Contactless payments, which bypass the need for the consumer to swipe a card, sign a receipt, punch in a pin, or even tap a phone, are now a reality in the UAE. At supermarkets, food and beverage outlets, department stores, petrol stations and cinemas, we can now pay quickly using wallet apps on our smartphones.
Consumers in the UAE are already spoilt for choice in digital wallets. They can pay contactless through Apple Pay, Samsung Pay, Beam, Etisalat Wallet and Emirates NBD Pay. Visa and MasterCard have both launched “tokenized” cards which can be operated securely from mobile phones. RTA has announced that it is testing its Nol cards for use as a prepaid wallet at convenience stores. The Emirates Digital Wallet, being developed jointly by leading banks under the aegis of the UAE Banks Federation, is also on its way.
Around the world there is even more choice with different use cases emerging based on customer needs. In Kenya, where banking penetration was lagging, mPesa, which works on any mobile phone, smart or otherwise, has long been a route of choice for making local payments and financial inclusion. The Starbucks app, launched as early as 2009 in the US, has proved to be highly popular with customers who want to pay for their coffee ahead of their arrival at the store. Close to one-third of Starbucks transactions in the US are now on mobile. In India, consumers have over twenty digital wallets to choose from, including Paytm and Citrus Pay, with the recent demonetisation program providing a strong tail wind.
From banks to telecom majors, and from fintech start-ups to retailers, digital wallets can be launched by different players to suit specific customer requirements. They cut across the entire socioeconomic spectrum of customers, from the smartphone wielding executive in Dubai using Apple Pay to pay for her skimmed milk latte, to the taxi driver in India who accepts payment for his fare on his PayTM app to the university student in Nairobi who receives monthly remittances from his brother via mPesa.
As a consumer, if I am at a checkout counter or making an online payment, which option my fingers will tap depends not on the protocols and technology, but on the method that places the least hurdles in the way of making the payment. Before I bother to try out a new way to pay, I would like to know these things:
Ease of use: How steep is the learning curve? Will I be sitting at the petrol station armed with a smartphone but unable to pay? Do I need always-on mobile data? The mobile wallet I use has to at least match, and then top, the transaction quality and speed already present in card swipe and cash.
Safe and secure: As a consumer, I would like to know that my transactions are not opening a backdoor for entry of cyber criminals and fraudsters. A secure transaction backed by the best protocols will make me feel safer. In the UAE, new regulation issued last year brings all payment service providers under the purview of the Central Bank and makes it mandatory for them to have a majority banking partner. That is reassuring.
Interoperability: Once upon a time, a SIM-card or phone issued in one country could not be used beyond its borders. Now the idea of switching phones and SIMs each time you travel internationally is unthinkable. Digital wallets have some way to go as far as interoperability goes. Will your local digital wallet travel with you on vacation or will you be stuck ATM-hopping looking for a way to pay?
As mobile wallets move to centre stage, two key functions of banks — storing money and enabling payments — are being disintermediated. Banks are looking to regain control by providing a trustworthy and secure platform to converge all your payment related requirements through one mobile banking app. But competition from non-bank players that focus on specific use cases continues to be fierce.
Ultimately, the war of the wallets will be won by those who provide the best user experience and value for customers in a consistent and trustworthy manner. Watch your mobile phone screens!
Suvo Sarkar is the Senior Executive Vice President & Group Head — Retail Banking & Wealth Management at Emirates NBD.