Credit Scores and Reports

Smartphones will become the new credit cards, experts say


Within a decade, says a new survey, smartphones will take over as Americans’ favorite money-storing and spending devices. They will become our wallets.

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Begone, plastic. Within a decade, says a new survey, smartphones will take over as Americans’ favorite money-storing and spending devices. They will become our wallets.

That’s the collective prediction of 1,021 Internet experts surveyed by the Pew Research Center’s Internet & American Life Project and the Imagining the Internet Center at Elon University.

Cellphones as payment devices are already taking off. A comScore study found that already 38 percent of smartphone users have made a purchase of some kind with their phones. So far, though, smartphone purchases largely fall into the categories of digital goods and clothing and accessories.

The experts interviewed by Pew for its April 2012 survey, “Mobile Payments May Replace Cash, Credit Cards by 2020,” say that will soon change. Most predict a full-blown shift to a mobile payment society by 2020. In fact, 65 percent agreed with the following statement:

“By 2020, most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards. People will come to trust and rely on personal hardware and software for handling monetary transactions over the Internet and in stores. Cash and credit cards will have mostly disappeared from many of the transactions that occur in advanced countries.”

The report included detailed explanatory comments from the experts Pew interviewed.

Hal Varian, chief economist at Google, says he thinks that while the 2020 date may be pushing it, the transition into a world of “e-wallets” will certainly take place.

“What is in your wallet now? Identification, payment and personal items. All this will easily fit in your mobile device and will inevitably do so,” Varian says. “But it may take a while. It is generally thought that two-factor authentication (secret + physical device) is better than one-factor authentication, and smartphones seem to have a natural role here.”

Some respondents of the study pointed out that the switch will actually not be much of a switch at all. Microsoft engineer Christian Huitema says the differences between what we have done in the past in terms of payment methods and what we will do in the future are subtle.

“We have already witnessed the transition from cash to debit/credit cards,” Huitema says. “The electronic wallet is not much more than a ‘virtual card,’ in which near-field wireless communication replaces the reading of a magnetic stripe.”

Some have their doubts. Of the survey respondents, 33 percent agreed with a statement that “people will not trust the use of near-field communications devices and there will not be major conversion of money to an all-digital-all-the-time format.”

Some of these respondents mentioned fear about security being a huge factor in the whole thing. One respondent, “Millennial Momentum” co-author Morley Winograd, suggested that resistance is futile, considering the pace at which young adults adapt to technology.

“In the United States, with the millennial generation representing more than one out of every three adult Americans, the ability to use technology to make each moment of the day more productive will win over this giant piece of the market, and then ultimately the rest will follow,” Winograd says. “Since privacy concerns are also not a millennial generation priority, such concerns will only cause older adults to resist the transition, but when dealing with their children they will fall in line as quickly as mothers learned to text to communicate with their kids.”

Some anonymous respondents pointed out more run-of-the-mill problems that could be encountered outside of security issues, such as a person’s phone dying, thus rendering them temporarily unable to make payments of any kind.

Many of the survey’s respondents agree adoption of a new method of payment will not crush all before it. They can happily coincide.

“When credit cards arrived, checks did not disappear, and neither did money,” says Amber Case, CEO of Geoloqi, a company that creates location-based software for commercial and enterprise use. “Although in some places either cash or cards are accepted, there are three main methods of payment. If another method of payment is added, we will likely have four methods of payment and retailers and businesses must accept another form of payment. Some systems may emerge that use completely smart payments, but there will still be other forms of payment available.”


The survey results are based on a nonrandom, opt-in, online sample of 1,021 Internet experts and other Internet users, recruited via email invitation, Twitter or Facebook from the Pew Research Center’s Internet & American Life Project and the Imagining the Internet Center at Elon University. Since the data are based on a nonrandom sample, a margin of error cannot be computed, and the results are not projectable to any population other than the experts in this sample.

See related:  Fed study: Consumers wary of mobile payment security

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