Perception doesn't match reality in the US payments industry

| by Will Hernandez
Perception doesn't match reality in the US payments industry

iStock illustration.

Over the course of 10-plus years analyzing, covering and writing about the payments industry, I've heard and read some hefty predictions and proclamations from executives.

Spoiler alert: most of them fall flat. In some cases, they trip into a deep valley never to be heard from again. I'm looking at you, MCX and Softcard.

But even the most respected executives in the industry make claims that don't match the reality of everyday consumers and their payments habits.

Bank of America's Head of Digital Banking Michelle Moore and PayPal CEO Dan Schulman each made separate comments the past couple of weeks that left me scratching my head.

Their perception doesn't match reality.

Let's unpack Moore's comments first.

She appeared on Jim Cramer's "Mad Money" show on CNBC and told him that Bank of America would like to get cash out of the system.

"The secret is understanding what our customers want," Moore said. "We listen to them and we give them what they want, not what we want."

But do those customers want cash out of the system?

I ask because a few days earlier, the Eater published a story about how fast casual burger chain Shake Shack walked back a plan to go cashless after customers complained of the decision at a New York City location that featured only self-ordering kiosks.

"In the first rollout at Astor Place (in Manhattan), we did not accept cash at all, and there are people who have told us very clearly 'we want to pay with cash'," Shake Shack CEO Randy Garutti said about the decision during an earnings call. "So in this next phase, we're going to go ahead and have cashiers as well as kiosks."

Of course, Shake Shack is not the only fast casual chain to go the cashless route.

Sweetgreen gained some unwanted attention for the move two years ago because detractors believed the push to a cashless society, particular in the U.S., alienates financially underserved consumers.

At the time, I argued that Sweetgreen should stay the course on cashless because honestly, the chain is not targeting that particular demographic with its food.

I still feel that way, but the Shake Shack situation clearly shows consumers want choice and that not everything is as black and white as banking and payments executives believe they are in 2018.

Which brings me to Schulman's comments.

The PayPal CEO believes physical payment cards will cease to exist in 20 years.

Schulman told Kramer (maybe there's a pattern here) in an interview at TheStreet's Investor Boot Camp conference in New York that the rise of digital platforms such as PayPal and Venmo will make the need physical cards obsolete.

"Twenty years from now, there will be no more credit cards, really," Schulman said. "Why have them when you can have a QR code or NCR tablet?"

Schulman's comments might be even more of a head scratcher when you consider the current plight of proximity mobile payments in the U.S.

Consumers here are not flocking to them en masse like the industry envisioned. Most merchants are not promoting mobile payments acceptance even though they are better equipped to handle such transactions.

Auriemma Consulting Group and Phoenix Marketing International each published consumer studies the past couple of weeks that suggest mobile wallet adoption is going backwards.

And, to tie it back to Moore's comments, cash is still an significant enough component in how consumers, even millennials and Gen Z, pay for things.

Consider this: a recent Fed survey found that consumers between the ages of 18 and 24 preferred to pay with cash more than other demographics. A fear of debt with credit cards has helped to fuel this trend.

But one thing surveys and payments executives fail to recognize is the idiosyncrasies of human behavior and the reasons for why they do what they do.

For example, my brother, who is about to turn 30 in a few weeks, rarely pays with plastic when he's at a bar or restaurant. The reason he prefers cash is because a bartender once messed up his tab and charged the wrong amount to his card.

It only takes one instance such as my brother's situation to change someone's behavior, potentially forever. 

One thing I would like to see the industry to is to cease making proclamations in the same vein as Moore and Schulman. I know that's hard to do in the presence of someone like Jim Kramer, but try.

Instead, improve the products you have now.

In Bank of America's case, I still can't make a mobile payment from its Android banking app. How can the bank be serious about eliminating cash when it has yet to give customers a way to pay via smartphone?

PayPal seems to be on the right path with the number of partnerships it has announced over the years, but I don't know a single person who's used PayPal at the physical point of sale.

In general, mobile wallets lack the pizzazz consumers want in their digital experiences. The easy thing to say is that providers should try and mimic the likes of Alipay and WeChat and turn their systems into a hub of sorts, one that enables me to reserve an Uber, book a doctor's appointment, or buy movie tickets. That's incredible value, but U.S. providers are nowhere close to that kind of environment.

And remember when the industry pushed loyalty as this magical elixir that was supposed to fix mobile wallets' shortcomings and increase consumer adoption? That argument seems silly at the moment when you consider the other gaps in the mobile wallet experience.

As long as mobile wallets are only about payments, consumers will continue using those pesky plastic cards Schulman wants to eliminate. And cash, too.

Topics: Contactless / NFC, Loyalty Programs, Mobile/Digital Wallet, POS, Restaurants, Retail, Trends / Statistics

Companies: Bank of America, Shake Shack, PayPal

Will Hernandez
Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of, he spent two years as the content manager for, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago. View Will Hernandez's profile on LinkedIn

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