Another all-in-one credit card product has bit the dust, and thousands of consumers are once again getting the shaft. Plastc, said last fall that it had 80,000 pre-orders — many from consumers who put up $155 bucks for the vaporware gadget. The firm announced last night on its website that it was ceasing operations.
Consumers are furious, and already discussing a class-action lawsuit against the firm.
“(I)was expecting this,” wrote one on the firm’s Facebook page. “I was silenced on their social media page for chronicling all of their delays and mistruths along the way. I pointed out more than one where I was told everything was on track, only to receive the announcement of delay a few days later. They definitely put out a more optimistic front to keep investors from requesting refunds.”
Last fall, I wrote an in-depth story for MagnifyMoney about why these all-in-one-cards were always doomed from the start. The key reason is pretty simpl e: It’s very hard to break into the payments business, and now is a particularly difficult time. From the story:
Why are all-in-one cards, and their elegantly simple idea, such a dud? There are plenty of reasons.
The key technology involved, which predates Coin, is called “dynamic magnetic stripe.” Installed on a gadget like Coin, it would theoretically allow consumers to load multiple cards onto the same device. Then it would change, chameleon-like, so it would look like the original bank-issued piece of plastic to any point of sale terminal. Fine so far.
But Coin and its ilk had bad timing. Barbieri was lucky enough to get an early version of Coin, but he found he could hardly use it anywhere. Just as Coin arrived, stores began abandoning the magnetic stripe in favor of EMV chip debit and credit cards. Coin had no way to deal with that.
“So it was a complete bust. [I] had to carry cards anyway,” Barbieri said.
But the chip issue is just the beginning of the problem faced by all-in-one card makers, says James Wester, a payments analyst at IDC Financial Insights. He’s not surprised that gadget makers shipwrecked while trying to change the way consumers spend money. Many tech firms have run aground before.
“Trying to participate in the payments space is very hard,” Wester says. “A lot of folks who try, find out the hard way.”
For starters, Coin and its imitators had to do the near-impossible: compete against a product that’s free and simple. Bank plastic doesn’t cost anything and works pretty much immediately. Cards like Coin cost money and have to be loaded and maintained.
“Is [carrying too many cards] a problem worth paying $50 to solve?” Wester asks. “When your largest competitor is a free product, that’s going to be really hard.”
As is clear from the continuing angst over conversion from magnetic stripes to chips — not to mention the fits and starts suffered by giant entrants Apple Pay and Google Wallet — old consumer payment habits die very hard. People don’t want to have to think about how they spend money; they just want it to work.
Folks who invest in these kinds of startups (Plastc calls them “backers,” not consumers) can find themselves in precarious positions when the product or company fails. That’s the nature of “investing.” There is risk. Backers can and do lose all their money. Hopefully, the lesson of Plastc won’t be too painful.
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