Smartphone payments set to boom

After smouldering for several years, 2015 will be the year that smartphone payments catch light - but it will be a slow burn, according to Deloitte, with credit cards and physical wallets commanding the bulk of the payments space.

It its annual "Technology, Media and Telecommunications Predictions" report, released yesterday, Deloitte suggests that in-store smartphone payments will rise by 1,000 per cent in 2015 - staggering growth, albeit off a very low base.

The big four advisory firm's forecast is that five per cent of the 600 million near field communications enabled phones in consumers' hands around the world will be used to make an in-store payment at least once a month.

While this is an uptake rate of just one in 20 NFC phone owners, it's still a significant increase on 2014 (a year when Deloitte said fewer than 0.5 per cent of NFC enabled phone owners had used smartphone payments applications).

Stuart Johnston, Deloitte Australia TMT industry leader described 2015 as the "pivot point" for smartphone initiated payments, noting that the smartphone "can and will be more secure than credit cards."

He also believes increased use of smartphone payments will lead to the lifting of some barriers on contactless payments, which are currently limited to a fixed number of contactless transactions of $100 or less, with the number of NFC transactions an individual can make further restricted.

Driving demand is the continued appetite for feature-rich smartphones. Deloitte is forecasting that a billion people will upgrade their smartphones during the year, many to phones incorporating near field communications capability and security features such as fingerprint recognition based access.

Australian banks are already moving to adopt that technical capability. Westpac this month opened the door for fingerprint access to its online banking app on the iPhone 5S, iPhone 6 and 6Plus, Samsung S5 and Note4, claiming that it was potentially more secure than a PIN. Its subsidiaries Westpac NZ, St George and Bank of Melbourne also offer fingerprint access to smartphone banking.

Johnston said that Australians were already comfortable using phones to check balances and make transfers and that using the phone for payments was the next logical step.