Apple Pay to level the playing field for mobile wallets

In recent years, the retail sector has been impacted by considerable payments system change, much of which has been of great benefit to the sector. However, as always there are still various challenges facing retailers including maintaining a fair, open and low cost transactional environment. The Australian Retailers Association (ARA) runs the Australian Merchant Payments Forum (AMPF) on behalf of Australia’s retail merchants to advocate competitive, innovative and consumer friendly payment options for the retail sector.

We are excited by the opportunities that mobile wallets and mobile payments can provide for merchants and customers. For retailers, mobile wallets can improve and simplify the payment experience, while creating the opportunity to deepen the relationship with customers.  For customers, they have the potential to make life simpler and more convenient by combining payment cards, loyalty cards, identification, public transport cards and more into one device.

Apple Pay, Android Pay and Samsung Pay are now all available in Australia, with awareness and interest in mobile wallets increasing rapidly. There is now an opportunity for innovation and for new players, platforms and services to emerge in a quickly developing market.  However, these benefits will not be achieved unless consumers and merchants have a choice between mobile wallets and mobile payment services, whichever mobile device or platform they have chosen to use.

With Apple’s iOS or Google’s Android installed on almost every smartphone sold today, a mobile wallet available on both of those platforms will stand a good chance of attracting customers, merchants and card issuers. A mobile wallet only available on the Android platform is unlikely to provide the same opportunities and retailers will need open access to that wallet to benefit from rewards schemes, product pick up, marketing or any other multitude of benefits.

A consistent user experience is particularly important to retailers for the purposes of market and customer support. For example, while some supermarkets have trialled an integrated wallet with Near Field Communication (NFC) technology on the Android platform, there is a need for mobile wallet solutions to continue to use an external ‘pay tag’ as this is the only solution available to all mobile phone users.

Access to the iPhone’s NFC function would allow retailers to develop or participate in mobile wallets that provide a consistent and fully integrated experience to all users regardless of their choice of smartphone.  It would also allow loyalty programs, coupons and rewards to be more effectively integrated into these mobile wallets for a richer and more convenient customer experience, as consumers would be able to choose how they wished to pay, either with loyalty points or with dollars.

We believe that NFC technology will be essential for mobile wallets and mobile payment services for some time to come, as the NFC infrastructure can be upgraded through software to provide richer information and additional services developed by merchants and acquirers. Unfortunately, Apple Pay remains the only app that can use the iPhone’s NFC functionality, therefore the potential for innovation in mobile wallets and mobile payments will be limited. It will take years for any alternative standard to be agreed and to become as ubiquitous and familiar as NFC. 

Further to this point, Australian consumers have rapidly adopted contactless (Tap’n’Go) card payments, as over 70% of face-to-face card payments on the major international scheme brands are now contactless. This has been achieved by the Australian banks and merchants investing in the widespread deployment of NFC acceptance touch pads and associated software and equipment, all of which have been provided on a fully open access basis.  For ARA members, the touch pads have either been purchased outright or paid for as part of their merchant acquiring arrangements. This investment has been made on the basis that any consumer with a payment device of their choice from any scheme, issued by any bank, would be able to use the touch pad. The lack of open access to the NFC function on the iPhone does not make this possible today.

Mobile wallets with access to the NFC function can offer the speed and convenience of a ‘Tap’n’Go’ payment, but mobile wallets that require additional steps or take more time to make a payment will impose costs on merchants and are unlikely to be used by customers, particularly in a busy shop or at the front of an impatient queue.  Simply put, asking the user to take the additional time to unlock their device, open a specific app and choose a specific option inside the app will likely fail the ‘friction free’ test.

Unfortunately, the Australian Competition and Consumer Commission (ACCC) have not authorised merchants and banks to collectively negotiate with Apple over this open access. Therefore, the ARA will continue to pursue this significant issue on behalf of merchants.

The ARA works to ensure retail success by informing, protecting, advocating, educating and saving money for its 7,500 independent and national retail members, which represent in excess of 50,000 shop fronts throughout Australia. For more information visit retail.org.au/member_advocacy/