Advances in technology have astounded many and affected all sectors of the economy. Now the thought of virtual payment alternatives come as a threat to some and an opportunity to others.

One such method is a digital wallet that stores payment cards in a virtual storehouse and allows the consumer to make purchases online by entering a username and password. No personal details or card numbers needed. The head of Square and a co-founder of Twitter, Jack Dorsey, “agrees that digital wallets will make the trade-offs between various payment options clearer to consumers and reckons this will force card networks to up their game.”

This is an example of how Business Technology Management (discussed in our lectures) can benefit consumers as technology is used to change the way in which purchases are made. In fact these types of online payment alternatives may revolutionise the way we perceive and use plastic credit/debit cards. According to Nilson Report (an industry newsletter), “Last year some $6.7 trillion was channeled through credit cards managed by the networks and over $15 trillion in debit and prepaid cards” (on chart bellow).

However, it seem in the short term new technology is encouraging the usage of payment cards. For example, smartphone apps often require users to enter their card details to pay for services. Although BTM is transforming the way in which we make purchases card companies/networks are not about to let it lead to their demise. Instead they have heavily invested in technology and embrace the inevitable. “Visa is betting its member banks can help it to narrow the gap with rivals like PayPal, for instance, which is part of eBay and has grown to 117m active users thanks in part to its use on the auction site.”

Another way for card companies to maintain their capital gains would be to invest in emerging markets, “where a lack of financial infrastructure is hastening the rise of phone-based payments systems”. MasterCard has already established a joint venture called Wanda with Telefónica (a Spanish telecoms firm), which aims to boost mobile payments across Latin America.

Original Article:

http://www.economist.com/news/finance-and-economics/21566644-visa-mastercard-and-other-big-payment-networks-need-not-be-victims-shift