Making payments with a mobile phone is a much-talked about technology goal that is already happening in Turkey
WHEN MASTERCARD wanted somewhere to show off its mobile payment technology, Istanbul was a natural choice. The company has a track record of innovation with Turkish banks and mobile operators, which is why a troupe of European journalists found themselves at the Kanyon shopping mall near the city’s financial district.
Armed with smartphones preloaded with MasterCard technology, we went on a very modern shopping spree, fitting for a country where half of its 78 million people are under 25 and 62 million use mobile phones.
Having dusted itself down from a financial crash a decade ago, Turkey is reinventing itself as an economic hotspot. Part of the reinvention is dealing with a black economy where 40 per cent of the population doesn’t have a bank account. Mobile payments fit nicely into the government’s plan to have a cashless society by 2025, making more financial transactions more visible.
MasterCard first launched its PayPass technology in 2002, a contactless payment system where consumers show their card or PayPass-enabled device to a compatible point-of-sale terminal. Card information is transmitted by radio frequency rather than a swipe. Mobile phones use Near Field Communications chips that carry additional data, such as loyalty schemes and money-off deals. It’s been a slow-grow series of pilots and trials that are now gaining momentum.
The benefit of a mobile payments system, so the pitch goes, is that it’s quicker than normal cards, can be used for small cash transactions and it’s more secure. “None of this will work if the consumer doesn’t feel it’s secure,” said James Davlouros, vice-president for mobile business development in Europe, MasterCard.
The PayPass chip does not contain the cardholder name. Only the account number and expiration date are transmitted along with a one-time-only number that identifies each transaction. Payment credentials are isolated from the phone’s hardware and only authorised programs can access it. Google Wallet is a case in point, launched in the US in September on Android devices.
Having identified mobile payments as a way to build and retain customers, Turkish banks and mobile operators have shown a capacity to innovate and work together that is hard to imagine in Ireland.
Turkcell, the leading mobile operator in Turkey, chose to embed the banking toolkit in its Sim cards. It even went as far as attaching the NFC chip to the Sim, because smartphones have been slow to build in the technology. The strategy has kept the operator central to the payment process and closer to its customers. “It will help decrease customer churn dramatically. They just switch over the Sim if they upgrade their phones,” said Cenk Bayrakdar, chief management officer for the new technology business in Turkcell.
Garanti Bank has a fresh outlook compared with most financial institutions and has been using contactless cards since 2006. Mobile payment was a natural next step and a new way for the bank to target customers with innovative reward schemes.
“We have a reward pool that offers real money to consumers that they can redeem at the point of sale in real time. And unlike most schemes, they don’t expire and there’s no minimum amount you have to spend,” said Mehmet Sezgin, chief executive officer at Garanti Payment Systems. “It’s a great motivator for merchants and retailers, and consumers get free shopping. It’s the biggest revolution in Turkish banking.”
According to Sezgin, Garanti has been able to broker such deals because its culture is fundamentally different to UK and Irish banks. “We start with the needs of the customer rather than fraud prevention,” he said.
Mobile operators were natural partners, their top-up services putting them in a good position to offer customers preloaded money cards – O2 already does this in Ireland, a dress rehearsal for true mobile payments.
The next step in Turkey was virtual cards on the phone, either preloaded with cash or with credit from the user’s bank. For any amount over €25, you must enter a pin number on your phone. There is also a money-send functionality for texting funds to friends or family.
In the Kanyon shopping malls there were 10 stores with contactless point-of-sale machines. You have to hold the phone over the device for a few seconds for it to register, a technique that varied slightly depending on the terminal. A minor niggle is that they all appear to be slightly different, and some are better flagged than others so you may not know until you’re at the till if the shop will take a mobile payment.
But there seems to be real momentum for contactless payments in Turkey. And with a black economy that undermines the country’s economic credentials, there is an incentive for financial institutions and the government to move it along.
Elsewhere, m-payment is slowly taking off. Tesco and Boots have upgraded to contactless point-of-sale systems, and Google Wallet has given cashless payments a higher profile in the US. With Visa and MasterCard driving uptake, the biggest obstacle is the lack of NFC on most smartphones. Its absence from the iPhone 4S was another blow for the technology’s backers.
There is no doubt, however, that it’s coming. Banks and operators have vested interests in making it happen, but the speed of adoption will ultimately depend on retailers and consumers.
