If you have replaced your ATM card over the past few months, you may have been given one of the new contactless Visa debit cards that are being rolled out by Irish banks. Designed to encourage the use of cards instead of cash, the contactless payments are intended to be quicker and more convenient for smaller transaction values, removing the barrier of chip and pin but still remaining secure.
But contactless cards are just the first in a new wave of payment options that Irish consumers may encounter in the near future. With mobile phones becoming ever more advanced, and near field communications becoming a standard technology in smartphone handsets, the day when your mobile phone will function as a digital wallet is coming ever closer.
Sage Pay Ireland MD Sean Wilson believes the mobile phone will be the next great innovation in the coming years for payments. "At the moment, the next major innovation is going to be driven by the consumer, and the greatest enabler is the smartphone, because we now have essentially a supercomputer in our hand. Customer expectation is [that] they want it easy, they want it accessible, convenient and secure as well," he said.
Tough sell
It may be a tough sell to Irish customers though. It's a well known fact that shoppers here are wedded to cash payments. A recent study by the Central Bank showed that Ireland has one of the highest usage rates of ATMs in Europe – more than double the average.
“Irish people like cash for a number of reasons. It is a real time indicator as to their immediate financial situation. Putting everything on a card can result in a ‘surprise’ when the bill arrives, or at least some anxiety if transactions are not tracked closely,” said Wilson.
Speed and convenience are also major factors, not to mention that, historically, merchants have discouraged small transactions on cards, often imposing minimum spends for cards.
Getting over that perception will first involve getting Irish customers – and retailers – to embrace contactless payments, easing them into a more radical solution.
“The acquiring banks in Ireland have been making major investment in getting the infrastructure out there. It’s somewhat of a chicken and egg thing; you need people to be using it, retailers want to see the demand for it, but then consumers need the platform to be able to use it,” said Wilson. I think the contactless card is the precursor, the first phase of mobile payments. At the moment, it’s using an NFC technology, reading a chip that is embedded on the card, that’s the current proposition. Ultimately that will migrate to the phone device.”
The mobile payments market is quite a broad spectrum, Wilson says, with different areas moving at different speeds. Getting ecommerce sites optimised for use with mobile devices is one major obstacle.
"If you consider the stats around mobile phones, they're quite staggering. We're already at close to 50 per cent of the Irish market using smartphones," said Wilson. "Of those, a very high percentage – about 80 per cent – use their phones to perform research. We typically see in-store a higher conversion rate of people who use smartphones. They'll do their research, they'll understand what they want, so when they go into the store, they're quite well informed about what they're purchasing and can conclude their purchase there when they see the goods and can touch them."
Bundle of apps
He sees the industry is developing to a point where payments will be managed ultimately by a bundle of apps on your phone, stored in a digital wallet, that will give shoppers a seamless experience.
“At the moment, from an NFC perspective, the newer phones are beginning to ship with that capability, and the card is really the intermediate point at the ultimate destination, which is the mobile phone,” he said. “To date, there’s been some security concerns about card numbers on phones, and we’re only really seeing handset manufacturers shipping NFC as a standard option, so there’s probably still a couple of years to go before we’re making contactless cardholder present type payments from our mobile phone as a mainstream payment method. But it’s certainly started.”
If it does gain traction, Wilson compares the impact it may have to the effect that PayPal has had in the payments industry over the past decade or so. "Paypal would have been the big innovation of the past 10 years; the big innovation of the future is really going to be the convergence of payments onto the mobile," he said.
Prior to PayPal, the dominant payments method was credit and debit; the company, which has operations in Ireland, offered an alternative direct payments facility. That model has been repeated by a number of other payments firms, each bringing their own stamp to it.
One of the newest and most relevant to Irish interests is Stripe, a company started by brothers Patrick and John Collison, originally from Limerick. Stripe makes it easier for businesses to add payment facilities to their websites, turning them into ecommerce-enabled sites – exactly what businesses need. Stripe has been operating in the US, and recently expanded into Canada. However, it is now targeting plans for European expansion, and Ireland is on its roadmap as one of the first countries in the region to get the new payment facility.
Enormous potential
Irish shoppers spend €4 billion of the total €35 billion retail spend online, a number that is expected to nearly treble to €11.3 billion in four years' time. Taking into account markets such as the UK, which are close by, the potential for Irish businesses that adopt ecommerce and mobile commerce is enormous.
“Obviously there are a lot of considerations you need to make before you embark on that overseas expansion, but the opportunity for Irish businesses is significant,” said Wilson. “We are becoming a global hub in terms of payments , whether it is global multinational players [which are] the obvious ones here. But we also have a significant indigenous industry, both well established [companies] and start-ups. There’s a lot of support for the industry here locally, and there’s a lot of opportunity for sales outside of Ireland.”
The investment required, for example, is significantly less than a brick and mortar expansion overseas. And online commerce, whether it is on the PC, tablet or smartphone, provides an easy way to track where customers are dropping out of the transaction, something that isn’t as readily available in real world stores.
Wilson’s advice is to look to the large firms for inspiration, regardless of the size of the business. “Learn from the big guys,” he said. “It’s expensive to get eyeballs to your website, so when you get a pair, you really want to maximise your conversion rate. The best opportunity is to learn from what they’re doing.”
That means minimising the clicks it takes to get to a certain point for customers, or offering the right delivery and payment options – be they debit, credit, direct or, at some point in the future, mobile.
