Smart credit cards are not the future of plastic
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Amidst all of the talk of juicers gone awry, you might have missed another tech-fail piece of news: Plastc, a smart credit card, announced that it was filing for bankruptcy, leaving customers who preordered the card to the tune of $9 million high and dry.The thing is, it shouldn’t be news. Not anymore. The finance-tech news cycle is littered with stories of smart credit cards that have folded or never materialized in the first place. Plastc is just another in a long line of unfulfilled promises.It’s unlikely that smart credit cards will ever take their place in our wallets or in our hearts. And there’s really no reason why they should. At the end of the day, a smart credit card is an unnecessary addition to our financial arsenal and it ultimately doesn’t matter if none of them become feasible products.
First things first: what is a smart credit card?In Internet of Things parlance, "smart" items are things that have not traditionally been connected to the internet that are now connected to the internet. Do you need a smart egg tray? Does a wifi-connected toaster do anything for you?But smart credit cards actually have a reason to connect to the internet: the real promise is the ability to combine all of your cards into one by storing all of your card information onto a single smart card – essentially cloning your cards the way a credit card skimmer does, expect you’re using this power for good.And it’s not just your credit cards that you can add; HSA cards, gift cards, and store loyalty cards are all potential candidates to be absorbed, Borg-style, into a single smart card and switched between at will.Other ostensible benefits include an on-card display (usually of the e-ink variety, a la a Kindle), the ability to "lock" your card remotely or via proximity to your phone in the event that it’s lost or stolen, and some combination of a classic magnetic stripe card, the newer chip model, and near field communication (NFC) payments like you might find on a smartphone.Consolidating all of your cards into one while taking advantage of modern technology? What’s not to love?Unfortunately, the past of smart credit cards is grim, and the future doesn’t look any more hopeful.
To put it bluntly, the history of smart credit cards is full of failures. Here are a few of the more high profile cards that flamed out, were bought out, or have yet to get off the ground.
If you look at past smart credit cards, the fact that Plastc folded isn’t a huge surprise. But as a company Plastc had plenty of its own problems beyond the industry it was trying to crack. Look at this timeline compiled by Digg; Plastc was supposed to launch in Summer 2015, was then pushed to Spring 2016, delayed until Summer 2016, then to Q4 of 2016, then Q2 of 2017 and then...bankruptcy.Now Plastc is permanently delayed (or, if you’re a glass-half-full type of person, won’t be delayed again).What happened? After securing $9 million in preorders, Plastc failed to secure the venture capital funding it was relying on after a couple of deals fell through. The card won’t ship, and the backers won’t be getting a refund.
Coin was a big name in the smart credit card space, in large part because it actually ended up shipping a card – a rarity in the space.So what happened? In what can be seen as a boon, the company was acquired by Fitbit so the wearable manufacturer could integrate a payment system into its fitness bands.Unfortunately, while the cards still technically work (as much as they ever have – more on this in a bit), the mobile app and servers have shut down so users can’t add new cards or edit existing cards. And once the two-year battery in the card runs out, owners are out of luck.
Stratos began shipping its smart credit cards in May 2015, and had sold itself by...December 2015. In 2017, after "a long hiatus" (almost all of 2016) there was an announcement that the company had been sold again and would not be shipping new cards. Customers who never got their card would not be getting refunds.
If you’re not turned off by past smart credit cards turning out to be duds, there’s still SWYP and ONE card.Unfortunately, you’ll have to wait for both.SWYP currently has a waitlist, and ONE card is set to ship in 2017. How many card end up getting shipped, and how long they’re supported, remains to be seen.
If smart credit cards are offering a future of convenience, why haven’t they gotten a foothold with modern consumers? And why is it so hard for companies to make them work?It turns out that replacing "dumb" credit cards is kind of difficult, and the benefits of doing it aren’t that obvious.
Read any comments section or subreddit about smart credit cards and you’re bound to see people who have used them – or at least tried to use them.Smart credit cards have a tendency to not work when swiped. It’s one of the main reasons long think-pieces have been written on why they will fail. A smart credit card that replaces all of your other credit cards doesn’t do much good if you still need to carry all of the other credit cards just in case.And manufacturers admit that because of the fickleness of magnetic strips and credit card terminals, smart credit cards won’t work everywhere.There doesn’t seem to be any exhaustive study or official repository of the swipe failure of smart credit cards beyond the anecdotal stories found online – but Ben Einstein of Bolt, writing about "The Failure of Coin", explains why that’s still a problem: it’s not a huge deal if, say, your fitness tracker isn’t 100% accurate in the number of steps it counts, but even one or two failures with something important like a credit card or door lock can be incredibly costly.Even worse? When only one or two failures would be an improvement; Einstein says that his first time trying to use a Coin card failed, and over the next 54 attempts in 10 days, it only worked 28 times.
By all accounts, smart credit card manufacturers use top of the line encryption to keep your card information safe. But considering the data breaches that seem to come out weekly, can you really blame consumers for being wary of having all of their card information in one place?And some of these cards don’t even practice common credit card security. Coin, for example, didn’t have a chip, relying only on its magnetic strip. That means that despite the high-tech nature of smart credit cards, it was quickly outdated when it came to card-reading methods.
Consumers might get taken advantage of when it comes to credit card fees, but for better or worse, you can’t beat the price of getting a traditional credit card: free.That’s not the case with smart credit cards. Coin cost over $100, and Plastc came out to around $155. Companies not only had to convince consumers to move to these cards, but they had to convince them to pay to move to them. And that’s just the cost to buy a smart credit card; if the cards you’re loading onto it have any fees, you have to keep those in mind, too.
Finally, there’s the issue of whether or not smart credit cards are really solving a problem – or, if they are, if it’s worth the effort.Besides what’s already been discussed, think of the other hurdles potential customers have to overcome:
They have to contend with something battery-based, that either dies or has to be recharged.
They have to carry enough cards at once to make consolidating them worth the effort.
They have to be convinced that the way to consolidate them is with another physical card rather than a digital wallet like Android Pay, Apple Pay, or Samsung Pay – something that’s built into the smartphone they’re carrying around anyway.
As one venture capital investor put it:
"That’s one reason we didn’t invest," he said. "I see the consumer benefit, but it also felt a little bit like a half-step between a wallet today and just having all of those cards sitting in your phone."
It’s a shame that people expecting to receive what they paid for from Plastc won’t be getting anything. But it’s also not entirely unexpected – and hopefully serves as a warning for anyone cautiously optimistic about the future of smart credit cards.
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