Will words and gestures replace plastic cards and cash?

Read Ian's 1998 post and compare his predictions to what we have now (they are mostly spot on). As Bill Gates said, "We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten."

Ridiculous.

So according to Ian we will need Words, Gestures, "and" a Smartphone. Not to mentioned speaking into a microphone due to all the ambient noise.

@Mark Would you let a complete stranger or two stay at your home, especially when you are not there? I said "ridiculous" when I first heard of such a proposition. Don't view things literally with your current hat on - technology changes more rapidly than individual minds.

@AlexanderPeschkoff:

I'm with @MarkAnderson on this. You may have balked at AirBnB but renting out a spare room to a "Paying Guest" or PG has been a standard practice in India and a few other countries for ages, well before AirBnB came into existence. When it comes to "words, gestures and smartphones", the problem with mainstream adoption is precisely what you've pointed out: Technology changes more rapidly than people. But people are the ones who need to adapt the technology and, to do that, they need a compelling reason. Despite being around for nearly a decade, mobile wallets haven't replaced cards because plastic is not broken. That will precisely be the challenge for adoption of "words, gestures and smartphones" when it comes to proximity payments. Moreover, if people are not comfortable speaking out the amount of payment at a supermarket checkout, they won't use this technology, however rapidly it advances.

@Ketharaman - I should have clarified: when speaking of "minds" I referring to the perceiption of "plausible" as opposed to "accepted for everyday use".

Fifty years ago, videoconferencing was in the realm of science fiction. Twenty years ago, very few people would have guessed that in just ten years we will be carrying videoconference terminals in our pockets and be able to use them anywhere.

Would it have been ridiculous twenty years ago to think that customer service issue on a train in India could be resolved in minutes via some short message from a mobile phone sent to no addressee in particular?

From that perspective, there are people - like Ian - who have ability to draw some (pretyy accurate) conclusions from gazing into their crystal balls. And it's only natural that the rest of us doubt such futuristic predictions.

@AlexanderPeschkoff:

I make my living selling technology, so you're really preaching to the converted if your point is about the power of technology to do new things:)

But the context of this post is replacement, not just new, where a new product category X replaces an existing product category Y. I haven't done any comprehensive research but, in the last century, I can barely think of 10 new, sizable tech-enabled Xs that have succeeded in replacing an old Y e.g. MS Word - Typewriter, Cars-Horse Carriage, MP3-CD, Email-Snail Mail, etc. OTOH, I can think of many Xs that have failed to replace many Ys regardless of whether X became popular or not viz:

1. Videoconferencing hasn't replaced face-to-face meetings.
2. Using Twitter to solve a customer service issue on a moving train hasn't replaced verbally complaining to the Train Ticket Examiner.
3. EMR / EHR haven't replaced handwritten / computer-printed prescriptions.
4. While I've personally never gone back to a human broker ever since I started using an e-brokerage 15 years ago, human brokers haven't become extinct.
5. Bank branches and digital channels still coexist.

I can go on and on but I hope you get my drift. 

If, even the mightly IBM is positioning AI as "Augmented Intelligence" that will empower human beings to do more rather than replace human beings with robots, there's a reason for that.

And, when it comes to proximity payments, I rate the chances of "words, gestures and smartphones" replacing plastic cards as quite low. Partly because plastic is not broken and therefore replacing plastic doesn't have a compelling value proposition. Partly also because payment leaders like SQUARE have tried and given up on an even more frictionless form of payment in SQUARE WALLET that worked by using face recognition and didn't even require words and gestures.

I don't know Dr. Ian Pearson. I take your word that many of his predictions have come true. But, with due respect to him, I don't see his prediction about "words, gestures and smartphones" replacing plastic cards coming true in the forseeable future.

@Ketharaman - What can you say on Alipay and WeChat in China?..

@AlexanderPeschkoff: I don't know much about these two products in China. What have they replaced?

Cash. And cards. Not 100%, but 10 years ago even 30-50% replacement of cash and cards in a retail environment in China with QR-based app would have sounded implausible. Europe is still littered with QR payment failures.

@AlexanderPeschkoff:

I did some checking around. I'm told that, in today's Shanghai, Alipay and WeChat account for 95% of retail payments, with cash / plastic cards accounting for barely 5%.

That said, China's GDP has increased by 5X in the last 10 years (Source: Wikipedia). Such an explosive growth is unmatched by any other country and would have sounded implausible 10 years ago. So, there's a massive amount of new money generated in China during this period. I lack historical data but it's quite possible that Alipay / WeChat account for nearly 100% of this new money but replacement of barely 10% of existing cash / plastic. Accordingly, even Alipay / WeChat would be an example of a new product category that has augmented - rather than replaced - another product category.

))) No major change happens fast. That was not the point :)

In the long term, we're all dead anyway. No point in hallucinating about changes beyond 5-10 years. That's my point:) On a side note, government diktat brought about a reduction in cash usage from 98% to 70% in 3 months. And this was in a vibrant democracy. So, major changes can happen fast - it just depends upon the change agent.

I thought your definition of a change was "complete replacement" :)

No. "Change" is any degree of change. "Complete replacement" means replacement of at least 90%, if not 100% (which becomes "disruption"). I'll leave the definition of "major change" open-ended and context-sensitive!

Not sure about Alipay but the Alipay-backed mobile wallet PayTM in India doesn't charge merchant fees for accepting cashless payments. This is in sharp contrast to 0.5-2% MDR levied by other digital payment alternatives like debit card, credit card and UPI. While PayTM has arguably the best UX of all the digital payment products in India, its zero-fees business model is arguably a bigger driver of its success. 

Thought of bringing this up because it's often forgotten that business model plays as important a role as product / technology in many of these "Product Category X replaces Product Category Y" memes. 

Very much so! Our disruprive "zero Capex" business model for mass transit ticketing does wonders.

@AlexanderPeschkoff:

Just stumbled on to an NYT article entitled "In Urban China, Cash Is Rapidly Becoming Obsolete". According to this highlighted passage in the article, much of the movement to cashless in urban China has happened in the last 3 years. This sounds incredible. I don't have any on-the-ground substantiation for this claim by the author but, if it's true, this is revolutionary and totally undermines my conjecture that only the new money in China has gone cashless. For this to have happened in just 3 years, Alipay / WeChat must have replaced a lot of cash and / or plastic.

OTOH, Finextra recently reported that China Union Pay is the world's largest card scheme and that 99% of its card base of 6B cards are used inside China. Given that Alipay / WeChat primarily work over bank accounts - and not credit / debit card - and their ubiquity in urban China, I can't understand where the 6B China Union Pay payment cards are used.

The mystery thickens!

@Ketharaman: Thank you for sharing. An amazing trend indeed!

I can feel the payment industry is being primed for a tectonic shift, on several levels - with each emerging force gaining momentum in a different vector, but still pushing away from legacy.

PSD2, PIN-on-glass, blockchain, radio-agnostic EMV, Alipay, Amazon (used for payments in physical retail), to name a few. Interesting times...

@AlexanderPeschkoff: True that!