Regardless of which Apple rumor du jour you choose to believe, all indications are that Apple will unveil its new iWallet mobile payments solution Tuesday. But don’t throw away your real wallet anytime soon. Cash is still king.
Sure, making payments using your iPhone is “cool” – particularly for millennials and those want to prove to friends, kids or grandkids that you’re hip and tech savvy. But is paying for something using your iPhone actually easier or better? Is it faster? Is it more reliable? Is it truly secure?
Celebrities Jennifer Lawrence and Kate Upton, whose intimate iPhone pictures were hacked and recently posted online, would surely have strong opinions about security. What if your phone battery dies and you don’t have your real wallet? What about an unreliable wireless connection while trying to make a purchase?
While it does the job reasonably well, the world’s existing payments infrastructure can be frustrating, expensive and inefficient. But it will be tough to convince big and small retailers, banks, payment networks like Visa and MasterCard, wireless carriers, and most importantly consumers that the experience and economics of mobile payment is genuinely better for them. More importantly, is there enough extra money to be made or saved through iPhone transactions to make the new technology worth their while?
If anyone can do it, it’s Apple. But even Tim Cook and his brilliant team will find it hard to solve a problem that doesn’t actually exist for consumers. After all, is it really that hard to pay for something using cash, credit or debit?
Apple has clear advantages in developing a mainstream mobile payment solution, including the fact that they already hold credit card data for an estimated 800 million iTunes accounts worldwide, a number twice as big as Amazon and PayPal combined. But 80% of people in the U.S. and 95% of the world population do not have an iPhone, according to my analysis. Nearly 10% of households in the U.S. don’t even have a checking account. Approximately 20% of households are either unbanked or underbanked and often rely on money orders and check cashing outlets. To put those numbers in context, approximately 50% of American households already have some form of account with JPMorgan Chase.
No doubt, even a tiny slice of the banked population that carry iPhones is an enormous market opportunity, but the actual number of people who could have access to Apple’s new solution is far smaller – at least today – than many market-watchers assume.
Whoever can pull off the right mainstream payment solution, if anyone, could become a meaningful game changer in short order. Starbucks, for example, developed its payment app just four years ago, and it has become the most successful – if not the only successful – mobile payment solution in the U.S. Mobile payments now account for a remarkable and growing 15% of the company’s total domestic store transactions. That’s impressive. But Starbucks was in a unique position: it created its own solution that works on its own point-of-sale terminals in its own stores for its own loyal customers.
For more than 40 years now, so-called experts have forecasted the imminent demise of cash within five years. But in actuality, the amount of currency is circulation in the U.S. continues to rise – not shrink – each year. The same goes for the amount of cash being dispensed out of the nation’s ATMs. The use of cash may shrink slowly over time and to some extent get “electronified” over the next few decades.
But cash is certainly still king today and I am willing to bet every dollar in my real wallet that it will remain so for many more years to come.
This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.
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