The Death of the Credit Card: 5 Futuristic Ways to Pay (Today!)
This month’s Wired has a great article entitled The Future of Money: It’s Flexible, Frictionless and (Almost) Free which focuses on how technology is helping cut institutional interlopers out of the equation when moving money around. As we’ve discussed at length here at MYC, venturing through the realm of credit card transactions is a bit like walking through a seedy neighborhood at night – if you’re not careful, someone along the way’s going to steal your money. Whether it’s a wire transfer fee, interchange fee, credit card processing fees or one of 243 different fees that MasterCard charges, there are numerous ways for your money to simply disappear on its journey from your wallet to the merchant. And the more middlemen there are along the way, the more opportunities there are for someone to take a cut. It’s like passing a pack of gum across the classroom to a friend – the more hands it changes through, the more likely someone is going to help themselves to a stick so that by the time the pack gets back to you, there’s barely half a piece of gum left for yourself.
It’s an immensely inefficient and inconvenient system that’s starting to make less and less sense as our abilities to connect directly with one another expand. The aforementioned Wired article focuses on one such gamechanger we are all familiar with: Paypal, which was founded on the libertarian principles of Peter Thiel, who hoped it would help make it “nearly impossible for corrupt governments to steal wealth from their people” by giving citizens more direct control over their currencies. In a sense, cutting out the middleman (or at least some of them).
Of course, as we all know, PayPal hasn’t quite achieved that. Rather, it’s become more like a middleman itself, albeit a much friendlier one to individuals and small vendors and merchants on the web. Instead of being at the mercy of the restrictive (and expensive) terms of Big Plastic (Visa, Mastercard, American Express, Discover), PayPal handles the messy business of credit card processing for a fee that is considerably less than what most brick-and-mortar merchants charge per swipe. PayPal, thus far, has been less of a replacement for the credit card industry and more like a user-friendly front end.
What’s more promising, however, are the new technologies that are emerging that make it even easier for individuals to pay and merchants to take payments. Wired pulled out five of these “new ways to pay” that may significantly eat into the credit card market share and we thought it’d be interesting to take a closer look. Check it out:
Twitpay
Twitpay is a bit hard to understand until you try it out. It works via Twitter and is powered by PayPal. Essentially, to send someone money, you just reply to them with the word Twitpay in your tweet along with the amount you owe them and an optional memo. For example, you can do:
@jackbusch Twitpay $2 for keeping it realz
That’s it. Twitpay searches for all tweets mentioning Twitpay, so it automatically grabs your payment and puts it on your tab. So, now, when you visit Twitpay.me, it shows that you owe @jackbusch $2 bucks. In order to settle up, you log in to PayPal and complete the transaction like normal.
True, this is essentially a social media friendly front-end for PayPal. But what makes Twitpay useful and unique is that it keeps a running total of what you owe. So, if you sent @jackbusch $2, but then @jackbusch owed you $1 later on before you settled, you would really only have to transact $1 at the end of the day. In a way, Twitpay has created a digital currency. And most importantly, it’s free to use.
Twitpay in action
Note: This is all, of course, completely on the honors system. You don’t have to settle up after you’ve promised to pay someone. But since your profile is public (you can see the transaction I just did for this example at twitpay.me/masteryourcard), everyone will know that you’re a deadbeat.
Zong
Zong lets you bill people via cell phone number rather than asking them to enter their credit card information. And in a world where more people are putting their credit cards on ice or simply don’t qualify for a credit card, this might be handy indeed. When customers buy using Zong, the amount they owe goes directly on to their mobile phone bill (kind of like when you text Haiti to 90999 to send $10 to Red Cross). Zong won’t BS you though – the service is expensive, since phone companies typically take a 25% to 50% cut from the merchant. But Zong reportedly converts 10 times more often than websites that accept only credit cards and as models like this gain traction, it’s bound to get better and more competitive.
Square
Square (as in “square up” and not affiliated with the makers of Final Fantasy) was co-founded by Jack Dorsey, one of the masterminds behind Twitter, and markets a device that turns your iPhone into a credit card reader. Customers can even use the touchscreen to leave their signature and get instant receipts via text or email. Transactions are processed through Square, which saves small vendors (for example, artists at a craft sh0w) from jumping through the hoops and investing in the equipment required to work directly with credit card companies. Square also has marketing potential, as it keeps track of frequent visitors so they can be offered perks and rewards (though this may raise Big Brother issues) and social cred for donating $0.01 of each transaction to the cause or charity of your choosing.
GetGiving
GetGiving takes the iTunes approach to making it worthwhile to receive small payments without getting killed by fees. GetGiving focuses on charities seeking “microdonations” and helps organizations cut down on fees by sending them one monthly lump sum instead of forcing them to cough up a $0.30 to $1.00 transaction fee per donation (which, if people are only giving $5 at a time, can be an absolute downer). Like Twitpay, GetGiving is powered by PayPal.
Hub Culture
Hub Culture aims to make collaborating with international vendors, consultants, teams and creatives seamless and cost effective. One of the ways they do this is offering virtual currency called “ven.” Ven can be used to buy, sell and exchange services and goods with other Hub Culture members (of which there are 20,000 and growing). So, if you wanted to pay a web designer in London in ven, he could then take that ven and pay his SEO tech in India, all without worrying about those nasty foreign transaction fees and currency exchange hassles. Ven is now extending beyond the network and is available to anyone with an email address, meaning that, if you wanted to, you could pay for just about anything with ven – whether it’s a limo reservation, a case of vegan beef jerky or a bounty on your arch nemesis’ head.
Implications
The move to virtual currency and alternate modes of payment is certainly interesting. Still, one issue to remember is that the one important reason that these services are so seamless and successful is that they are lightly regulated (if at all). But when you think about the concept – inventing currencies for thousands of end users to exchange internationally – services like these are bound to become the subject of at least some government oversight. For now, it seems unnecessary. These entrepreneurial innovators need little incentive to provide value and accountability to consumers other than the fact that if they don’t deliver, they’ll fail. Fast-forward 50 years, though, when some of these industries may have grown and become as entrenched and sprawling as today’s credit card companies, and that might be a different story.
What do you think? Will virtual currency, social media and micropayments save us all from the usury and nickel-and-diming of the current financial structure? Or is it all hype? Let us know in the comments.
Image from House of Sims
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