Apple Pay is revolutionary, but perhaps not for the reason most people think. It isn’t going to replace the credit card. The credit card has never been an annoyance, not to retailers, cardholders or the people behind them in the checkout line. (The greatest annoyance remains people fumbling with checkbooks at the last minute.) The credit card will stick around because it is integrated into Apple Pay. That tight integration is also one reason Apple Pay has a good chance of succeeding.
But the real reason it will succeed is that it will replace the wallet, the actual physical thing crammed with cards, cash, photos and receipts. The smartphone has a history of replacing other devices. It has killed or wounded, among others, point-and-shoot cameras, video cameras, tape recorders, MP3 players, GPS devices, wristwatches, daily organizers, maps, alarm clocks, calculators, flashlights and compasses.
When you are out shopping, it’s the wallet, not the credit card, that is the annoyance. It’s bulky. It can be forgotten, or lost. I’ve learned while traipsing about buying stuff with my ApplePay that I can whittle down wallet items that I need to carry to three:
A single credit card, for places that have not embraced, but soon will, some form of smartphone payment.
A driver’s license. The law says I need to carry it, but I don’t need a whole wallet for it. (To carry it, I tuck it and the single credit card into an iPhone case that has room for three cards and two tightly folded bills.) But give it time. Although no state appears to be actively considering digitizing a driver’s license, I am convinced that within five years some will. (I do, however, foresee a risk in that. You would need to hand over your phone to a police officer who is asking for identification, and then the authorities could have access to anything on that phone.)
About $20 in cash. This may seem like a strangely small amount. But younger people will tell you that carrying $40 sounds strange. We are starting to see the first signs of the end of cash.
Citibank did a survey recently asking what method of payment is used for smaller purchases. Nearly half of the people in their 50s said cash. (That just over half said something other than cash is in itself startling.) But among those under 30? Just 30 percent said they’d use cash.
The millennials preferred to use debit cards; about 40 percent said it was the preferred option. Only a quarter of those over age 60 said they’d use a debit card.
It looks as if how the young pay for things will change again soon. Analysts at Forrester Research estimate that in-person mobile payments will reach $34 billion in annual transactions before the end of the decade, from $3.7 billion this year. To put that in perspective, in-person mobile payments are a quarter of 1 percent of retail sales. But with a compound annual growth rate of 56 percent, they would be the fastest-growing segment of mobile payments. (Other kinds include those done online using the phone and directly paying others via mobile device.)
Forrester is confident of that kind of growth, even though it says only 19 percent of American adults who use the Internet say they would use a system like Apple Pay or Google Wallet. One reason is that it thinks the introduction of credit cards with computer chips on them, a security enhancement common in Europe, will cause retailers to upgrade their checkout systems. Many will buy ones that enable smartphone payments.
If I were to make a bet, I’d say that 10 years from now the most popular answer from young shoppers about how they make small payments would be: thumbprint. And you’ll get a dull shrug when you ask what a wallet is.