The End of Payments

By Tien Tzuo August 30, 2019

Apple’s new credit card launched last week. It’s a joint venture with Mastercard and Goldman Sachs. Pros: It gives you cash back on Apple purchases, and doesn’t have any fees. Cons: There are no travel rewards, and it’s obviously dead on arrival if you’re an Android user.

There was also one detail that particularly struck me.

The Apple card itself is apparently very, very delicate. It comes with detailed care and cleaning instructions (“gently wipe with a soft, slightly damp, lint-free microfiber cloth”). Hard surfaces can scratch it easily, and it’s not supposed to come into contact with denim or leather (!). So I guess wallets and jeans are a no-go.

But then again, maybe Apple doesn’t expect anyone to use it, because the card is mostly virtual anyway. It’s a piece of software that’s linked to Apple Pay and built into your iPhone’s wallet app (the “card” goes in your “wallet” – get it?).

So if physical credit cards are going away, does this mean payments are going away as well?

That might sound like a silly premise. For example, today Zuora supports 37 global payment gateways, and we have many more in the works. So wouldn’t that mean that payments are as important as ever?

Well, actually, I’m starting to see several signs that payments (or at least physical transactions) are beginning to fade away:

Let’s start with China. Today their cities are essentially cashless. Everything is handled on your phone via Alipay or WeChat pay. Mobile payments are used to pay salaries, hospital bills, traffic fines. Last time I was in Beijing got yelled at for trying to pay with a credit card! The buskers have QR codes that you can scan with your phone if you want to give them a tip.

Now let’s look at Venmo, the mobile payment service that lets people transfer funds to others via a phone app. If you’ve been out to dinner with a large group of friends lately, you’ve probably seen it in action. Venmo’s net payment volume was over $24 billion last quarter and is growing at 70% a year. Zelle, Google Wallet, Square Cash, and Apple Pay are also in this space, which is growing like crazy. No cards, no checks, no cash — just a few clicks on an app.

Finally, there are Amazon’s new cashierless convenience stores. They want to have 3,000 of these in operation by 2022, and they’ve already got competition. Right now they’re mostly just quick meal kits for people grabbing lunch, but you’re already starting to see “just walk out” technology getting adopted by major grocery store chains. This is increasingly looking like the future of retail.

There’s a great Jeff Bezos quote in the book: “I don’t know about you, but most of my exchanges with cashiers are not that meaningful.” And of course, Amazon Prime and subscriptions in general are all about getting rid of transactions in order to provide a seamless service.

So where is this all headed? Well, if you want to get a sense of the end state of transactional commerce, just start by eliminating the pain points. What puts friction between you and getting access to the stuff you need, where you want it, when you want it? Well, payments. They still certainly count as pain points in my book.

As I mentioned a couple of weeks ago, we’re rapidly moving towards a service-based economy where things just happen: food shows up in your refrigerator, clothing shows up in your closet, car rides show up on your driveway, etc.

Commerce isn’t going away, but payments are. That has lots of implications for businesses who want to keep us consistently satisfied over the next decade.

Remember that great scene in the Big Lebowski when the Dude pays for his carton of milk with a personal check for sixty nine cents? I guarantee you that much of the way we execute daily transactions is going to look just as silly in five years.

Or, to paraphrase the Dude: “These payments will not stand, man”.

 

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