The death of cash (yeah yeah…)
Posted: February 10th, 2011 | 2 Comments »Starbucks released a mobile payment system, and the Huffington’s post runs an article on how this payment system will “kill” any other form of transactions.
Banks beware — if by July this year you are still issuing plastic cards, or still opening checking accounts — you are about to be in a world of hurt!
A quick look at the history of innovation (DVD vs cinema, mobile vs fixed internet access, etc) tells us that innovations rarely replace what was here before. They usually reshuffle the balance of power (in this case: mobile payment becomes one of the possibilities) and increase the size of the global pipe (more payments happen overall).
Now to this particular technology: it is likely that this kind of systems will be adopted differently depending on generations (and 37% of the world’s population is above 45 years of age), depending on the penetration of smartphones, etc. I am pretty sure my grandma will still be using cash for the years to come.
And from the demo (video below) mobile payment is still more painful than handing bills to the cashier. Launch an app, click, wait. In fact there are plenty of reasons that plead for our good old bills: cash is anonymous, cash is a habit, cash is a symbol, etc.
What we see here is the typical hype cycle, we are embarking to the famous peak of inflated expectations. In the coming months, we will hear lots of predictions about the end of cash and the ubiquity of mobile payments. Truth is it will take several years to develop a solid use case, and spread that technology to the mass markets. Don’t believe everything you read ;)
[kml_flashembed movie="http://www.youtube.com/v/or6U0GeZ4j0" width="425" height="350" wmode="transparent" /]
I would just like to say that your interpretation is very swiss-centered, and I’ll explain why. Switzerland is one of the last cash-centered payment developed societies I know of (Japan is one of the others). When I moved to Switzerland I was surprised that people still used cash as often as they do. In Portugal, where I come from, even my grandmother uses debit card to pay for stuff (and she’s 86 years old), and I don’t know anyone from my parents generation that still uses cash on a regular basis (55 years old).
So, what you are saying is correct, but I would argue that not as much as you imply with the phrase “mobile payment is still more painful than handing bills to the cashier”, since handing bills to the cashier is already something rare for most of the developed countries. Mobile technology will catch up and be as fast (or faster) as using a debit/credit card.
Swiss-centered, argh, I’ve been living here too long! This year is the year I have spent more time in Switzerland than in France, so I guess a few Swiss centric posts can slip past me I must admit ;)
I agree that Switzerland is a cash centric country. When I arrived as a student in 1994, I was also shocked by the queues of people lining up at the post office with tenth of thousands of cash in their hands, waiting to pay their taxes at the post office. Pretty fascinating.
I guess the points I wanted to make were:
- that nothing ever completely replaces something else, especially not something as deeply embedded in culture as cash.
- generation can be a way to divide users, but it’s certainly not the only way as the example of your grandmother shows. For ex, adoption of non-smartphone mobiles seems to be distributed not necessarily by generation but more by wealth.
- in Switzerland (unlike in the US for ex), mobile payment is still quite painful. Credit card payment means waiting at least 20 seconds for validation, the solutions I see involving the launch of an app are time consuming. We need more itunes like experience (where spending happens with no pain – until you get the end-of-the-month bill of your kids ;), things like cash (a really cool system that was bundled to debit cards) or NFC payments.
Overall my point is not “mobile payment will not work”, it is “mobile payment will complement other solutions, take a big part of the market, co-exist with cash and other systems, and we still need a few more years until it becomes a reality”.
A few years down the road, it will be interesting to see some “cash integrists” appear (I’m sure they are already hiding somewhere away from the media radar), people who refuse all forms of electronic payments because they are afraid to be tracked and logged by their cards and phones.