Mobile payments: hype or happening?

When I first wrote about mobile payments for BlueNotes in October 2014 Apple had just announced the iPhone 6 and Apple Pay. While we in the payments industry had been thinking about mobile for some time before the announcement it marked a turning point in terms of public speculation.

"It’s easy to see why Australia is among the earlier markets around the world to launch mobile payments."
George Lawson, Head of Emerging Products and Innovation, Visa Aus, NZ & SP

It’s easy to see why Australia is among the earlier markets around the world to launch mobile payments.

Australians are still the world’s biggest users of contactless payments with 75 per cent of all face-to-face Visa transactions happening on our Visa payWave platform, according to VisaNet data.

Compare with Singapore where payWave accounts for three out of 10 transactions or the UK at one in seven.  So, the infrastructure is in place and the number of mobile payment options is expanding.

Tokenisation is well underway too, with many of the new mobile payment solutions using the Visa Token Service or tokenisation in some form as a new layer of security.

However, I’d argue it’s still early days for mobile payments in Australia. The number of Visa Mobile payWave transactions is still small compared with Visa payWave transactions on cards but increasing.

While it is early, based on our data it looks like popular merchant categories for mobile payments could be supermarkets and dining.

EVOLUTION

This isn’t surprising when you think about the evolution of tap and go payments. Adoption came first in supermarkets, quick-service restaurants and petrol stations, places people go regularly and where speed and convenience are key – that is the key value proposition of contactless payment.

Visa’s research shows us consumers are open to mobile payments. We asked consumers around the Asia Pacific region if they would use a smartphone for everyday payments and 85 per cent said they would, if and when the option is available to them.

In Australia, 84 per cent say they’d use a smartphone for payments. This has increased from 53 per cent 18 months ago, so we’re seeing consumer sentiment change.

The question is what will convert this sentiment into a change in behaviour? We think the experience. Tap and go is already a frictionless way to pay. The payment experience on mobile has to be as good or better to dislodge plastic.

One area mobile can bring added value to payments is contextual commerce: what happens before, during and after the transaction. This is part of the payment experience because we are making payments smarter and more context-aware.

Not only are service providers using data based on when, where and how a customer is transacting but they are tailoring this information to the customer’s purchase environment and the considerations they are making up to the point of purchase. It’s mobile and the capabilities of the device that will further enable this.

ATTACHED

Take this example. Given we’re all so attached to our phones, the geolocation signal your device transmits from your pocket is often one of the best indicators of where you are in the world.

When customers are open to sharing their location, Visa’s fraud detection system, combined into a mobile banking application, can incorporate that geo-location data into the transaction message. 

If a customer is going on holiday to Europe, they no longer need to tell their bank ahead of time to prevent their account being blocked. When they land at Heathrow and use their Visa account to pay for a taxi, the GPS in their phone tells the Visa network they’re actually in London and the transaction isn’t fraudulent. This information is provided to the issuing bank to help with its decision making.

While mobile location has an obvious benefit for fighting fraud, it’s also a geo-targeting opportunity. A merchant could push an offer directly to a customer’s phone when they walk into their store. Or use their location to help them navigate to particular items.

Mobile is already at the centre of commerce, even if it’s not yet in our hands every time we check out at the store. Consumers in Australia are using their mobile phones for:

• Virtual window shopping – 73 per cent of consumers

• Making price comparisons – 63 per cent

• Paying for goods and services (online or in-app) – 62 per cent

All the right conditions are shaping up to support a shift to mobile payments but change takes time.

We believe the numbers will continue to grow and there is great potential for smartphones and other connected devices to be used for payments, provided the experience gives consumers something they can’t already get today.

George Lawson is Head of Emerging Products and Innovation, Visa Australia, New Zealand and South Pacific