What Is The Future of Credit?


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Just as we thought that credit and debit cards were about to completely supersede cash, there are now new payment systems that could take over and make plastic cards obsolete altogether. As mentioned in a post exploring those things that are Likely to Disappear in the Next Ten Years, credit cards may soon be out of circulation, likely within the next ten years.

While everyone will still be able to pay by credit, the rectangular bits of plastic that are used as a mode of payment will likely disappear from our wallets soon. It is actually starting now, as many of us are beginning to rely on our phones, smart watches, and other mobile devices to pay. There may come a time when no device is needed at all. Payment systems will work via facial recognition, as is already happening in China, and soon enough, the rest of the world.

In the US, credit cards are still very prevalent. Data collected by Statista shows that about 83 percent of Americans between 30 and 49 years old own a credit card. This is why most banks and companies still use traditional methods to establish a credit score. A post by Petal Card on building a good credit score outlines how the number is calculated in the US through five main factors:

  • A consistent, strong payment history
  • The amount of credit used compared to your total credit limits
  • How much credit history you have
  • Having a good blend of revolving credit and installment credit
  • How many times your credit history is pulled

A credit card owner must know how to keep tabs on every single one of these factors to ensure that their credit remains in good standing, allowing them to borrow more and have access to excellent mortgage rates in the future. However, this doesn’t mean that people will continue to be reliant on credit cards.

Across the world the demand for digital payments is growing. It is expected to rise even further in the coming years, especially since services like Apple Pay offer customers a more personalized payment experience. In Asia, the adoption of digital wallets and digital payments is already widespread. In China alone, mobile digital wallets account for 35% of in-person spending. It’s gotten to the point that China’s central bank is planning on printing less paper money as cash is becoming a thing of the past for its citizens.

It’s becoming clearer by the day that the future of credit will not be reliant on cards. Efforts made by Google, Apple, Facebook, and Amazon in the digital payments arena will undoubtedly help in further expanding the market and raking in more customers, but it’s also likely to result in more competition in the industry. Ultimately, the widespread adoption of digital payments will also threaten the strong customer relationships that banks and credit card companies have been able to successfully leverage, as mobile payment apps offer a more convenient user experience for the everyday consumer.

With all this said, the future of credit is pointing to digital payments, and with cryptocurrencies like Libra steadfastly rising this will shake up the industry even further. At the end of it all, the payment system that can best serve the consumer’s needs will prevail. Much like those other things likely to disappear, it looks like physical credit cards may be among them.

2 thoughts on “What Is The Future of Credit?

  1. Thank you as always, Frank. Does your work explore the emergence of cryptocurrency in relation to big trends in the economy (resulting from the pandemic), monetary policy, universal basic income and such? Have you published previously on this?
    Thanks and best regards, Dan

    Liked by 1 person

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