Paying with plastic is so last season. In recent months, credit card companies such as MasterCard and Visa have introduced alternative methods of paying for goods and services -- an innovative technology trend that is only expected to intensify in 2016.
"The premise is that every connected device is a payment device and every connected device is a marketing vehicle for us to reach the consumer," explained Raja Rajamannar, CMO at Purchase, N.Y.-based MasterCard.
Next year, MasterCard will begin rolling out a series of products, including a key fob, dress and ring, that can function as credit cards. The company has partnered with General Motors, fashion designer Adam Selman and wearable tech company Ringly on the effort. Similarly, Visa is working on a series of initiatives such as a Swatch watch that can make payments, which will roll out beginning in Switzerland next year. The Foster City, Calif.-based company, which has issued about 2.9 million global credit cards, is also in talks with 14 different automobile manufacturers about how to commercialize a car system that pays for goods, like meals at a restaurant, so consumers don't even need to leave their vehicle.
All of these initiatives are partnerships with other product-making companies, while the credit card issuers simply provide the technology. Visa developed its strategic partnership program three years ago.
"We're an enabling platform and we want to be able to connect to as many devices as would want to do commerce," explained Jim McCarthy, exec VP of innovation and strategic partnerships at Visa. He noted that Visa currently has a car sawed in half at its innovation lab. "We've effectively hung an open sign on our front door and have these companies coming to us."
Many of these new payment initiatives could help to lure in much-desired millennials, a generation that has usually shunned traditional methods of finance. Jeff Fromm, president of millennial-focused agency FutureCast, said that it's only logical companies like Visa and MasterCard are experimenting with technology and improving the payment process for consumers since millennials are known as influencing older generations.
"As an industry, they're slow and late to the party -- as a result we'll see a number of startups take significant amounts of value from historical leaders in the industry," said Mr. Fromm of FutureCast, which is owned by Barkley, noting that brands such as Venmo and Apple have already attracted millennial consumers, a demographic that reached 88 million this year. He added that whatever companies try to do, above all the product must be useful. "If it's not useful, it's not workable," he said.
MasterCard, for its part, is already hard at work on additional innovations from its Manhattan-based technology hub, a three-floor lab opened last year in the Flatiron District that "looks at the future from a fresh perspective," said John Sheldon, senior VP of innovation management at MasterCard Labs, on a recent tour. In addition to wearables, the department is working on an information system for real estate brokers, a payment system for restaurants and an authentication tool for consumers that uses biometrics to verify one's identity.
"Five years from now, you won't need passwords," said Mr. Sheldon.