Tap and shop with your smartphone

FRAN FOO
December 12, 2013
The Australian

WESTPAC customers at Woolworths and Coles will be able to exit with their groceries faster next year when they simply tap their smartphones upon checkout.

While using smartphones as a payment mechanism isn’t new, it will be the first time where the handset doesn’t require a special casing or sticker to work – an offering Westpac is hailing as a “world first”.

Westpac believes the new payment method could proliferate in six months as a new standard emerges.

More than 180,000 Visa terminals can receive contactless payments at a variety of merchants, including the two supermarket giants.

The service will work on compatible Android phones that supports contactless payments. In Australia, Samsung’s S4 and Note 3 are the only devices to pass muster.

Once their Westpac debit and credit card details are stored on the bank’s mobile banking app, there are at least three ways to make payment, said Westpac’s David Lindberg.

Some customers could choose to launch the app, enter a password, then make a payment, while others could opt to merely open the app, Mr Lindberg said.

“Some won’t even have to launch the app,” Westpac’s financial services chief product officer for Australia said. “How it works depends on the settings the customer prefers”.

By default, people have to unlock their phones prior to making payment but Mr Lindberg said it was possible to use the app without unlocking the device.

“We’re very comfortable with the security because we’ve tested it and we stand behind any risk associated with that but that will be the user’s preference,” he said.

The handset approach works like any debit or credit card – tap and go for purchases $100 or less, while a PIN is required for higher amounts.

“It’ll be exactly the same as using your credit or debit card tap and go today (but) it’ll just be on your phone,” Mr Lindberg said.

He said two basic technologies were required to make it work: near-field communication and a “secure or embedded element” which sits in the handset.

NFC is a radio communication standard that allows smartphones and other devices to communicate with each other in proximity.

Payments can be made as the secure element in the handset is able to “talk” to the Visa terminal.

Mr Lindberg said as more smartphones have this capability, “I think this is really going to spread … and those phones have been selling so well that we think this will be very popular”.
Westpac has more than 2 million active mobile users who log-on 15 times a month, and about 40 per cent own an Android handset.

There’s no breakdown for Samsung users but the Google platform is growing, the bank said.

Mr Lindberg believes that in six months, a new security protocol called host card emulation could take the payments world by storm.

“That allows all phones with NFC, but without a secure element, to make secure payments. This essentially means all Android phones in the market.

“It’s an industry standard and has yet to be adopted,” he said.

Mr Lindberg said he was hopeful that EMVCo, which manages the circuit card specifications for chip-based payment cards, will adopt the standard within the next six to 12 months.
“That would mean that every single Android phone can be used to do what we’re launching here,” he said.

The service was trialled on iOS devices but the results were far from satisfactory. Apple iPhones are not NFC-enabled.

“Customers themselves didn’t think the technology was modern enough to make it attractive or appealing. That was probably the biggest issue,” Mr Lindberg said.

He said Westpac’s offering was “the first time anywhere in the world where you can use your phone to pay without any additional add-on like a sticker or a case”.

Mr Lindberg said Australia has led the world in contactless payments and over the past 12 months had gone from almost zero to around 55 per cent of all contactless debit transactions.
“In parallel over the last two years we’ve seen more than 50 per cent of all our logins now on a mobile device.

“We’re very excited that this will change the face of payments in Australia.
“It’s an Australian leadership story globally,” he said.