GN Focus | Credit, Debit and Loyalty Cards

Look ma, no hands!

Contactless and mobile payments are making huge inroads in the UAE and will change the way people shop and spend. As banks, merchants and vendors plan their launches, users will have much to learn and like

  • By Iona StanleySpecial to GN Focus
  • Published: 00:00 November 29, 2012
  • GN Focus

  • Image Credit: AFP
  • An employee from Japan’s Coca-Cola Company demonstrates the purchase of a soft drink from a vending machine through a phone in 2003. The technology has been available in the country for a long time now, allowing consumers to pay for a purchase by simply waving their device over a reader at the point of sale

In a few more months, consumers in the UAE can pay for their purchases with a tap, a wave or a click. The move is a giant nod and certainly in the right direction, as the country joins select others in offering contactless and mobile payments.

MasterCard recently announced that it will make contactless payment available by the end of the year at several hundred coffee shops, restaurants, cinemas and stores across the country. Consumers only have to tap their PayPass debit or credit card — other enabled devices include smartphones, watches or wristbands — in front of a secure reader that is configured to accept payments. Created in association with Network International, MasterCard’s PayPass is a contactless payment platform that provides a secure, fast and convenient way to pay and eliminates the need for a personal identification number (pin) or signature, and, of course, cash.

“Local consumers can expect secure and convenient solutions to their everyday transactions. The introduction of more than 1,000 PayPass terminals across the UAE will provide them improved access to faster payments at check out,” said Eyad Al-Kourdi, Vice-President and Country Manager UAE, MasterCard Worldwide, at the announcement. “We expect PayPass to undergo a rapid transition from being a novel new technology to an everyday shopping experience.”

The PayPass acceptance network is being developed in conjunction with Near Field Communications (NFC) payment technology for cards, which can also be accessed with smartphones and mobile payment tags. Dubai First, Mashreq Bank, Emirates NBD and Abu Dhabi Commercial Bank have already joined the PayPass bandwagon and several others are set to hop on. All new credit and debit cards issued by these banks will have the PayPass Tap and Go logo to enable contactless payments.

At Gitex, Khalifa Al Shamsi, Chief Digital Services Officer, Etisalat, was among those endorsing NFC payments, stressing that payments made via this exciting new technology would be fast and secure.

 

Express payments

The technology has been available in Japan for a long time now, where everything from groceries to lifts at ski resorts can be paid for through a smartphone. Recently, Coca-Cola equipped all its vending machines in the country to accept payment through mobile phones.

Whether by phone, card or device, contactless payments are ideal for low-value transactions in fast-payment environments such as fast food restaurants, petrol stations, event arenas, and movie theatres. Signatures or pins will not be needed for small transactions, and users will also be protected against any fraudulent losses by their zero liability policies. Earlier in March, Emirates NBD announced the launch of MoneyMobile. The project is currently being tested by staff at the bank, Visa, Etisalat and Gemalto. With MoneyMobile, users will be able to complete retail transactions by waving their NFC phone at Visa payWave terminals. “Our application sits on the SIM, but the challenge is that the technology only works with a smartphone,” R. Sivaram, Senior VP, Head of Cards for Retail Cards Business, Emirates NBD, told GN Focus in May. “Until two or three years ago, the percentage of smartphones as opposed to total phones was about 10-12 per cent. Today about 40-50 per cent of all phones are smartphones. So the first push has to come from manufacturers. If mobile phone manufacturers see the power of NFC, it will move ahead.”

Starting next year, consumers with smartphones will be able to pay for public transport in Dubai with just a wave. The Road and Transport Authority of Dubai (RTA) has already begun trials of their contactless payment system and expect to launch the service in early 2013. Instead of using Nol cards, commuters who have NFC-enabled smartphones will be able to swipe their mobiles over sensors at Dubai Metro stations, bus stops, and water bus stations.

