Change on the cards for retail
A 10-week-old joint venture created by the country's major banks and mobile phone companies, is promising to revolutionise the retail industry by bringing out what could be the world's most unified electronic wallet.
But it will be a gradual revolution.
The wallet services, called TSM and expected to debut by June, will initially let people use some smartphones as replacements for credit and debit cards when paying for goods in shops, chief executive Rob Ellis says.
But within months of launch, TSM plans to use its payment platform to support a range of new services, many of which are beyond the capabilities of plastic bank cards.
Retailers would be able to send discount and loyalty vouchers to consumers' smartphones, which they could automatically redeem when they paid for goods in store. Movie, sports and concert tickets could be sent direct to smartphones when consumers purchased them online.
Ellis says TSM also expects people would be able to use their smartphones in place of smartcards to pay for public transport.
TSM hopes to persuade Snapper to make its public transport ticketing system available as an electronic application within its mobile wallet, he says.
Snapper chief executive Miki Szikszai says there have been no discussions between the companies to date, but he would not rule that out.
"We are keen on any way we can get our application to more customers and if that is a good way to do that, absolutely we will be in there," he says.
Further into the future, TSM's technology could allow eftpos receipts to be sent electronically to consumers' smartphones, so retailers would not need to print them out in-store.
Within years, the mobile wallet could be used to hold electronic versions of today's public library cards and drivers' licences, Ellis says.
New Zealand was the first country where all the major banks and mobile phone companies had come together to support a single mobile wallet in a push to provide an alternative to bank cards and other smart cards, he says.
TSM is half-owned by Paymark, which is in turn a joint venture between ANZ Bank, ASB Bank, Bank of New Zealand and Westpac. The remainder of the company is equally owned by Vodafone, Telecom and 2degrees.
Ellis estimates there are about 250,000 Android and Windows 8 smartphones currently in circulation in New Zealand that have "near field communication" (NFC) chips built in, allowing them to double as payment devices. But he expects that number will grow rapidly to about a million by mid-next year.
Apple has not yet built NFC technology into its iPhones but there is speculation it may include the chips in the iPhone 6, which is rumoured to be likely to go on sale in about March.
The chips are similar to those embedded in contactless credit and debit cards, but the advantage of encasing them in phones, rather than in a dumb plastic card, is that information can then be sent to them and stored over mobile phone networks.
Retailers would be charged for "added-value" services such as NFC-based loyalty schemes. The fees they paid on straightforward consumer transactions would be up to the banks, but TSM itself aimed to provide a "low-cost utility infrastructure", Ellis says.
Retailers Association chief executive John Albertson says he sees no reason why the fees retailers pay to accept payments should rise just because smartphones are involved. In fact, he argues they could fall.
"If a bank is simply using TSM as an alternative to other payment infrastructures, personally I would expect the fees shouldn't be dramatically different. If anything, as they got more efficient, they should be coming down. But those are all discussions to be had over the next 12 months."
Ellis says consumers will be able to use their smartphones to make payments under $80 without their phone being turned on. But payments above that level would require they were powered-on so the purchase could be authenticated.
Consumers would select a default account, such as a credit or debit account, which the phone would automatically use for purchases. But they would be able to manually select and switch between different accounts to pay for transactions over $80.
The joint venture is close to agreeing a brand by which its service will be marketed to consumers and has contracted Dutch-based technology firm Gemalto and United States-based firm C-Sam to build its back-end and front-end systems, Ellis says.
TSM itself would remain a "lean operation" that would probably not employ more than 20 staff in the next few years, he says.
WHAT IS TSM? A joint venture between the four main banks and the three mobile operators.
What will its service let people do? Use smartphones instead of bank cards to make "tap and go" contactless payments in shops, from mid next year.
Why is that an advance? Some people are keener on getting out their smartphone than digging a card out of their wallet.
Any other advantages? Yes. Over time, smartphones could support sophisticated loyalty schemes, double as "tag on, tag off" public transport tickets, replace printed eftpos receipts with electronic receipts sent straight to a phone, the list goes on.
Any downsides? An explosion in loyalty schemes might mean you had to spend time fiddling about on your smartphone checking what offers were out there from what banks and from what merchants, if you wanted to get the best deals on purchases. You could drop your phone when you got it out to pay for your bus journey and break it.
Could I still use a smartphone for payment if it was turned off or if its battery was flat? Yes, for purchases under $80.
Will I be able to use any smartphone to make these payments? No, it will need to be one that supports near-field communications (NFC). No iPhones do that yet.
Is anyone going to be disadvantaged? If the banks try to exploit the opportunity to increase the fees they charge retailers to process electronic payments, then yes. But the signs are that is probably unlikely. There could be a cost to retailers if more people used, say, a credit card function in their smartphone's mobile wallet to pay for goods instead of cash or eftpos.
- © Fairfax NZ News
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