While low-tech, credit cards are very flexible. I worry that the more high tech approaches (NFC, etc) are motivated not because its a step forward, but because its an opportunity to grab more control of the market, and leave consumers more exposed to fraud.

How are credit cards more flexible than a computer in your hand? Worst case your phone acts exactly like your credit card where you read numbers off of it.

Also, how would a phone lead to more fraud? You could authorize each transaction by cryptographically signing it after entering a passphrase. With a credit card anyone that steals your numbers can charge to it.

Magnetic credit card readers are cheap; look at how much Square charges.

The fraud prevention mechanism for magnetic cards is mostly reactive and doesn't require "passphrases" or "cryptographically signing," which is a big usability win.

Since issuers are on the hook for unauthorized charges, and generally make money from transaction fees, it's in their best interest to find a good compromise between fraud protection and usability. Adding consumer software and a wide variety of commoditized portable computing devices into the mix doesn't seem worth the cost.

What do you propose we replace them with?

Our phones