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Apple Pay vs. Credit Cards- Start the Revolution or Continue the Evolution?
Mobile Apps Feature
December 11, 2014

Apple Pay vs. Credit Cards- Start the Revolution or Continue the Evolution?

By Peter Bernstein
Senior Editor

There is an old observation that all revolutions happen in an evolutionary manner.  One suspects that this is going to be the case with Apple Pay. That it is going to revolutionize the payment industry and make us all reliant on our smart devices to be our digital wallets. 

 You might wish to ask Bill Gates (News - Alert) about how that vision he had back in 1993 of a digital wallet worked out for Microsoft.  Or before you get caught up in the frenzy, it is good to note that Sony and Philips (News - Alert) laid the groundwork for Near Field Communications (NFC) in 2002 and despite the functionality being in most new smart devices, it has yet to live up to its promise.  Yes, tablets had been around for a while before the iPad help define the category and the same can be said for the iPhone (News - Alert) helping kick start the smartphone era. However, it really did take time for those markets to reach a tipping point before mass adoption kicked in. 

The reason to be somewhat circumspect about the pace of smartphones replacing plastic of all kinds for the majority of transactions is precisely because despite the hype surround Apple Pay old habits do die hard. Hence, it remains to be seen if Apple Pay really is the capability that ignites the digital wallet fire. Indeed, indications that this revolution could very well progress in evolutionary steps abounds on the technology as well as business model fronts. 

One company, with its own innovative approach to mobile payments is Ann Arbor, MI-based  Stratos Inc.  The company’s Bluetooth Connected Card™ Platform combines plastic cards into a single, smart, dynamic card. Credit, debit, loyalty, membership and gift cards can be loaded into one mobile-connected card. Users have the convenience of a single card in a familiar form factor while merchants have means for speeding transactions without a major infrastructure upgrade.

Stratos (News - Alert) wanted a better understanding of consumer attitudes about mobile transactions and commissioned its Stratos Holiday Mobile Payment Survey. This survey was conducted online within the United States by research firm AYTM - Ask Your Target (News - Alert) Market among 400 smartphone owners ages 24 - 50 on November 11, 2014. The data reported has a 95 percent confidence level with a margin of error of + or - 4.9 percent. The highlights, to be released in their entirely December 16, are food for thought.

 A majority of smartphone users (64 percent) said they preferred paying by cards since cards were accepted everywhere and 54 percent admitted that they were simply used to paying that way.  Other reasons consumers preferred to pay by cards included:

  • Smartphones not working all the time - 25 percent
  • Smartphones losing power – 22 percent
  • It takes longer to pay with a smartphone than a card – 18 percent
  • Fears over dropping their smartphone while paying – 15 percent

Smartphone users also pointed out that paying with a card seemed more appropriate during social situations ranking a business meal as the number one time you would rather pay with a card than a phone, followed by:

  • Meal with friends 
  • A date
  • Meal with kids
  • Meal with parents
  • Nightclub or bar
  • Picking someone up by buying them a drink

An overwhelming majority (80 percent) of smartphone users say cards can be improved and ranked the features that were most important:

  1. Link to loyalty and point programs
  2. Hiding credit card numbers from fraudsters
  3. Chip and pin encryption
  4. Ability to track with GPS if stolen
  5. Smartly linked to my smartphone

 “Looking at these results, consumers feel more comfortable paying with their cards because they are accepted everywhere and can be much more convenient in various payment scenarios,” said Thiago Olson, co-founder and CEO of Stratos, Inc. “We predict by the end of 2015, connected “all in one digital cards” like Stratos Card combined with paying with smartphones will be the preferred in store payment method for consumers.   By 2016, we predict to see more in-store mobile payment volume made using connected devices and wearables than payment directly via phone.  Although, mobile wallets like Apple Pay will continue to experience growth in places like grocery stores and big box, in social and business situations, we predict connected all in one cards like Stratos Card to be the preferred form of payment.”

Mobile payment solutions/wars have already emerged on most research firms’ lists of top trends for 2015.  That prediction seems to be rather obvious.  What is less obvious is what platform consumers ultimately prefer.  Will it be Apple Pay, NFC solutions, all-in-one cards, wearables, all of the aforementioned or none of them?  Time obviously will tell, but how long we have to wait for time to really tell is the hard part to predict.  After all, predicting human behavior even in a big data era is still as much art as science. 

Edited by Stefania Viscusi

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