Friday, 2 September 2016

Paying with your Phone

The time is approaching where all you will need to take with you on your shopping trip is your smart phone and car keys. The ability to pay for transactions through your phone is becoming a reality as the current generation of smart phones have the hardware to support this process, using Near Field Communication (NFC) technology. This allows for contactless payments in the same way you currently use your credit card.  Android phones (Samsung, HTC, Nexus etc.) can use the Android Pay service which supports any Android device with the NFC chip and Android KitKat. This opens up the majority of the smart phone market. Apple have an equivalent service, Apple Pay, which works on iPhone 6 and later models. While the smart phones may have the hardware and software to run the service, it also requires the retailers and banks to offer the payment solutions. In Australia, Android Pay rolled out to over 30 banks and financial institutions in July, although of the big four banks, only the ANZ have signed up with the other stated as coming soon. Apple Pay, by contrast, is currently only supported by ANZ bank and American Express. The reason for this is that Apple only allow access to card payments through the Apple Wallet. The banks are arguing that this limits choice as they would prefer to be able to use their own apps to access payments (which is allowed on the Android Pay service). The major banks have even applied to the ACCC to allow them to bargain with Apple as a cartel, but this is currently under review. This is a major issue for banks as they charge over $3 billion a year for processing credit and debit card transactions.  

To setup the pay service on your Android phone download the Android Pay app and run through the card setup process. This involves taking a photo of your card and confirming your details. You may need to download your bank's app for verification of your bank details. Once this is completed, you can then use the phone at contactless terminals for payment. Your card details are kept secure as a virtual account is used and not your card info when making payments. On an iPhone you add your credit card details to the Wallet built into iOS. You are required to unlock the phone or use Touchid when making payments. You can also use your Apple watch for payment (which requires unlocking the screen to allow payments). Your credit card details are kept secure through a unique device account number that is allocated to each card in your Wallet. This is used instead of the card details when making purchases.  

While it is still in the early stage, I predict that mobile payments will eventually remove the need for physical credit cards in the future. Just as smart phones have replaced the need for a camera, the payment apps will eventually replace the need to carry a credit card. 



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