The form factor—the physical device that initiates an electronic payment—is changing significantly for the first time in 30 years.
That change, from magnetic stripe and embedded chip to a mobile device, will precipitate global change in payments that has implications for consumers, banks, networks, and infrastructure providers.
The last time the form factor changed in such fundamental ways was at the end of the 1970s, when electronic clearing and settlement replaced three paper receipts—the first and critical step in the creation of a truly global payments business.
Product configurations are not likely to change. They will continue to provide access to prepaid, demand deposit, and current accounts or provide access to a line of credit. But, the replacement of the plastic cards resident in the consumer’s physical wallet by virtual payment media residing in a digital “wallet” portends more than a “cooler” way to pay.
1. Aite Group, “The Hosted POS: Enabling Mobile Marketing and Mobile Payments in the United States,” Rick Oglesby, September 2011.