Is money better known as a number on a screen or a crisp linen bill? For the time being, the word may still comfortably conjure an image of green slips of paper, but the future may tell a different story in which electronic, mobile payment first comes to mind.
Moving away from cash to electronic payments has the advantages of convenience and reducing crime and tax evasion. The flip side of that coin, however, says that electronic payments disenfranchise poorer people who lack easy access to the internet and bank accounts and make it easier for governments and businesses to monitor a person’s every move. Still, the movement to electronic payments will likely hinge on the ability of technology companies, a term now to include banks as they struggle to keep pace, to continually make it easier to pay without paper in daily, personal transactions.
The adoption of electronic payments is happening at a varying pace and in different ways around the world. The United States has moved slower than many other wealthy countries in moving away from cash. A possible cause of this is that American banks have been slow to make instant bank transfers possible, and most still take at least a day. While debit and credit cards remain the most popular personal payment methods in the United States, mobile payment methods have begun to revolutionize how Americans move money. Apps, like Venmo (owned by PayPal), allow customers to make person-to-person payments, and retailers have started to join the mobile payment game; in early 2018, stores including West Elm and Pottery Barn will start accepting Venmo for the first time.
Venmo, a leader amongst millennials in mobile payments, is a digital wallet and social media feed in one and allows friends to transfer money even if they use different banks. The app asks for comments on every transaction, and these comments are posted like a newsfeed for friends to see, adding fun to a normally tedious request for cash. The app does have its drawbacks. For instance, app users cannot undo payments, and account balance transfers from Venmo to a bank account take at least one business day and will not be deposited on weekends or bank holidays.
The traditional players in electronic money storage, big banks, have been slow to gain traction in the person-to-person payment arena. Despite largely trailing technology firms, banks view mobile commerce as one of their largest opportunities. A group of large banks is attempting to bridge the gap by connecting their existing smartphone apps to an industry consortium that developed a money transfer network known as Zelle, designed to compete with PayPal’s Venmo. They hope to be ready when customers want to use their mobile devices for more than just person-to-person transfers.
The competition is still heating up. Apple is rolling out a person-to-person payment tool called Apple Pay Cash, which will allow iOS users to send and receive funds to friends, family, and other contacts via the Messages app with an Apple Pay Cash card. The race is on to determine who will win American’s loyalty in the mobile payment game, and the key is to make it easy.
Maureen Gallagher is a second-year law student at Wake Forest University School of Law. Prior to law school, she worked for two years for Citi Private Bank as an analyst in the ultra-high net worth group. She holds a Bachelor of Business Administration in Marketing and a Bachelor of Arts in Hispanic Studies from The University of Texas at Austin.