A smartphone based payment system which charges merchants 1.5 per cent per transaction, but gives back to the consumer a third of that in the form of a loyalty credit has been launched by Bendigo Bank.To use Bendigo's 'redy' payments system consumers need to download the app for their iPhone or Android smartphone and link it to either a Bendigo Bank account, or a Visa or MasterCard account. To pay for goods or services they open the redy app, scan the QR code displayed on the merchant's redy terminal, and the funds are transferred, with loyalty credits (dubbed creds) automatically updated in the user's account.Accrued creds (worth 0.5 per cent of each redy transaction) can either be passed onto selected charities (ten have so far signed onto the scheme) or used to get discounts at local businesses using the payments platform.  Statements detailing charitable donations will be provided to customers for tax purposes.Besides the 1.5 per cent transaction fee, merchants using the redy system will also need to spend $25 a month on a dedicated Samsung tablet which will display the QR code and cost of transaction. The terminal can only be used to accept redy payments, so to accept eftpos or cash payments, a second point of sale terminal would be required.While banks remain enthusiastic over the potential of smartphone based payment systems, the Reserve Bank's recently released research discussion paper on trends in consumer payments injected some sobriety into the debate.It found that less than one per cent of consumer payments were made using a smartphone app in 2013 although they were considerably more popular for initiating transfers either with friends and family, or between different accounts (nine per cent).Growth of smartphone payments however has been swift. The RBA found 28 per cent of survey respondents had made a smartphone payment in 2013, up from around ten per cent in 2010.Bendigo Bank is clearly hoping demand will continue to increase.Trialled in Charlton and Heathcote in Victoria, the redy system is now being progressively rolled out in towns and cities in Victoria, South Australia, Tasmania and Queensland with NSW to follow.So far just 17 merchants have signed up, 11 of those from the two trial sites. The bank however believes there is significant scope for adoption among its approximately 30,000 merchant customers and 1.6 million customers.The bank is, for example, in discussion with a number of councils.While Bendigo did not rule out extending the use of the system to handle online purchases, it acknowledged it was conceived as a "proximity based system."Developed by Community Telco Australia, a wholly owned subsidiary of the bank, further innovations are underway including a person-to-person payment facility and a range of analytics for merchants providing demographic profiles of spending patterns.