It is 15 minutes before you have to be at your desk and the queue at the coffee place around the corner is manic. It’s only when you’re just at the till, 10 minutes later, that you realise you left your wallet – with all your cash and cards in it – back in the car.
A few years ago, that might have been a problem, but payments technology has moved on and you can pay for your morning coffee using the ring on your right hand. Or maybe it’s the band on your wrist, or a small sensor embedded in the sleeve of your jacket that activates when you get close enough to the contactless terminal. That’s how the future of payments could look: quick, easy and still secure.
It is not so far in the future either. Apple Pay, available in Britain, can be used with the firm’s smartwatch, allowing customers to pay for their shopping in Marks & Spencer or their ticket on the London Underground with a single tap. All consumers have to do to set it up is scan their credit card details into their phone, provided it is compatible with the service.
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Samsung Pay, for now only available in the US and Korea, offers a similar service. Android pay, Google’s payments service, launched in the US last year and is set to be made available to UK customers this year. MasterCard, meanwhile, has run trials with smart jewellery firm Ringly and Nymi’s wearable band to bring contactless payments to wearable technology.
The idea is to make paying for goods and services a seamless affair, making it easier for consumers and less hassle for retailers. It is going to be big business. According to recent research from Juniper, the value of online, mobile and contactless payments will reach $3.6 trillion this year, up from $3 trillion in 2015.
Mobile and wearable contactless devices alone will reach $98 billion by 2018, up from under $35 billion in 2015.
Juniper researchers estimate that almost 150 million consumers will use their handsets to make mobile payments in 2016, with Apple and Samsung accounting for about 70 per cent of that figure. Apple Pay and Samsung Pay are only available in a certain number of markets – and neither of them can be used in Ireland just yet – with Chinese consumers registering almost 40 million cards with Apple’s service in 24 hours.
Apple wasn’t first to market with idea of a contactless payment through mobile phones. Mobile operators were testing payments through NFC before the Apple Pay announcement in 2014. In Britain, EE announced its cash-on-tap service in 2013; Telefonica was trialling contactless payments at Mobile World Congress in 2010.
However it seems that mobile operators are about to get squeezed out of the picture, with the handset manufacturers taking precedence. Between Apple and Samsung, the number of consumers using their handsets for mobile payments is expected to reach 148 million this year. Android Pay, Google’s own digital payments service and the successor to Google Wallet, will also help to boost those numbers.
And more are on the way. Asian phone maker Xiaomi has already filed patents for its own payments service. ZTE and Lenovo are also getting ready, with embedded secure elements in some of their phones.
However, although phones may be at the forefront of contactless payments now, that may not be the case in five or 10 years. As the Internet of Things become increasingly widespread, the opportunities for payments firms to change how people do business also widens.
“Depending on whom you believe and what reports you read, there is going to be between 30 and 50 billion connected devices globally in 2020,” says MasterCard’s Garry Lyons, the chief innovation officer with the company. “Right now there’s about 12 billion. Every single connected device is a commerce device. We don’t care whether it’s your phone, your tablet, your car, your fridge, your vending machine, your washing machine, your TV, your ring.”
Companies such as MasterCard may be working on new ways to make payments less painful for consumers, but any solution still has to fulfil crucial criteria. “We have a philosophy in MasterCard that cool doesn’t cut it. It might be fantastic to pay with Google Glass; it might even be cool to pay with this ring instead of using my phone, but really what we’re looking for is to apply technology in a way that it’s easy to adopt, to be scaled and solving real problems,” Lyons says.
Figuring out what the future of payments will be is no easy job and a lot of experimentation – trial, error, failure, success – is needed. That’s where MasterCard Labs comes in, providing a platform where new ideas can be developed and trialled in a short period of time. Although it is likely that some will remain an experiment and never make it to product stage, MasterCard has already implemented digital payments services to help both consumers and business make payments more quickly.
Its MasterPass product, for example, is already in use in Wagamama in the UK, allowing customers to pay at the table through their phones instead of waiting for the bill to be brought and payment taken by a staff member. That frees up tables quicker and works out more conveniently for consumers. Also on the cards is the ability to verify identity for payments through taking a selfie, or using your ECG – the electric signal from your heart.
Irish-headquartered PCH, meanwhile, is using its partnership with Massachusetts based MC10 to develop a skin sensor similar to a temporary tattoo to facilitate everything from contactless payments to access to your hotel room.
Payments technology may be evolving at a faster pace than initially anticipated, but researchers think that it will still be a few years before wearable payments are at critical mass.
Although Apple sold nine million Apple Watches in 2015, it sold far more NFC-enabled iPhones, leading Juniper to conclude that mobile may still dominate for the next couple of years at least. The company estimates that wearables as a whole will only account for about 2 per cent in value terms of non-card contactless payments in 2018.
There may be other boosts though to the technology as more payments providers get on board. Paypal is also embracing NFC payments. Once dismissed by former eBay chief executive John Donohoe as “Not For Commerce”, the company has since revised its stance on the payment technology. An upcoming version of its mobile app, due for launch initially in the US and Australia, will support NFC to facilitate payments through the app on compatible mobile phones.
In the UK, Barclaycard is launching the bPay range of contactless products, offering consumers a wristband, a keyfob or a sticker that can be used to pay for good worth under £30. Consumers use the app to preload credit to their bPay account and use it at terminals that accept contactless payments.
For now, Irish consumers are still getting to grips with contactless cards. There are currently more than 3 million contactless Visa payments cards issued in Ireland and although the technology was initially slow to catch on here, the latest figures from the payments company show one in every seven Visa transactions is now done via the tap-and-go method. The arrival of some of the new services may help to push that figure even higher.
