The Battle Of The Mobile Wallet

Juniper Research has just released a report “NFC Vs QR Codes ~ Which Wallet Wins?”

They estimate that, by 2019, nearly 2.1 billion consumers worldwide will use a mobile wallet to make a payment or send money, up by nearly 30% on the 1.6 billion recorded at the end of 2017.  The emergence of several high profile mobile payment services, including Apple Pay, Samsung Pay and Google Pay, has provided the sector with fresh impetus.

Furthermore, the accounts (or wallets) used to store consumer credentials are now have an integration of offline and online payments, enabling users to access them both for remote purchases and instore.

But there are significant regional variations in the mechanisms to make contactless mobile payments. In some countries mobile wallets win out, whereas elsewhere the NFC payment card wins. In addition Host card emulation (HCE) is on the rise, the software architecture that provides exact virtual representation of various electronic identity (access, transit and banking) cards using only software. Prior to the HCE architecture, NFC transactions were mainly carried out using secure elements, such as the chip on a card or other means.

HCE enables mobile applications running on supported operating systems to offer payment card and access card solutions independently of third parties while leveraging cryptographic processes traditionally used by hardware-based secure elements without the need for a physical secure element. This technology enables the merchants to offer payment cards solutions more easily through mobile closed-loop contactless payment solutions, offers real-time distribution of payment cards and, more tactically, allows for an easy deployment scenario that does not require changes to the software inside payment terminals.

When we compare the relative share of contactless cards and wallets in key markets outside the US (Europe, Canada and Australia), we see that, typically, cards account for well over 90% of transactions by value (rising to 98% in Spain and Canada). In the US, the positions are reversed, with mobile wallets accounting for 87% of the total.

While many markets focus on enabling instore mobile payments via NFC (which uses the same infrastructure and technology as contactless cards), a small number have embraced QR code-based instore payments. While precise mechanisms vary, typically the consumer is presented with a printed QR code, after which he/she launches the payment app and scans the code with the smartphone camera. This directs them to a payment page, where the transaction amount is entered and the transaction is made.

By far the most successful deployments of QR code-based payments have come in China, where these have already surpassed cash and cards in both instore transaction volume and values. Deployments elsewhere are sporadic, but the mechanism has been a mainstay of Scandinavian wallets for several years and is also gaining traction in India.

However, a study by researchers at the System Security Lab at the Chinese University of Hong Kong’s Department of Information found that it was possible to gain access to the phone’s camera to record an image of a QR code.

Furthermore, as QR codes can contain any kind of data (not just payment/transaction details), it is possibly to create codes containing links to malware or phishing sites.

As a result, the People’s Bank of China confirmed in December 2017 that it would be introducing plans to regulate payments by QR codes and other scannable codes. The new regulations, which come into effect in April 2018, will include a payments cap of RMB500 ($79) for basic payments, rising to RMB5,000 ($790) if additional security procedures are implemented, such as tokenisation, risk monitoring and anti-counterfeit measures.

Outside China, NFC has long been the proximity payment mechanism of choice by mobile wallet providers, although the initial model whereby the SE was based on the SIM has largely been jettisoned in favour of alternatives, where the SE is either embedded in the handset or else virtualised using HCE.

The evolution of offline payment in the US has lagged behind that in other developed markets, with EMV only mandated from October 2015. After that point, if merchants had not introduced processing systems to facilitate chip-based payments, then liability for fraud would pass from the card providers to those merchants.

Even with the onset of EMV, banks were reluctant to move to Chip & PIN, apparently concerned that their customers would be unable to remember a 4-digit PIN. Hence, US customers now use Chip & signature instead of the more secure alternative.

This means that Apple Pay and the wallets that followed in its wake, have the opportunity to establish themselves as the contactless mechanisms of choice.

The challenge facing Apple and its rivals is to ensure that the infrastructure is in place for consumers to make instore payments. According to Head of Apple Pay Jennifer Bailey, when Apple Pay first launched in September 2014, it was supported by just 3% of retailers, a figure that had risen only marginally by the end of that year. However, by the end of 2017, half of US retailers supported the mechanism, indicative of the progress that contactless has made in that market.

