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Monday, March 19, 2018

WSJ: Payment and Credit Technology Shifts Away from Credit Cards Benefiting Community FIs

The Wall Street Journal points out today that mobile phone and other technologies are increasingly allowing community banks to provide the two key benefits of credit cards without requiring use of a credit card:  ease of payment and access to unsecured credit.

High barriers to entry, scale economies and card networks have driven community banks out of the credit card business.   Five large banks have 80%+ of the credit card market.  But now consumers and businesses can make payment with any number of mobile-embedded or debit card linked technologies, such as Apple Pay, Google Pay, BillGo, electronic check or transfers with tools like Venmo. These payment methods are faster, cheaper and more secure than credit cards.   More importantly, digital lending technologies allow FIs to provide faster, cheaper and more secure unsecured credit direct to checking accounts more efficiently that using credit card networks.  Millennials are driving the trend away from credit card to smart phone payment and credit use.

Consumers will continue to demand simple and easy payment methods and access to unsecured credit, now a $1 trillion plus market.  As Christian deRitis of Moody's Analytics points out, "They just don’t need to carry around plastic credit cards anymore to meet their needs."  Check out how FIs are linking digital lending and checking payment at

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