There’s a lot of excitement surrounding Apple’s new mobile payment system, Apple Pay. As we’ve said before, consumers have been waiting for one unified payment system that will be accepted at every major retailer to fully embrace the idea of totally digital payments, and it seems Apple’s new system will do just that. However, we’re not quite ready for a total reversal of the payment landscape and the full digitization of transactions, and the reason is a little more complicated than you might think.
Classic Payment Systems Won’t Disappear
While new payment methods, such as Apple Pay, which will even be compatible with the Apple Watch, are more convenient for both brick-and-mortar and e-commerce transactions, they aren’t full payment solutions. Consider, for a moment, how you last paid your rent, your utility company, your phone bill, or even your babysitter. Classic payment systems, like Interactive Voice Response (IVRs for short), checks, and direct payments are still essential for these recurring expenses. Not even the much-buzzed Apple Pay is compatible with many common transactions, and that’s a problem that will be difficult to solve.
The reason is that these payment solutions are known, trusted, and have been tested and perfected until they’ve reached their current form. When it comes time to pay the landlord, consumers don’t want to have to worry about whether or not their landlord has Apple Pay, or uses apps like Chase Quickpay, when they can simply deposit their check in the mail each month. The same goes for utility companies, who may either send a paper statement with a return envelope, or offer payment methods like online bill payment or reoccurring pay, both solutions trusted third party payment providers, like E-Complish, facilitate.
Then there’s the most classic payment system of all: cash. According to a recent article on Quartz, many advanced economies, including Germany’s, rely on cash transactions for 80% of expenses. Regardless of how convenient or simple point-of-sale mobile transactions become, nothing will ever fully take the place of cash. As cited in the article, the Federal Reserve commissioned a study on seven advanced economies across the world, surveying participants on their reasoning behind their answers. Germans, who overwhelmingly rely on cash even though they boast some of the most competitive and intuitive mobile and debit/credit payment processing solutions in the world, gave two reasons for their cash spend.
The first was budgeting, which was the most provided answer. According to the study, participants found it easier to budget their spend when carrying cash. One look at their wallet told them everything they needed to know about their funds, and they didn’t run the risk of overspending. The second, more interesting answer was security and privacy, a hot-button topic that leads us into our next point.
And There’s Still That Trust Issue…
In a study commissioned by the Federal Reserve, the most-cited reason American consumers gave for not embracing the digitization of payment processing was concerns over security. Although we’ve previously explained that physical data, such as stolen debit and credit cards, are more valuable in the underground cybercriminal market, there is a lingering feeling among consumers that newer payment systems are more vulnerable. Unfortunately for payment processors everywhere, recent cyber crimes have made front page headlines, and the list of “worst data breaches in history” needs constant updating.
The effects of these breaches are long lasting, not only for consumers’ opinions on digital payment security, but on the businesses themselves. According to a recent article on Forbes, Target shares have tumbled after their high-profile data breach, where millions of customers’ credit card information was exposed. The hack of Sony Playstation’s online network of video gamers’ credit card information has resulted in hundreds of thousands of unsubscribers. And most recently, Russian hackers stole millions of users’ email addresses and passwords from one of the most trusted and secure companies: Google. By now consumers must be thinking, “If Google can be hacked, so can I.”
The truth is that you’re more likely to have your debit or credit card information stolen from a rigged ATM, be the victim of a mugging, or have a criminal find your bank information in the trash than ever be the victim of a cyber crime as a result of an unsecured mobile payment. Although the statistics prove this, consumers worry about what they hear on the news. With all of these recent high-profile cybercrimes, who can blame them?
So What’s Next for Payment Systems?
While the new payment systems need to focus on proving their security features to an uneasy consumer base, the payment systems of old will continue to persist as the main avenue for transactions. Don’t expect paper checks, debit and credit cards, phone payments, or cash to go anywhere anytime soon. In addition to concerns over security, there’s still no technology that can fully replace the person-to-person and complex business solutions and transactions these methods provide. Eventually, perhaps as soon as next year with the release of Apple’s new system, we’ll see the traditional payment models decrease in frequency in favor of mobile, text, and digital payments, but the full upheaval of the payment landscape isn’t coming anytime soon.
For more information about E-Complish’s solutions for businesses, take a look at our Solutions page, where you’ll find information on what they do, who will find them useful, as well as the all-important measures we take to ensure your data is secure.