Nevertheless, although a majority of the remaining US retailers are now believed to own POS terminals capable of fulfilling contactless transactions, a significant number have not yet activated the technology. Furthermore, in some stores only a minority of terminals accept the technology: Juniper estimates that just under 30% of all POS terminals in the US were capable of processing contactless transactions by the end of 2017.

Purely from a payments and convenience perspective, it will be difficult for mobile wallet providers to gain market share from contactless cards. It is therefore incumbent upon them to deliver services through which the mobile wallet will become the default payment mechanism.

We would argue that there are at least 2 means by which this could potentially be achieved:

  • Offering an integrated wallet which can be used on both offline and online environments;
  • Offering services based around loyalty.

HCE threatens the central role of the network operator in NFC’s value chain, it strengthens that of the bank and makes handset-based contactless payment a more attractive proposition.

Banks have increasingly understood this. By the end of 2014, Juniper Research estimates that just 7 banks had introduced commercial services based on HCE. By mid January 2016, that number had increased to 55; by the end of 2017, Juniper Research estimates that well over 200 banks had introduced such services. Those launching in 2017 included Belfius (Belgium), Citi (US), Credit Agricole (France), Deutsche Bank (Germany), Rabobank (Netherlands) and SBI (India).

A number of banking collectives have also sought to implement HCE. In June 2016, the Danish banking collective, the BOKIS partnership, launched an HCE wallet utising a solution provided by Nordic digital payments specialist, Nets. The BOKIS partnership includes 62 banks that form the small to mid-sized banks segment of the Association of Local Banks, Savings Banks and Cooperative Banks in Denmark, together with 5 Danish regional banks: Jyske Bank, Sydbank, Spar Nord Bank, Arbejdernes Landsbank and Nykredit Bank. Meanwhile, In October 2016, 27 Spanish banks teamed up to launch a new mobile payment platform called Bizum whicih utilises HCE.

However, despite this plethora of bank launches, adoption has been relatively modest: many services have only a few tens of thousands of users, with none yet reporting that they have achieved more than a million. The scale of the challenge facing the banks is largely tied to that facing NFC in general: in Western Europe; banks’ own contactless services are up against both contactless cards and the OEM-Pays, making it extremely difficult to gain a foothold.

NAB Adds Samsung Pay

NAB customers can now use Samsung Pay to conveniently make contactless payments.

Samsung Pay is a secure and easy-to-use mobile payment service that allows users to add credit and debit cards from participating financial institutions, and loyalty cards from participating merchants.

NAB Executive General Manager of Consumer Lending, Angus Gilfillan, said Samsung Pay complements the bank’s mobile payments service, NAB Pay, which customers can already use on compatible Samsung and other Android devices.

“We are continuing to invest in giving our customers the best digital payments experience,” Mr Gilfillan said.

“We know Australians increasingly want to pay for their purchases quickly and conveniently. The growth in ‘tap and pay’, and take up of NAB Pay since we launched it two years ago, has been remarkable.

“By adding Samsung Pay, we’re giving our customers more choice in digital wallets.”

NAB customers can also use Samsung, Fitbit, and Garmin smartwatches to make contactless payments, and NAB will also be adding Google Pay to its suite of mobile payment services very soon.

“We see the highest number of NAB Pay transactions being made at supermarkets, restaurants, and at takeaway venues – which is exactly when you want to be able to make quick and easy payments,” Mr Gilfillan said.

Samsung Electronics Australia’s Head of Products and Services, Mark Hodgson, says Samsung is thrilled to be able to provide the Samsung Pay experience to even more Australians.

“Our partnership with NAB builds on our commitment to providing a simple and secure digital wallet experience to every Australian using a Samsung smartphone or wearable. We believe our collaboration with partners like NAB will help further enhance our mobile experience, and we look forward to evolving the portfolio further over the upcoming year.”

