage, which saw volume grow by $190 billion between 2015 and 2016, and likely continued to expand last year. Even PayPal, which recently launched Choice to give its customers more flexibility when selecting payment methods, has seen users shift toward card funding.
And they aren't really being supplanted by digital payment methods. Digital and remote payments are driving card volume overall, which isn't likely to change, as Schulman indicated in his funding method comment. But in-store, customers still prefer cards to mobile wallets by a fair margin.
Even among customers who had loaded their cards into a mobile wallet, 65% planned to replace half or less of their in-store card payments with phone-based payments, according to TSYS — a figure that would shrink among nonadopters, which still comprise the majority of the US population.
But his message about value proposition should resonate with major players. Cards are a defining factor in the payments ecosystem, and that doesn't look like it'll change any time soon. But Schulman's point about value proposition should resonate, as it's a trend we've seen throughout the payments industry, with customers picking credit cards based on rewards, or merchants selecting their point-of-sale (POS) systems based on the nonpayment features they offer.
And so if firms want to maintain, or improve, their positioning in the space, it's important for them to consider what they can offer to customers, whether that's convenience and ease of access, financing flexibility, or a rewards and incentive program, as the space evolves.