A fierce battle is underway to convince Australians to replace their credit and debit cards with mobile wallet technology – and smartphone users are cashing in.

A litany of offers, led by Samsung Pay and Android Pay, have included gift cards from major retailers (Coles, Rebel, Myer, Boost Juice), cinema vouchers, as well as cashbacks and bonus point scheme rewards (FlyBuys and Qantas Points).

The reason is clear: Australians have been among the fastest adopters of contactless cards in the world but paying by smartphone is clearly not offering the same appeal.

“The device manufacturers see it as an opportunity to collar the market, which I think is extremely short-sighted,” Capgemini banking and financial services practice leader Philip Gomm says.

“This is why there's a struggle going on in terms of incentives offered because the size of the prize is significant for the one that can crack it, but operating a ‘closed loop’ has historically proven to not work. It's only those with a deep background and experience in payments who get that.”

Gomm’s ‘closed loop’ description refers to the varying user experience between Apple Pay, Android Pay and Samsung Pay. While mobile wallets can be loaded with an increasing array of card types, using a phone to pay is nowhere near as uniform and seamless as using a card. That means people may find it a step backwards from the convenience they currently enjoy with contactless cards.
Unless the customer experience is ubiquitous, together with seamless and frictionless, then historically takeup of alternative payment methods has been very low

Ubiquitous, seamless and frictionless needed for better take-up

More than four in five (82 per cent) of Australians now use contactless cards (or tap and go) every week and one-third have been annoyed that a store hasn’t offered contactless technology, according to the Mastercard Digital Purchasing Survey. However, only one quarter (26 per cent) are aware of having contactless payment options on their mobile phone.

“Unless the customer experience is ubiquitous, together with seamless and frictionless, then historically takeup of alternative payment methods has been very low,” says Gomm, who still thinks cards are a transient technology as we move to phone payments over the long-term.

MWE Consulting founder Mike Ebstein says a likely shift from a closed loop to an open loop system across public transport would give mobile payments a shot in the arm. A contactless card and mobile payment trial was launched in Sydney across the Manly Ferry service, which uses the Opal card system, in July.

“When you get on any public transport, almost everyone is holding a mobile phone. As you go past the turnstile or scanner, people will just get used to tapping their phone and I think that will become the norm.”

London successfully rolled out contactless card payment facilities across its bus, tube and tram network in 2013, helping speed up the adoption of tap and go payments. Prior to that, Londoners charged their Oyster cards (or paid in cash) before travelling, similar to Sydney’s Opal and Melbourne’s myki cards.

Mobile payments taking off in emerging markets

Despite this initially slow update, the increasingly dominant role of smartphones in our lives suggests that they will eventually become a common payment device. The global mobile wallet market is expected to grow from $US3 billion in 2013 to $US53 billion by 2019, according to the Capgemini and BNP Paribas 2017 World Payments Report.

Mobile payments are already taking off quickly in emerging markets, where contactless cards have not taken such a stranglehold. Mobile wallet use in emerging markets such as India is growing fast after new measures to foster a cashless society were introduced in 2016, according to the World Payments Report. The market is forecast to post compound annual growth of 144 per cent as it climbs to $US4.4 billion by 2022.

Gomm says that authorities in emerging markets with low levels of traditional payments infrastructure could mandate a single smartphone app that would rely on open banking to produce a seamless customer experience. 

“There is something about emerging markets which will define the user experience going forward, and then those types of solutions will retrofit back into mature markets is my expectation.”

Once their convenience is consistent, mobile wallets stand to take widespread hold, cementing our love affair with our phones, and lightening our pockets in more ways than one.
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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