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Cape Town - A cashless payment system may be closer than one would think as one of the main stumbling blocks is being rolled away.
The technology to replace cash, and even card payments, is fast approaching as cellphones become ubiquitous, but challenges remain.
The first is that not all smartphones have NFC technology, widely regarded as the ideal route to building a contactless payment system. The problem is exacerbated by the number of feature phones still in circulation.
Gemalto has developed a sticker that could turn any cellphone into an NFC-enabled device, and the company was bullish about the prospect for increased expansion of the technology to replace cash-based payments.
"In practice, when using an NFC smartphone, the NFC payment function can be protected by a personal PIN and should the handset be lost or stolen, the NFC payment issuer or the mobile operator, via its Trusted Services Manager platform (TSM), can immediately lock or even delete the contactless payment application from the handset remotely," Benjamin Binet, vice president of Gemalto Southern Africa told Fin24.
Merchant infrastructure
The idea to use mobile phones as payment gateways is not new, and a number of developed countries already implement the system - though it's still on a small scale.
In Japan, some retailers have a programme where you pay for groceries simply by swiping your phone at the checkout. Absa conducted an NFC trial with its workers where payment with mobile phones could be concluded at ATMs.
The technology has also been employed in public transport systems where users simply wave a card to make the payment. Using the same technology with mobile phones seems to be the next logical step.
"The Near-Field Communication (NFC) stickers, once stuck on the handset, can turn any mobile phone, even if it is a low end or a feature phone, into an NFC phone," said Binet.
Digital payment solutions will replace cash and increase security for merchants. (Duncan Alfreds, News24)
He argued that the merchant infrastructure would soon support NFC devices.
"Point of sales contactless payment terminals' cost are being supported by merchants but knowing that 90% of the terminals being shipped today include contactless payment functionality, the number of installed terminals will be renewing itself naturally over the coming years and very soon, all terminals will offer both functionalities - standard and contactless payment."
Cashless payment could boost the economy especially as the technology is integrated into virtual currencies. Many people in poor and rural communities could be included in the formal economy by using the payment system.
Online payments
"Contactless mobile payment based on NFC technology could nicely complement existing mobile money solutions such as M-Pesa. Whereas mobile money solutions enable remote mobile payment, NFC mobile contactless solutions offer end users a new and convenient way to pay in a contactless mode in shops," said Binet.
Cashless payments are part of a growing trend of moving toward e-commerce which is expected to grow to eventually become the standard payment system if issues like end-user security can be adequately resolved.
Juniper Research reports that mobile e-commerce sales amounted to $1.5 trillion in 2013, and is projected to hit over $3.2 trillion by 2017.
As more people access internet services, it is likely that they will migrate to digital payment platforms and companies have to ensure that these platforms are available as consumers demand it.
Statista reports that digital shoppers in the US grew from 172 million in 2010 to 191 million in 2013, and is projected to reach 215 million by 2018.
In SA, the growth of online payments of virtual products has demonstrated that there is an appetite for online payments that is simple, yet secure to use.
Binet said that the NFC stickers would act like traditional PIN cards which could be secured to prevent theft.
"As for feature phones using NFC stickers, the scenario would be exactly the same as if your banking card got stolen. Depending on the liability of the bank, end users could cash back the amount of money which was credited on the card."
- Follow Duncan on Twitter
The technology to replace cash, and even card payments, is fast approaching as cellphones become ubiquitous, but challenges remain.
The first is that not all smartphones have NFC technology, widely regarded as the ideal route to building a contactless payment system. The problem is exacerbated by the number of feature phones still in circulation.
Gemalto has developed a sticker that could turn any cellphone into an NFC-enabled device, and the company was bullish about the prospect for increased expansion of the technology to replace cash-based payments.
"In practice, when using an NFC smartphone, the NFC payment function can be protected by a personal PIN and should the handset be lost or stolen, the NFC payment issuer or the mobile operator, via its Trusted Services Manager platform (TSM), can immediately lock or even delete the contactless payment application from the handset remotely," Benjamin Binet, vice president of Gemalto Southern Africa told Fin24.
Merchant infrastructure
The idea to use mobile phones as payment gateways is not new, and a number of developed countries already implement the system - though it's still on a small scale.
In Japan, some retailers have a programme where you pay for groceries simply by swiping your phone at the checkout. Absa conducted an NFC trial with its workers where payment with mobile phones could be concluded at ATMs.
The technology has also been employed in public transport systems where users simply wave a card to make the payment. Using the same technology with mobile phones seems to be the next logical step.
"The Near-Field Communication (NFC) stickers, once stuck on the handset, can turn any mobile phone, even if it is a low end or a feature phone, into an NFC phone," said Binet.
Digital payment solutions will replace cash and increase security for merchants. (Duncan Alfreds, News24)
He argued that the merchant infrastructure would soon support NFC devices.
"Point of sales contactless payment terminals' cost are being supported by merchants but knowing that 90% of the terminals being shipped today include contactless payment functionality, the number of installed terminals will be renewing itself naturally over the coming years and very soon, all terminals will offer both functionalities - standard and contactless payment."
Cashless payment could boost the economy especially as the technology is integrated into virtual currencies. Many people in poor and rural communities could be included in the formal economy by using the payment system.
Online payments
"Contactless mobile payment based on NFC technology could nicely complement existing mobile money solutions such as M-Pesa. Whereas mobile money solutions enable remote mobile payment, NFC mobile contactless solutions offer end users a new and convenient way to pay in a contactless mode in shops," said Binet.
Cashless payments are part of a growing trend of moving toward e-commerce which is expected to grow to eventually become the standard payment system if issues like end-user security can be adequately resolved.
Juniper Research reports that mobile e-commerce sales amounted to $1.5 trillion in 2013, and is projected to hit over $3.2 trillion by 2017.
As more people access internet services, it is likely that they will migrate to digital payment platforms and companies have to ensure that these platforms are available as consumers demand it.
Statista reports that digital shoppers in the US grew from 172 million in 2010 to 191 million in 2013, and is projected to reach 215 million by 2018.
In SA, the growth of online payments of virtual products has demonstrated that there is an appetite for online payments that is simple, yet secure to use.
Binet said that the NFC stickers would act like traditional PIN cards which could be secured to prevent theft.
"As for feature phones using NFC stickers, the scenario would be exactly the same as if your banking card got stolen. Depending on the liability of the bank, end users could cash back the amount of money which was credited on the card."
- Follow Duncan on Twitter
