Pandemic shapes trends in contactless payment
The lockdown has affected consumer spending habits — and has finally brought Apple Pay to SA
More than six years since its release in the US and after multiple delays, Apple Pay finally launched in SA on March 30. It is now available to Absa, Discovery Bank and Nedbank clients.
Apple’s mobile payment service lets iPhone users make purchases on their smartphone via its embedded near-field communication (NFC) chip at any contactless payment terminal. It is also supported on the Apple Watch and as a checkout method on Safari and on iOS apps.
Apple Pay is similar to other mobile payment services introduced to SA in 2018, including Samsung Pay, Fitbit Pay and Garmin Pay. Each uses a tokenisation system that loads a random number instead of your actual bank card number, making it secure to use without compromising your physical cards.
These payment methods are all virtual wallets with an NFC chip, which allows them to act like a physical card.
They differ from the SnapScan, Zapper and Masterpass apps, which scan a quick response (QR) code to make payments.
They cannot be used with a contactless payment terminal, as Apple Pay can.
Samsung Pay soared during the pandemic from 2-million transactions in February 2020 to 3-million by November. It is available on more than 40 Samsung smartphones across all categories and on its smartwatches. It works with Absa, Standard Bank, FNB, RMB Private Bank, Discovery Bank, Investec, Nedbank, Virgin Money and British Airways.
"As SA deals with heightened hygiene and health requirements, a record number of customers have adopted and embraced digital transactions," says Cowyk Fox, managing executive for everyday banking at Absa Retail and Business Bank.
Apple Pay helps customers avoid handing their payment card to someone else, touch buttons or exchange cash, says Absa. The bank saw a 200% increase in contactless payments last year, says Fox, as e-commerce doubled.
The Mastercard Economic Institute’s "Economy 2021" report, released earlier this year, notes that Covid has led to permanent changes in consumer spending habits, the growth of online banking, fintech disruption as well as opportunities to boost financial inclusion. A key trend is the sharp shift to digital platform use — driven by changed consumer behaviour, mobility restrictions and the need to generate business revenues beyond brick-and-mortar locations.
The report also says that the latest technologies will facilitate financial inclusion by connecting consumers to small businesses and micro-merchants. With digital innovation and greater internet access, digital payment options such as contactless, virtual card numbers and QR codes offer more possibilities than before, it adds.
The Peach Payments gateway for e-commerce sites in SA and the Dineplan website for restaurant booking deposits were quick to add Apple Pay to their platforms.
"A significant portion of our customers use Apple products at checkout, so introducing Apple Pay as a payment option will be a bonus for these customers," says Dineplan director Greg Whitfield. Online transactions are consistently increasing, says Whitfield.
Chipo Mushwana, executive head of emerging payments at Nedbank, says a fair number of its clients use iPhones, and this was something that had to be gauged when analysing the benefits of Apple Pay. She says the bank hopes to provide safe and secure digital payment capabilities not just to existing clients but to new ones looking to get the most out of digital channels.
Contactless payments have accelerated during the pandemic, says Mushwana. A key trend seen by Nedbank was "payment as a service".
Another trend seen by Nedbank is the rise of "super apps" — a marketplace of services and products through third-party integrations. Nedbank launched its own super app, Avo, in the lockdown. It allows customers to do multiple tasks including buying groceries, checking for restaurants or managing personal finances.
Nedbank says Avo is approaching 200,000 downloads. The most popular transaction is purchasing essential goods.
Data-driven technology will allow for a highly personalised service and encourage customer loyalty, says Mushwana.
Security will become an important issue, she adds. "Security is always a big concern when it relates to digital payments, but biometric authentication has taken off — there’s a shift in how payments are cleared and data encrypted."
However, the biggest trend Mushwana expects is open banking.
"You would have noticed a lot of retailers and telcos coming into the space. How it is regulated … will shape the payments landscape."
Late in January Spot Money, SA’s first open banking platform, launched what provides a transactional account and the ability to generate virtual cards or order a physical contactless debit card.
It also brought a financial services marketplace to customers from third parties; offers to earn rewards; no-to low-cost transactions for deposits, airtime and paying bills; or as a safe way to pay foreigners employed in SA.
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