“Using a compatible SIM and a compatible smartphone, your phone will function exactly as a Nol card,” explains Mohammad Al Mudharreb, Director of Unified Automated Fare Collection, RTA. “Commuters opting to use this service will have to replace their SIMs with those that are preloaded with the application before they can start using the service.” While RTA does not plan to impose any additional charges, Etisalat and du have yet to announce if service charges will be applied.

For many consumers, mobile payments may sound daunting, but they probably don’t realise that they are already using them. In May, Dubai eGovernment updated its mPay mobile payment gateway and added several new features, including SMS capabilities. The online payment channel already allowed residents to conveniently pay Dubai government-related fees and bills. With the updated system, users can also send an SMS to make enquiries and pay transaction fees and dues. The service currently allows Salik recharges from the RTA, payment of traffic fines from Dubai Police and payment of electricity bills from the Dubai Electricity and Water Authority.

Last month, the Department of Transport in Abu Dhabi announced the launch of a mobile fee payment service for the capital’s car owners, enabling them to pay for parking by using their Etisalat or du mobile phones.

 

Local trend alert

Travel and tourism giant Amadeus’s 2012 report, From Chaos to Collaboration: How Transformative Technologies will Herald a New Era in Travel, looked at how technologies and social change would transform travel by 2020.

According to the report, many UAE residents would prefer to make payments for travel services through their mobile phones than with cash or by credit card. Thirty-two per cent of the UAE’s respondents said they found it ‘extremely appealing’ to use a mobile phone for travel transactions, compared to 24 per cent of global respondents, while a further 92 per cent of UAE residents (78 per cent internationally) said they thought mobile payments were ‘somewhat appealing’.

This and other studies confirm the obvious potential for mobile devices to further infiltrate how people shop, spend, or save. Concurrently, they highlight the need for a deeper understanding of consumer needs, the removal of entry barriers, and enhanced security before full adoption is possible.

Similar to when online banking was launched, security remains the main concern for consumers embracing payment change. While the trust factor automatically makes banks and credit card providers a popular choice, telecom-owned systems could prove ideal for smaller payments.

The promise of various types of contactless and mobile payments, combined with the UAE’s favourable regulations, makes the market very attractive for new entrants and established players. The competition will help keep costs low, and quality high. But consumers are well advised to shop around for the best and the safest deals. It is one thing to act like an excited child who cannot wait to show off with, ‘Look ma, no hands’. It is quite another to cry like confused children.

Types of virtual wallets

Mobile payments allow consumers to pay with their cellular phones instead of by cash, cheque, or credit and debit cards. The four types of mobile payments are premium SMS-based transactions, direct mobile billing, mobile web payments (WAP), and the popular contactless NFC (Near Field Communication).

The four core components of NFC are speed, insight, security and convenience. It takes only a tap or wave of the mobile phone on an approval machine to make a payment. A spending alert that pops up on the phone before making payment is infinitely more insightful than a credit card statement delivered at the end of the month. Mobile payments that are linked with loyalty programmes help accumulate rebates, points and rewards and offer improved visibility of purchases. According to industry experts, mobile payments will eventually become more secure than traditional credit cards.

Research and advisory firm Gartner predicts that in 2016 there will be 448 million mobile payment users worldwide in a market worth $617 billion (Dh2.2 trillion). Asia-Pacific will have the most users, but Africa will account for the highest revenues.

Contactless payments systems are credit or debit cards, key fobs, smart cards and other devices enabled with radio-frequency identification chips that allow consumers to make an alternate form of secure payments. The embedded chip enables consumers to simply wave their card or device over a reader at the point of sale to pay for purchases. Contactless transactions can be almost twice as fast as payments with cash, or conventional credit and debit card purchases, especially because signatures or pins are not required for smaller purchases. The key advantages for consumers are speed of purchase and avoidance of long queues, while retailers don’t have to handle large amounts of coins.

London 2012 was highlighted as a cashless Olympics, with retailers at various sites enabled for contactless payments. However, Visa reported in September at the NFC World Congress that only 150,000 payments were made with contactless technology at the Games, representing 15 per cent of all card payments of up to £20 (Dh116.6) in the UK.

— I.S.

GN Focus