Peter Reville, an analyst at Mercator Advisory Group, recently published an article that raised some fascinating points on the uptake of contactless in Australia, and what that might mean for the United States.
Reville’s final question was, “what is it about the move to using a smartphone that is holding people back from what seems like the next logical step from a contactless card to a phone or other smart device?”
Ironically, it is the success of contactless itself that has been the main reason preventing the move from a contactless card to a smartphone or wearable.
It’s worth understanding just how ubiquitous contactless has become in Australia.
Australia’s central bank, the Reserve Bank of Australia (RBA), recently published its triennial Consumer Payments Survey. This showed that in 2019, around:
- half of all in-person payments were made by ‘tapping’ a debit or credit card on a card terminal; and,
- three-quarters of point-of-sale “plastic” card transactions were contactless.
This ubiquity – and the convenience and security that comes with it – means that there is less reason to move to a smartphone: consumers question the real benefit of pulling a phone (rather than a card) out of their pocket.
Reville is therefore right to have observed that, “the growth of mobile devices to pay for things hasn’t caught on as one might have expected given the growth of contactless in general”: the RBA’s survey noted that 5 per cent of in-person payments were made by ‘tapping’ a smartphone or wearable rather than a physical (plastic) card.
So what will lead consumers to take the next step from a contactless card to a phone or other smart device?
The first driver will be contactless transit. This was the driver for contactless itself in the UK. It’s likely to be the driver for mobile in Australia simply because it’s the first payment people make in the day, it sets the customer experience for the day, and as they’re probably on their phone waiting for the bus/train/tram/ferry/taxi why not also use it to pay? Most of Australia’s states have either already started rolling out contactless transit or have plans to do so – under a framework created by AusPayNet – so this driver will likely have a discernible impact over the short-term.
Another driver will be rewards/loyalty. As major retailers combine paying and loyalty within the same smartphone experience, consumers will see value in pulling a phone (rather than two cards) out of their pockets. Again, this customer experience is now becoming more and more common at major retailers, and is also likely have a discernible impact over the short-term.
COVID has been an unexpected, additional driver. As some of Australia’s major banks have reported, mobile/wearable use has significantly increased as people recognise the benefit of paying/authenticating on their own device – with biometric (their face or thumbprint) – rather than the merchant’s (with PIN). This is likely to be “sticky,” given the good customer experience that goes with it.
Interestingly, this increase in mobile/wearable use has occurred notwithstanding AusPayNet’s work with the payments industry and retailers to increase the contactless PIN limit from $100 to $200 during the pandemic. This change has helped reduce the spread of coronavirus by ensuring daily that hundreds of thousands of Australians do not have to physically interact with a payment terminal. But nonetheless, it would appear that many consumers are demonstrating both a preference and a confidence to go beyond this by using a smartphone or wearable, and that they see this as safer, as well as secure and convenient.
So that “next logical step from a contactless card to a phone or other smart device” may not be far away Down Under.
