Paypal says the use of physical credit cards will soon die out by 2018, thanks to rising number of Australians using their smartphones for purchasing almost virtually anything, according to a senior executive of the digital payment service company.
Global Vice President for Paypal Hill Ferguson said that in about five years, digital alternatives or equivalents of the credit card will be the new norm.
Mr Ferguson said that in a perfect digital world, people would not need credit cards, let alone wallets. He said credit cards are just "dumb tokens" stored in people's wallets with data on them.
Mr Ferguson cited the high smartphone penetration rates of Australia as the main reason for his statement about credit cards dying.
Based on a Google/TNS study, about 65 per cent of adults in Australia own smartphones. Mr Feguson predicted that physical credit cards will become obsolete in five years.
People who eat in restaurants and traditionally reach for their credit cards will soon pull out their smartphones and pay for their meals using a digital wallet.
A digital wallet is different from a mobile wallet since the former will contain data stored securely on a server. Digital wallet data can be accessible anytime and anywhere using various devices, according to Mr Ferguson.
The virtual credit cards in the digital wallet will still have the same customer data and branding as the physical credit card.
Despite the Paypal executive's bold prediction, top credit card provider Visa is not buying it. Visa is not convinced that credit cards are dying.
Visa not convinced
According to Visa, physical credit cards are considered legitimate currency and recognised globally. Visa Australia Country Manager Vipin Kalra said credit cards will continue to be around for many years and play a significant role in paying for products and services. Credit cards are already accepted worldwide with 36 million merchants around the globe.
Mr Kalra acknowledged the growing number of consumers who are using multiple devices to pay for products and services. People would want to use digital technology since it is more convenient, fast and secure. He says the wide acceptance of mobile payments is important to the exponential growth of any payment innovation.
Virtual and contactless cards have paved the way for mobile payments. Once retailers accept contactless cards, the same terminal can also be used for mobile Near Field Communication (NFC) payments.
Mr Kalra revealed that Visa had investments in the development of NFC payments and digital wallet services, together with their partner financial institutions. He said Visa stands out because of its strong relationships with merchants and partners.
Visa had launched its digital wallet known as "V.me" with Australian retailers like Cotton On, City Beach, JB Hi-Fi and Lorna Jane. Over 40 financial institutions are ready to offer Visa's digital wallet, including the ANZ Banking Group, National Australia Bank, Westpac, Citibank, ING Direct and Suncorp.
Paypal has not been as active lately in pushing its mobile since it is still busy building relationships with financial institutions and merchants. The digital payment service company has 5 million users in Australia.