NAB also announced last year that it is working with the Commonwealth Bank of Australia and Westpac to build Beem It, a free app enabling anyone to make an instant payment using their smartphone, and to request payment from someone who owes them money or to split a bill.

“We are continually looking at all options to provide our customers with access to safe and secure ways to make digital payments.”

“From our own mobile banking app and NAB Pay, to a range of other payment platforms and services, we’re investing in solutions to help our customers use and manage their money. We’re very pleased to be launching Samsung Pay to our customers now,” Mr Gilfillan said.

NAB’s Mobile Banking App includes a range of world-leading features to help customers have more control over their cards. Features include the ability to switch on or off online transactions, overseas card usage, and ATM withdrawals, and to block, unblock, and replace a card that may have been lost.

The app also includes real-time alerts and merchant information, providing customers more information about their transactions straight away, and a range of options to help them know more about and manage their repayments and accounts.

Suncorp Introduces Samsung Pay

Suncorp has announced that customers with a Suncorp Clear Options Credit Card can now access Samsung Pay.

Suncorp Executive General Manager Deposits & Investments, Bruce Rush, said the introduction of Samsung Pay was the first step in Suncorp’s plan to enhance its digital payment offering.

“As we move to an increasingly cashless society, we know that our customers need more efficient and sophisticated technology, including digital wallets,” Mr Rush said.

“From 27 September, 2017 all customers with a Suncorp Clear Options Credit Card, and compatible Samsung device, will have the option to use Samsung Pay.

“We will continue to invest in our payment technologies and are committed to delivering new services that our customers want and need.”

Samsung Pay is a secure and easy-to-use mobile payments service available on compatible Samsung devices, including the recently released Galaxy Note8. Head of Mobile Payments at Samsung Electronics Australia, Mark Hodgson, said Suncorp and Samsung are committed to improving customer experience through innovation.

“With Samsung Pay, Australians are provided with the convenience, security and choice to undertake everyday tasks when transacting,” Mr Hodgson said. “In addition, Suncorp Clear Options Credit Card cardholders can now benefit from Samsung Pay’s unique features, such as our three-layered security system, and can enjoy using the service anywhere you can pay with a contactless credit card.”

Access to Samsung Pay only applies to Suncorp Clear Options Credit Card cardholders and does not include Suncorp debit cards.

Westpac Now Offers Samsung Pay

From Gizmodo.

In the eternal war between Apple Pay, Android Pay and Samsung Pay, the world’s largest smartphone maker just scored another — minor — victory. Millions of customers from Australia’s second largest bank can now use Samsung’s phones and smartwatches instead of their credit and debit cards to pay at almost any NFC payment terminal around the country.

Although for the average user there’s not a great deal of difference, Samsung Pay is technically superior to Apple Pay or Android Pay in that — because it only works on a certain number of Samsung phones and Samsung’s Gear S2 and Gear S3 smartwatches — it can also emulate the MST magnetic strip on physical cards, which can be useful for payment terminals that don’t have NFC support already.

It’s also a convenient time for Samsung to switch on its newest feature — a NFC provisioning feature, which lets customers add cards into Samsung Pay by tapping them on the back of the phone, rather than taking a photo of the card itself with the phone or by — ugh — entering details manually.

Samsung already has Citibank’s Mastercard and Visa credit card holders on board, as well as American Express, so Westpac’s various debit and credit cards will massively bolster the roster of Samsung Pay payment methods available. Westpac customers will be able to add their cards to Samsung Pay from 8AM on Tuesday morning.

Westpac says:

You’re even more unstoppable with Westpac when you tap and pay using your Samsung Galaxy S7, S7 Edge, S6, S6 Edge, S6 Edge+, S5, S5 Mini, S4, Note 5, Note 4 Edge, Note 4, Note 3 or Alpha.

To start paying for everyday purchases with your smartphone, simply download the Westpac Mobile Banking app and choose which Westpac eligible credit and debit cards you’d like to use for mobile payments.