Some of Us Say Debit, Credit Cards Are Done in Just 5 Years

NEW YORK (MainStreet) — We seem to like, if not love, our debit cards.

According to the Federal Reserve, there were 283 million debit cards in use in the U.S. last year, with an average 23 payments per month.

But analysts speculate that debit cards have an expiration date of their own, possibly becoming obsolete within a few years (along with credit cards).

The blame goes to mobile payments, which are growing in use at an impressive pace. The research firm Gartner says mobile payments accounted for $235 billion in 2013, but that figure is expected to rise to $720 billion annually by 2017.

"It won't happen overnight, but mobile payment platforms like Apple Pay will eventually take the place of debit cards," says Sean Graw, spokesperson for BradsDeals.com, a consumer deals site.

Data safety is the big reason, but convenience plays a role too, Graw says. "Since mobile payments are encrypted, your card and account numbers are safer. They also reduce the need to carry around a wallet full of cards," he says.

Consumers can expect debit cards to be around for a few years before they go the way of the hula-hoop and phone booth and are replaced by mobile chip technology. "Debit cards are here to stay for at least another three to five years, in which time they will be replaced by SIM card mobile technology," says Jim Angleton, president of AegisFS, a wholesale financial payments services company. "Chip-and-PIN technology is finally taking hold in the U.S., taking the place of the archaic older card-based payment system that has experienced cyber attacks, loss and theft of funds."

Consequently, many retailers and service providers are unplugging card-based systems and moving to mobile.

Nick O'Neil owns a mobile gift card startup that gives him firsthand experience with the growing power and pervasiveness of mobile payments. "We've done a lot of research into the [peer-to-peer] payments market and tried out just about every developer service for paying users, and yes, debit cards take a central role in this area right now," he says. "But now we're seeing emerging mobile p2p payment markets, which are pushing payments directly to users in services like Venmo, Square Cash or Treat."

It's largely Millennials driving the revolution, with 68% of that group saying how we access money will be totally different in just five years and 33% not expecting to use a bank at all, according to the Viacom Millennial Disruption Index. "Millennials already know that technologies like digital wallets, digital currency and wearable devices will transform the payments industry," says Alexander K. Alexander Ashe, chief executive at Finio Business Spendology, a personal finances website.

Not everyone is convinced bank cards are destined for the trash heap. Debit card use will surely decrease due to new payment technologies such as Apple Pay, but I don't think that debit cards will ever go away," says Matthew Coan, founder of the finance site Casavvy.com. "Bank cards are a direct link allowing people to access their checking account funds and account information, and that has value."

Ben Katz, CEO of Card.com, agrees. "Debit cards are not disappearing," he says. "Apple Pay will be less than 1% in usage for the rest of the decade.

— Written by Brian O'Connell for MainStreet

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