Friday, May 02, 2014

Mobile Money Spells Economic Annihilation For Credit Cards

I don't let hype over US-Russia economic sanctions take my eye off the ball.  Other wanna-be global powers can talk all they like about creating alternative global settlement systems to the US-based SWIFT system.  Russia will not succeed even with help from China until both of their economies are completely open.  Transparency and the rule of law have enterprise value even though they are weakening in the US.  The relative advantage still lies with the Anglo-West and even Asian banks prefer more transparent interbank transfers.

The real action worth tracking is in mobile P2P payments.  The emerging tech for smartphones is an existential threat to the major credit card companies.  Any combination of Google Wallet and M-Pesa is a knockout blow to credit card payment systems.  The combo will eventually metastasize in the developed world.

Vendors who migrate from card payments to mobile payments will find many advantages.  They won't lose gross margin by paying credit card charges.  Reducing the number of steps in a transaction means less friction for purchases.  Consumers will love the simplicity of mobile transactions and spend even more of their dwindling middle-class paychecks.  The unbanked poor in the US will finally join the mobile revolution once they see how quickly M-Pesa fills their SNAP accounts.  Everybody wins.