How will the changing credit ecosystem affect payments?

A lot of attention is now being paid to the ways in which consumers might be willing to change their credit card usage habits, and the effect that mobile technology might have on these behaviors. But now, many wonder about how these new options will impact the use of cash.

These days, many companies are focusing on ways to make payments easier for consumers to complete without reaching for their wallets, according to a report from Fortune. This includes the development of mobile wallet payment platforms by companies as wide-ranging as cellphone service providers, smartphone manufacturers, payment processors, tech giants, startups and retailers, as well as devices that can complete these transactions using only a wireless handset.

However, while it is more or less agreed that mobile purchasing is almost certainly the wave of the future for payments of all types, the question remains of how companies developing these types of systems can best change consumers' spending habits, the report said. The reason there are hurdles to this is, essentially, that there are multiple factors that have to be accounted for. First, the technology necessary to complete everyday transactions using a smartphone or other mobile device has to become widely available and inexpensive in machines consumers use every day, and, concurrent to that, merchants have to begin installing machines capable of processing these types of purchases.

But at the same time, many experts concede that generally, consumers likely won't want to use these services until they can do so in as many places as possible, the report said. And for this reason, it's up to companies developing mobile purchasing systems to incentivize adoption not only among consumers, but also with companies.

It's generally believed that the value of mobile purchases is going to spike considerably in the next few years, the report said. Projections from Javelin Strategy and Research shows that in 2011, 2012 and 2013, the total value of payments made via mobile wallets will not exceed $500 million annually, but could should surpass that mark by 2014, and then rise to nearly $1.4 billion by 2017 alone.

Already, experts have seen a trend toward more use of non-paper purchasing methods over the past two decades, and expect that to continue into the next one as well, the report said. The Nilson Report recently noted that in 1990, transactions using cash or checks made up 85 percent of all purchases, but as the amount of money people spent has increased significantly in the 20 years since, the role of paper has been diminished by the rise of plastic. As of 2010, cash and checks accounted for some $3.1 trillion in spending, just 39 percent of all money spent that year. That's compared with $3.8 trillion in spending on cards, and $1 trillion in electronic spending.

A move to a future without cash
While many who walk around with bills in their pocket every day may be surprised to hear it, some experts believe Americans are growing fairly close to eschewing the use of cash altogether, the report said. While this will hardly be a quick process, even with the rapid adoption of credit cards and mobile purchasing for everyday transactions expected in the near future, the first steps toward that day have likely already come. Analysts have seen new payment technologies adopted far more quickly than many initially suspected, the result of a public eager for more convenience in their purchasing methods and slightly less wary of the security for their new options than some may have projected.

Much of the new ecosystem for payments will likely be driven by businesses at the top of their industries: banks and major retailers, the report said. Depending upon the options they give to consumers for handling their various accounts, there could be more rapid acceptance than experts might have believed possible, particularly if merchants make it easier for customers using any type of mobile wallet payment system to complete a purchase.

"Financial institutions are going to have a big role to play," Bill Gajda, the global head of mobile at Visa, told the news magazine.

The benefit for consumers in mobile wallet transactions goes beyond convenience. In addition, these systems are generally considered far more secure than traditional credit card use. However, people who want to increase the protection of their accounts should also take the time to order copies of their credit reports. This will help them to identify potentially unfair markings that may be having an adverse effect on their credit ratings. However, working with a credit repair law firm can often help to alleviate these problems and put borrowers back on the right path.