The Big Payments Question: Why Should I Use This?
by: Sam Murrant
Payment cards have been with us a long time. Plastic is an old technology, backed by old infrastructure. It is slower, more expensive, and less convenient for merchants to accept cards than it is to accept various forms of electronic P2P transfer, let alone cash. Cards are unsuited for remote transactions and international transactions, but that hasn’t stopped them becoming the most heavily used online payment tools globally.
For banks, cards are a useful source of income via interchange fees, although fraud — especially online — is an increasingly acute problem. For merchants, cards are expensive to accept anyway, and they also risk direct losses from fraud in the form of chargebacks when accepting cards online. Consumers are barely affected by any of this. Banks have to pay consumers back for fraud, and goods are no more expensive for consumers to buy on cards than they are with cash or any other payment tool.
So consumers continue to use payment cards because they work — there is no real problem to solve on the consumer side of consumer payments. On the other side of the equation, banks are affected by fraud and merchants have trouble maintaining their margins. These problems cry out for solutions from the industry, and fintech providers are developing and delivering these. For consumers, though, payment cards are familiar, comfortable, and functional, and so there are no push factors driving them to pick up something else.
Once the initial reluctance to use a new tool is overcome, consumers will continue to use the tool and come to rely on it — but only if it provides a better experience than their other options. Therefore, one of the most important questions a fintech provider can ask is “why would a consumer use this tool over a card?”
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