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1. Virtual Currencies
- With the integration of virtual worlds like Facebook and Twitter into the physical worlds of nearly 400 million users, social media and digital content have created a new market for virtual currencies. In 2010, we will see more virtual flowers sent to mom, more Christmas trees gifted online, and more gifts exchanged through virtual worlds. Note – KITN Media recently acquired virtual currency service provider, Super Rewards for a rumored $30 million.
2. Digital Content and Games
- With Zynga’s FarmVille gameon Facebook accounting for more active users than Twitter, (69 million active users), online entertainment will continue to grow, and as a result we’ll see more ways to ‘pay for play’. Note – FarmVille’s rival Playfish was recently acquired by Electronic Arts in a deal valued at up to $400 million.
3. Pay By Mobile Phone
- The mobile payment channel is one to watch in 2010, as more wireless carriers enter the payments space, much like ILD Teleservices’ LEC billing is to the landline, we’ll see more wireless devices used for ecommerce and social entertainment.
4. Credit Card Transaction Decline
- While we are a plastic dependant society, “cash is king”, and with 45% of consumers telling Consumer Reports that they are paying less with credit than last year, we will see more credit card account closes and more prepaid and direct bill payment options.
5. Credit Card Companies Look to Alternative Payments
- Credit Card companies like Visa and MasterCard will look deeper into alternative payment methods, following the footsteps of the acquisition of Revolution Money by American Express for $300 million.
The death of the credit card is inevitable.
You don’t agree? Read this 3-part series.
The oldest payment method in civilization is making a strong comeback. No, not gold (that’s for another post). Rather, the concept that if you are going to buy something, you’re going to have to pay for it. Consumers are shifting away from the “borrow and buy” mentality back to the “cash and carry” model which has been used for civilizations.
If back in the day, you didn’t have the money to pay for merchandise, then you went without. Not the norm anymore, given all the plastic in our wallets. Believe it or not though, consumer credit is still a relatively recent phenomenon – for how much longer we have to ask? To answer that, we’ve got to understand the history.
History.
The first modern consumer credit cards were developed only 60 years ago (in the 1950’s) with Diners Club, followed by American Express, then Bank of America (“BofA”) with their BankAmericard (which is now Visa) close behind. In an effort to capitalize on the “all-purpose credit card”, companies started dropping preapproved credit cards to unknowing consumers. BofA, for example mailed over 60,000 preapproved cards to folks in Fresno, California, although those consumers never asked for them. Others again followed suit, and the next thing you know the scams started - people are stealing credit cards out of mailboxes, consumers are getting billed for cards they never knew they had, and a black market began in stolen credit cards and identity theft.
Things got a little better in the 70’s, when Congress began regulating the credit card industry. For starters, they banned the practices of mass mailing active credit cards to those who had not requested them (some of whom were even dead). However, not all government regulations have been so consumer friendly. In 1996, the U.S. Supreme Court in Smiley vs. Citibank lifted restrictions on the amount of late penalty fees a credit card company could charge. Deregulation has also allowed very high interest rates to be charged. In an effort to get consumers to use, award points programs were promoted and in the decades since, using a credit card has become so universal that paying with cash has become passé. Check your wallet, how much cash do you carry around these days?
The death of the credit card is inevitable.
Read the final post of this 3-part series.
The Solution.
Hamlet’s charachter, Polonius warned, “neither a borrower, nor a lender be“. But most of us are one or the other, and it’s this endless willingness of lenders to lend and borrowers to borrow that has shaped this recent economy. It’s not all bad, because it kept the consumer economy moving steadily from the early 1990s until the meltdown of 2007. But what about the future? How sustainable is high interest borrowing and lending? Look around. We are seeing alternative payment companies like PayPal, BillMeLater, Boku, and ILD Teleservices, experience phenomenal growth. The alternative payment method (APM) providers offer consumers a secure way to shop online without increasing their debt load and interest loan with “no credit card required” offers, and no interest. While conversely credit card companies are implementing increasingly hostile practices not only toward consumers but with extra fees for merchants, too.
A national poll by Consumer Reports lends further validation to this argument:
- 45% of consumers say they are paying less with credit than a year ago
- More than one-third (32%) have paid off and closed a card since January 2008, and half of those that canceled did so in direct response to the actions of credit-card issuers, such as cutting limits, hiking rates, or imposing fees.
So, do you still think credit cards will be alive and well for another 60 years? Clearly, I think there are some big changes coming, but I’d like to hear your thoughts, so please share them below.
Oh by the way, here are some other interesting links. If you don’t go to the site, at least read the headlines:
Consumer Reports Poll: Consumers Angry at Credit Card Companies; Citing Unfair Treatment When Closing Accounts
Merchants Start Campaign in Battle Over Credit-Card Fees
Anheuser-Busch Steps Into Credit Card Transaction Fee Reform Battle
http://www.csnews.com/csn/cat_management/malt_bev/article_display.jsp?vnu_content_id=1004030231
“The fees that the credit card companies charge defy logic” – CHS Joins Battle Against Credit Card Fees
http://www.allbusiness.com/retail-trade/food-stores/4486057-1.html
Angry Consumer Slices and Dices Credit Cards To Protest Rate Increase
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