Mobile payments – do people even know that they exist?

I went down to Bunnings (Australia’s largest hardware store) the other day to buy some wire for the line trimmer, and when I went to pay I whipped out my android smartphone to make the payment. When I did this the girl at the register was amazed and said “I’ve never seen that before”, and given how many people she must serve at Bunnings this was ringing alarm bells for me.

Am I an early adopter of technology (not especially so, in my opinion anyway), or do people just not care about contactless payments via their phones? Or do people just see it as a gimmick that will never catch on? I don’t know which one of these is correct, but since this is a personal finance blog and I’m interested in the topic, I feel like I owe the readers a brief overview of the concept.

What are contactless payments?

Most mid to high level android smartphones have come with inbuilt Near Field Communications (NFC) capabilities for a number of years, and it is these chips that allow a mobile phone / cell phone to make contactless payments just like a credit card (think Visa’s Paywave, MasterCard’s PayPass or American Express’s ExpressPay).

If your smartphone has an inbuilt NFC chip and the appropriate app from your bank then that’s pretty much all you need. To make the transaction happen you just unlock your phone and then hover it over the payment terminal until it beeps. And that’s it.

It only works for transactions under $100 (just like the normal card-based tap ‘n’ go transactions), but given that these are the types of transactions that many people would normally use cash for, mobile payments really are a good step in further reducing the use of cash in our society. As an accountant who likes to be able to track his finances, I couldn’t be happier that cash use is declining. Cash transactions are the opposite of automation when it comes to accounting records.

Before you ask, the security stuff has already been thought of, and is essentially equivalent to what you would get from a normal credit card. They have thought of all the things about remote scanning/duplication of cards using the NFC system, so I’m not going to bother going over it here. Suffice it to say though that the security thing is sorted – it’s as good as or better than what you would get with a standard chip and pin credit card.

Who actually offers contactless payments?

This is the setup that I have - a Samsung Galaxy S4 (bought cheap off Kogan of course!) and Westpac credit/debit cards, linked up to my smartphone. Works brilliantly!

This is the setup that I have – a Samsung Galaxy S4 (bought cheap from of course!) and Westpac credit/debit cards, linked up to my smartphone. Works brilliantly!

Until recently, contactless payments have been a thing for Android phones only, and even then it was mainly the higher end models. In Australia this meant Samsung Galaxy S#, and only with two banks, these being Westpac Bank and Commonwealth Bank. As I understand it though, Australia has been a bit of an anomaly in this area, as the UK had this functionality for all Samsung Galaxy S3 phones based not on the bank, but on the VISA card instead. In the UK, VISA is the dominant payment method for debit and credit cards, and so the technology was therefore available to a much wider segment of the population.

Barclaycard in the UK also announced in September that they would enable contactless payments for any NFC-enabled android phone, so it is no longer exclusive to the Samsung Galaxy S# series. Which is a good thing, since all of the handsets clearly had the capability, it was just that people (usually banks) weren’t prepared to invest in the software.

Apple Pay – late to the party, but still laughing all the way to the bank

Apple Pay - it even works on the Apple Watch (I think).

Apple Pay – it even works on the Apple Watch.

Apple recently announced that its entry into the mobile payments arena via their Apple Pay system (I’m surprised they didn’t call it iPay, but perhaps that would be a good description for every Apple user).

Now even though the android options have existed for over two years, I was intrigued as to why Apple hadn’t entered the market. Supposedly they didn’t like NFC technology, and were at one stage looking at bluetooth or other technology to make mobile payments possible. In the end they obviously decided to go with NFC, but with a big difference, in that they would have a deal with the credit card issuers to take a cut of the merchant fees.

It didn’t surprise me that Apple would only enter this field when they could totally gouge the market (see my earlier post on why it doesn’t make financial sense to own Apple products), but it does make you wonder whether Apple Pay can actually launch in other countries. I wonder if it was really only the US’s bizarrely backwards financial arrangements (like only recently introducing chip and pin technology and still using cheques like they were a new invention) that allows this to happen, as I just can’t see other countries putting up with that sort of price gouging when viable alternatives already exist (and have existed for many years).

Just so you know, Apple are taking 0.15% of the transaction as their fee for the US and the UK. I couldn’t even guess what the total value of transactions on the system would be, but I’m sure that will be a whole lot more cash going into the Apple coffers. Investing in Apple shares still seems like a good prospect at this stage.

To round out the Australian perspective for Apple Pay, interchange fees (which are not the same as merchant fees) for transactions are capped at 0.33% of the transaction, so I can’t see anyone being prepared to give up 45% of their interchange fee so that Apple can siphon it off to the US (or Ireland or wherever it is that they’re domiciled!). If you’re an Apple fan, I wouldn’t be holding your breath for contactless payments in Australia.

