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Your phone is your next credit card

People have possessed the ability to spend and send money with their smartphones for years, but mobile payments have yet to take off in a big way. Plastic and cash are still the preferred modes of buying stuff — by a long shot.

But four recent events suggest that mobile payments are about to take off in a big way.

  • This week, investors pumped $150 million into Square, the mobile-payments company that lets people turn their smartphones into virtual cash registers. The investment values the company at $6 billion.
  • Last week, eBay opted to spin off payments service PayPal. A big part of the reason: PayPal has been held back by its parent company, and the move is expected to free PayPal to increase its mobile payments presence.
  • Facebook is experimenting with a one-touch payments system, and this week TechCrunch reported that Facebook is about to release a peer-to-peer money transfer feature in its Messenger app.
  • And then there’s the big kahuna: Apple Pay. Set to be released later this month, Apple Pay will let iPhone 6 and iPhone 6 Plus users make payments at participating retailers simply by using their phones’ fingerprint scanner then holding the phone up to a scanner. Retailers who have already signed up include Bloomingdale’s, Macy’s, McDonald’s, Staples, Walgreens and Whole Foods Market.

More than 70% of U.S. adults have smartphones, and more than one in five have already used a “mobile wallet” in the past 90 days, according to Mary Monahan, executive vice president and research director at Javelin Strategy. More than half of mobile purchasers bought physical goods with their phones.

The trend lines are clear. And as more apps and smartphones push mobile payments, consumers will become increasingly willing to ditch plastic for their phones.

Recent history would dictate that pretty much anything that has required a physical world medium for delivery — CDs, film cameras, the Encyclopedia Britannica — have been all but replaced by a digital equivalent,” said Nick Holland, a senior analyst at Javelin Strategy.

What’s not clear is which form of mobile payments will become dominant.

Square, for instance, is hedging its bets by selling a credit card reader and a mobile app that lets you pay without taking your card out of your wallet. Although the company was a mobile-payments innovator, products like Apple’s could make its most visible product, a reader for credit cards, obsolete.

This won’t happen for many years, but in a new world where Apple Pay is seen as the shiniest new thing — where the plastic cards have the ability to be physically removed from the payment process — Square has lost quite a lot of its sheen,” Holland said.

Monahan said she believes mobile users up to age 45 will make the transition to mobile payments relatively seamlessly. As to the others, she expects the transition to be slower, but to eventually come the same way other digital adoptions have — with a nudge from the younger folks around them.

Most likely, it will be the sons and daughters who sweet talk and cajole the parents ….” she said. ” Dad — I need the tuition check now, please. Just send it to me using mobile P2P.”

That’s how teens got parents to text — just so parents could talk to their teens on the phone, they learned in self-defense. Now it’s the next step.”

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