The Search for the Credit Card’s Replacement: Part One

by Alex Johnson 0

“Your scientists were so preoccupied with whether or not they could that they didn’t stop to think if they should.”

That’s a quote from Jeff Goldblum’s character in the movie Jurassic Park. The quote was originally in reference to the genetically engineered dinosaurs running rampant in the movie, but it could just as easily describe the attitude of many of today’s financial institutions when it comes to the creation of a post-credit card payment product.

Since the release of the iPhone and the dawning of the smartphone age, the financial industry has become obsessed with an idea—replacing credit cards and debit cards with a new payment product built around mobile, internet-enabled devices—a “mobile wallet”. Traditional banks and new, non-bank start-ups are all trying to figure out how they can be the first to successfully build a mobile wallet that consumers will replace their cards with.

However, when it comes to mobile wallets, the question isn’t can they build it, but rather should they build it? When it comes to new technologies, there is a tendency to overestimate the value that those technologies will provide to the end user. The “cool factor” tends to overwhelm the more mundane (but much more important factors) like usability and convenience.

To put mobile wallets through my “Jurassic Park test” and see if they really should be built (and if consumers should be adopting them), I have spent the last couple weeks testing emerging mobile wallet products—Square and Moven.

In a two-part series I’ll walk you through what I have learned, starting with Square.

Square is best known for the square-shaped dongles that enable small merchants to accept credit cards. While the merchant-side of their business justifiably soaks up all the attention, Square also offers consumers a digital wallet product that promises to enable completely seamless purchasing experiences from Square-enabled merchants.

Account Opening and Set-up

The process for signing up for the Square Wallet was ridiculously easy. I downloaded the app from the App Store, filled in my personal information, answered a couple of out of wallet questions to confirm my identity, and selected a profile picture. To get my account ready for making payments, all I had to do was link to one of my credit or debit cards and set-up the auto check-in feature with my favorite Square merchants (more on that feature below).

Mobile App Design and Usability

The Square Wallet app is gorgeous. It’s simple, clean, and very easy to use. It allowed me to open and close it without requiring me log in multiple times (although my password was required before I could make any major account changes). Probably due to the fact that the Square Wallet only works with Square merchants, the app also offers a handy feature for locating nearby merchants that accept Square Wallet payments.

Using the Product

Paying with the Square Wallet was incredibly simple. The app allows you to set up an automatic check-in feature for specific merchants. When you do that, all you have to do is walk in to the store, select what you want to buy, and give the cashier your name. This works because the instant you walk into the merchant’s store (as determined by your phone’s GPS); your Square Wallet account pops up on the merchant’s Square Register app. When you check-out, all the cashier has to do is confirm that your name and face match the name and picture for your Square account.

When I tried out the Square Wallet at a local coffee shop; I ordered my coffee, gave the cashier my name, and electronically received a receipt. The experience was completely seamless—literally there were no seams or points of friction. I never had to take anything out of my pocket or sign anything or punch in a PIN. From my perspective, the only problem with the Square Wallet is that, at least in Bozeman Montana, there are a limited number of merchants that accept it.


Overall, my impressions of the Square Wallet were very positive. It provided an exceptionally frictionless payment experience, so much so that it kind of freaked me out. I could see a lot of consumers being initially uncomfortable with the process, just because it is so different from the experience of using a credit card. If it becomes more widely adopted, I could also see Square’s approach producing some new fraud concerns since it doesn’t include a lot of the traditional fraud control mechanisms like PINs.

I’ll reserve further judgment until I have another post-credit card product to compare Square to. My second test of the mobile wallet will focus on Moven.

Alex Johnson is marketing specialist for Zoot Enterprises Inc., a provider of loan origination, account acquisition and credit risk management solutions for large financial institutions. You can follow him on Twitter @ZootAlex or Google+. Visit Zoot’s Credit Strategy Session and its Merchant Acquiring Strategy Session on PaymentsJournal.

Featured Content