Using your smartphone to make payments in shops or
public transport should become more widespread this year, but its
supremacy will depend on how successful retailers are in enticing people
to keep their cards or cash in their pockets.
The stakes are
high for phone manufacturers and operators, not to mention banks, as the
success of contactless systems where consumers sweep their smartphone
over a reader could shake up the lucrative retail payments market.
But
the chief executive of Ingenico, a leading manufacturer of payment card
terminals as well as new contactless systems, doesn't see people as
ready to give up their debit cards just yet.
"Smartphones will be
a small part of the market but the main payment mechanism will remain
the traditional (card) terminal which will continue to see growth," said
Philippe Lazare, whose company manufactures more than one in three
payment terminals in use worldwide.
That view didn't stop
Ingenico from announcing this past week at the Mobile World Congress
trade show in Barcelona a contactless payments system compatible with
Apple Pay.
Apple's adoption last year of NFC, or the near field
communication standard, was a major step towards this becoming the
dominant technology.
Google has had a similar service, Google Wallet, available for a couple years.
NFC allows smartphones or other devices to communicate with one another within a distance of several centimetres (inches).
This
means consumers can quickly sweep their phones over readers rather than
having to pull out a card, insert it into a terminal and wait to punch
in a code.
"It was a decisive step towards the creation of an
ecosystem but that may not be sufficient as several solutions are
available," said Anne Bouverot, head of the GSMA trade association for
mobile operators that organises the Barcelona event.
She said
that it is also important to get people accustomed to using their phones
for making payments by using them elsewhere, such as with public
transportation systems that have adopted contactless technology like in
London or Paris.
In launching Apple Pay, the US tech giant was
again demonstrating its longstanding role as a trendsetter, rather than
responding to consumer demand. It has yet to be rolled out anywhere
except in the United States.
But Apple's initiative has pushed its competitors to also move forward.
All
high-end smartphones are now coming equipped with NFC. Some are coming
with added security features, like the new Samsung Galaxy S6 unveiled at
Barcelona that has a fingerprint scanner.
Google last month
bought Softcard, a rival to its Google Wallet co-founded by US mobile
operators AT&T, T-Mobile USA and Verizon in 2011.
And Samsung
recently acquired LoopPay, whose technology links up with the magnetic
strip readers in existing payment terminals instead of NFC.
This system transmits card details via secure magnetic signals to the reader when held up against it.
It
has the advantage over the Apple and Google systems of being
immediately compatible with more than 30 million payment terminals in
use in the United States.
US banks are watching nervously as the
emergence of contactless payment systems comes just as they are
investing to upgrade payment cards and terminals from magnetic strips to
chip cards.
US banks lost out in the Internet payments market to
Paypal, which announced during the Mobile World Congress that it was
getting into the contactless payments game with the purchase of
Paydiant.
This US company works with merchants to develop loyalty
and incentive programmes as part of mobile payment systems to help them
boost sales.
Many experts see retailers offering discounts and
promotions tailored to each client as an important element in
encouraging consumers to make the switch to contactless payments with
their smartphones.
Not everyone is expecting a boom in the use of smartphones for making payments.
"For
several years now an explosion of that of kind of payment has been
expected but one should not forget that 85 percent of all the
transactions in the world are still made via cash," said MasterCard's
chief executive Ajay Banga.
He expects adoption of contactless payment systems to instead grow steadily over several years.