Android Pay – even later to the market, not price gouging though

Android Pay: Not the most imaginative name, but at least it's obvious that it does the same as Apple Pay.

Android Pay: Not the most imaginative name, but at least it’s obvious that it does the same as Apple Pay.

As often happens with Android/Google, when they see that Apple are onto something they quickly replicate it (and if they aren’t replicating it, they look like they are), and this seems to be what has happened with Android Pay. While Google had Google Wallet for some time, I don’t think that it ever worked outside of the US, so Australia never got to use the product. Hopefully Android Pay actually makes it across the Pacific though!

Now while the old Google Wallet could do a stack of things and was arguably a bit too complicated for simpletons to use, Android Pay is meant to just be the simple tap to pay feature that always existed in Google Wallet, but minus the harder to use/understand bits. This is supppsoed to make for a much simpler user experience, but we will have to wait and see.

A big plus for Android Pay is that there are no fees for transactions, which makes it an easy sell to introduce to the Australian market (or any other market for that matter). If this no fee structure is successful in non-US markets, then it could be a serious challenger to the Apple Pay product over time. Having said that though, if Apple gets a strong foothold though (as it probably will), I can see how this momentum could be difficult to challenge, especially given the significant number of Apple faithful.

Are you using mobile payments?

So now that you have an overview of mobile payments, is this something that you are actually considering?

Or are you already using mobile payments, and if so, what do you think about them?



10 thoughts on “Mobile payments – do people even know that they exist?

  1. I live in the US and as far as I know, we only have Apple Pay. I am old school and don’t feel comfortable having everything on my phone. I’m afraid of losing it, and someone having access to everything. I’m trying to get myself to try mobile deposits; I still go to the ATM, since my employer doesn’t offer direct deposit.

    • Wow, I just can’t understand why the US is so far behind with this stuff. You can put a PIN code on your phone to lock it which would address your security concern, and even without that, how is losing your phone any more likely than losing your wallet?

      And how is it that your employer doesn’t pay you by direct deposit? Do you mean to say that you receive a physical pay cheque every week that you have to then go and deposit at your bank? That concept died out in Australia about 20 years ago! Imagine the time you would save every single week of your life from not having to handle that cheque!

  2. I’ve never heard of this! But I’m not the most tech savy person, and prefer to be a late adopter. 🙂

    Not sure if Germany has this, but seeing as many places (e.g. big supermarkets) don’t accept credit cards, I doubt they do mobile pay. Also, I just switched from a company iPhone to my own Windows phone, which doesn’t have as many apps or support.

    • Yeah, well I’m starting to realise that a lot of people have never heard of it! It will probably take the widespread introduction of Apple Pay for people to realise it’s out there.

      All of the big places in Australia take credit cards, but it’s only the likes of my favourite supermarket (Aldi) that charge a surcharge for using a credit card instead of a regular debit card. So I don’t use mine there, unfortunately.

      I’ve never used a windows phone before, a while I’m sure they’re alright, the fact that they only have about 5% of the market means that they will struggle with app numbers for some time to come I would say. Why did you choose a windows phone over an android one?

      • I chose my Windows phone because of cost. Hardware is a much better value than an Android phone, and most of the apps I regularly use are on the Windows platform anyway. I still have my older Android phone that I keep around to use one app that I can’t use on my new phone. It sounds like a pain but this particular Android app is a VoIP app that I only use when I’m at home (on Wi-Fi) to call my parents in Canada. Not very minimalist but it will do for now!

        • Wow, I’m surprised that windows phones are so much cheaper than Android ones – that’s not what I had observed but perhaps I had only been comparing the higher end models. I understand why you have the android phone for VoIP but that really sucks that you can’t get it on your windows phone. Surely someone is developing an app to fixmthis as we speak!

      • Hmm… perhaps Ms Canadian Expat meant that they don’t accept credit cards without a surcharge? That’s what they do in Australia anyway.

        • No, at least no surcharge for the card holder.
          All the major chain supermarkets in Germany accept CC, but the privately owned ones usually don’t- to expensive for them.
          For the mobile payment: it’s possible as well, but usually you have to set it up via the store’s own mobile app. You download the app, link with your CC, bank account etc and your loyalty card and you are all set. However- nobody seems to use it.
          In some Edeka’s it’s even possible to pay by fingerprint after signing up with your account details.

          • No wonder no one uses each store’s mobile app – it would be very tedious to have to manage all of the separate apps for each store!

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