Carpetbaggers go for contactless

Contactless payments cards may be gaining favour among Australian consumers - but they are also luring thieves and house burglars.

Acting Inspector Glenn Spencer, from Canning Vale Police Station in Western Australia, said that contactless cards were now a clear target in WA home burglaries, with thieves rifling through purses and wallets specifically looking for Visa PayWave and MasterCard PayPass cards.

Knowing that there was a A$100 limit on the cards, the thieves were then going out and spending amounts up to that limit, confident they wouldn't be asked to prove their identity or input a PIN.

He said more traditional payment processes, which require some form of identification in the form of a PIN, are safer than the tap-and-go cards.

In the future it might not just be contactless cards that the criminals go after but Near Field Communications-enabled smartphones, which can also be used for contactless payments.

Only about nine per cent of the smartphones currently for sale feature an NFC chip. To make a contactless payment from most smartphones, people still have to either glue an NFC chip on to their phone or buy a slip-on case with an NFC chip - which is the approach Commonwealth Bank has taken to make its Kaching mobile phone payments application contactless.

By 2015, Gartner predicts that 50 per cent of smartphones will have NFC, but it notes that even in its most optimistic scenario NFC mobile phone payments will only lead to global gross revenues of US$750 million - for the entire industry - which would "be dwarfed by set up costs, transaction costs and fraud management costs."

"The fact that the majority of these fees will simply be cannibalising existing revenue for banks and payment providers only makes the matter more concerning."

Antony Cahill, executive general manager of digital and direct for NAB, acknowledged that forecasts regarding smartphone NFC adoption were previously more aggressive than seemed warranted today.

However, he said, there had been lot of progress in mobile payments, and the logical next step was to make more use of the mobile phone. He predicts that more comprehensive solutions will appear in the market over the next six to 12 months, as the supporting ecosystem, comprising banks, card providers, phone makers and telecommunications companies, work together to create more compelling solutions.

Matt Barr, regional head of market development and innovation for MasterCard, suggests that part of the problem may be "if all you are doing is helping the phone versus a piece of plastic then you are not adding enough value."

He expects NFC-enabled phones will come into their own when there is a richer ecosystem so loyalty points can be viewed or used and coupons delivered to the phone can also be used contactlessly. By that stage he sees the contactless card and the NFC-enabled smartphone as being complementary payment systems rather than rivals.

As to the continued lack of an NFC-equipped iPhone, Cahill said that it would help if Apple had an NFC-equipped phone but he wasn't sure it was the only thing holding back demand.

Gartner research director Sandy Shen acknowledged that if the iPhone 6 did ship with an NFC chip it would add momentum to the contactless payment market, but she warned that there was no guarantee of this as NFC promised relatively little benefit for Apple.

Shen said that while many NFC-enabled mobile phones started shipping in the second half of 2012 there were still relatively few in the market. She warned that "NFC will not be mainstream on mobiles before 2016."

"Apart from these technical issues there are behavioural issues. They (consumers) need a reason to make the behavioural switch - maybe that is giving them loyalty points."

She believed tackling consumer behaviour would prove a bigger challenge than overcoming any lingering technical issues.

A survey conducted on behalf of PayPal, and released this month, suggests, however, that there could be a latent consumer appetite for contactless payments via mobile phones. It discovered that four out of five Australians wished they didn't have to take their wallet everywhere; 23 per cent would take a smartphone rather than a wallet if they could only take one item; and 77 per cent had decided not to purchase something because the queue was too long, indicating a potential appetite for streamlined contactless payment.

Consumers may still have to wait though, as Commonwealth Bank is the only major to have moved beyond the contactless trial stage.

"The phone is a slightly different animal" to a contactless card, according to Westpac's Harry Wendt, and more complex because of the challenge of loading the secure element on to the phone - either on to a dedicated NFC chip or on to the secure element of the SIM card, which relies on the support of telecommunications providers.

Westpac's 2012 trial saw 170 staff and partners (Optus and MasterCard staff) being offered the chance to use their mobile phones to make payments. That trial continues to run, but Westpac has yet to say when it might launch a product, although the inference from Wendt is that the main game won't start until NFC chips are natively installed in most mobile phones.

NAB and ANZ have also run trials of NFC smartphone payments.

Earlier in May, Eftpos Payments announced that it would also begin mobile payment trials later this year, as the result of a five-year agreement signed with mobile-wallet developer C-SAM to create an Eftpos-branded wallet allowing mobile and contactless payments, and with the facility to store loyalty points and receipts too.

Bruce Mansfield, chief executive of Eftpos, said that contactless payments had gained traction in the last six months and were proving a substitute for cash in some transactions.

He acknowledged that there was also "some substitution from our products at the lower end" and that contactless had had an impact on Eftpos' growth, although he said the organisation was still on track to complete 2.5 billion eftpos transactions this year, up from 2.3 billion in 2012.

Mansfield said that, besides the smartphone trials, Eftpos was working on its own contactless solution but with the addition of an NFC-facilitated cash out facility, and this was likely a 2014 prospect.

He said that organisations offering both contactless cards and tap-and-go phone payments needed to look beyond pure technology and "focus on a compelling consumer and a compelling merchant proposition."