Tag: Apple Pay

CBA makes another bid to cut Apple Pay deal

From ITWire.

The Commonwealth Bank has attempted, on its own, to break the impasse with Apple over Apple Pay, by offering to pay the tech firm for use of its payment infrastructure.

However, the CBA is still insisting that Apple should give it access to the near field communications controller so that it can set up payments, a demand that Apple is unlikely to grant.

A report in the Australian Financial Review quoted Matt Comyn, the head of retail banking at CBA, as saying the fee that Apple was asking for use of Apple Pay was not the main hurdle to cutting a deal.

He said: “If we could get access to the NFC antenna and our wallet had the same experience [as Apple Pay] on parity, there is no way the interchange fee, as currently contemplated, would be the stumbling block.”

The CBA is currently using a workaround for its iPhone customers to access its payment app, with a sticker that can be placed on the back of the phone to serve as an antenna.The sticker costs $2.99 and Comyn said 400,000 customers had ordered them but the latest numbers showed 600,000 transactions had been made per month.

The CBA, along with Westpac, the National Australia Bank and Bendigo and Adelaide Bank, have been denied permission by the Australian Competition and Consumer Commission to negotiate as a cartel with Apple over Apple Pay.

Apple has repeatedly said it will not allow direct access to the NFC controller.

Banks Blocked From Collective Bargain With and Boycott Of Apple on Apple Pay

The Australian Competition and Consumer Commission has issued a draft determination proposing, on balance, to deny authorisation to the Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank, and Bendigo and Adelaide Bank (the banks) to collectively bargain with and boycott Apple on Apple Pay.

mobile-pic

The banks sought authorisation to bargain with Apple on two key issues:

  • access to the Near-Field Communication (NFC) controller in iPhones. Such access would enable the banks to offer their own integrated digital wallets to iPhone customers in competition with Apple’s digital wallet without using Apple Pay
  • removing restrictions Apple imposes on banks preventing them from passing on fees that Apple charges the banks  for the use of its digital wallet.

“This is currently a finely balanced decision. The ACCC is not currently satisfied that the likely benefits from the proposed conduct outweigh the likely detriments,” ACCC Chairman Rod Sims said.

The banks argue that being able to engage in the proposed conduct will increase the likelihood of being able to offer competing wallets on the iOS platform and pass through Apple fees, which would lead to the following public benefits:

  • increased competition and consumer choice in digital wallets in Australia
  • increased innovation and investment in digital wallets and other mobile applications using NFC technology
  • greater consumer confidence leading to increased adoption of mobile payment technology in Australia
  • increased pricing efficiency in digital wallets.

“While the ACCC accepts that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, the benefits are currently uncertain and may be limited,” Mr Sims said.

The applicant banks have yet to reach agreement with Apple over deals to enable their cardholders to use Apple Pay. Apple does not allow the banks, or any entity, direct access to the NFC to allow them to offer their own integrated digital wallet to iPhone users.

“However, banks can already offer competing digital wallets on iPhones without direct access to NFC, through their own apps using Apple Pay payment technology, or using NFC tags. Banks can also offer digital wallets on the Android platform,” Mr Sims said.

“Digital wallets and mobile payments are in their infancy and subject to rapid change. In Australia, consumers are used to making tap and go payments with payment cards, which provide a very quick and convenient way to pay. It is therefore uncertain how competition may develop with the availability of mobile payments and possible future innovations.”

The ACCC is concerned that the proposed conduct could reduce or distort competition in a number of markets.

The conduct would reduce the competitive tension between the banks individually negotiating with Apple, which could reduce competition between the banks in the supply of mobile payment services for iPhones.

“Apple Wallet and other non-bank digital wallets could represent a disruptive technology that may increase competition between the banks by making it easier for consumers to switch between card providers and limiting any ‘lock in’ effect bank digital wallets may cause,” Mr Sims said.

There may also be detriments to competition in digital wallets arising from the proposed conduct. Authorisation would allow the banks to agree not to sign up to Apple Pay for three years. This is a significant period of uncertainty and would result in decreased choice for consumers whose banks engage in this conduct.

The ACCC considers that the conduct could also distort competition between mobile operating systems. Apple’s iOS platform is a differentiated offering that competes globally against other operating systems, such as Android. One of the features each system provides to consumers is mobile payment services and digital wallets. To the extent that the proposed conduct leads to an alteration of the offering that Apple is able to make available on the iOS platform, the proposed conduct distorts competition between these operating system providers.

The ACCC is seeking submissions on its draft determination before making a final decision.

Background

A ‘digital wallet’ is an app on a mobile device that can provide a number of the same functions as a physical wallet, including the ability to make payments in-store and storing other information, such as loyalty or membership cards. A ‘mobile payment’ is a payment performed in-store using a digital wallet.

On 26 July 2016, the banks sought authorisation on behalf of themselves and other credit and debit card issuers to engage in limited collective negotiation and limited collective boycott conduct. The banks have since clarified that they only wish to collectively negotiate with Apple in relation to specified issues regarding NFC access on iPhones, reasonable access to the App Store for their digital wallets, and the ability to pass through Apple Pay fees.

On 19 August 2016 the ACCC decided not to grant interim authorisation to the applicants.

Currently only consumers with eligible payment cards issued by ANZ and American Express are able to use Apple Pay. Cuscal Ltd, on behalf of 31 issuers, recently reached agreement with Apple to offer Apple Pay.

Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit resulting from the conduct outweighs any public detriment.

The ACCC will conduct further public consultation with interested parties regarding its draft determination. The applicants or interested parties may call a ‘conference’ to make oral submissions to the ACCC about the draft decision.

The banks have undertaken to agree to an extension to the statutory six month period for assessment, because of the additional time for the banks and interested parties to make submissions and for the ACCC to consider those submissions. The ACCC has decided to extend the statutory period for an additional three months.

The ACCC expects to release its final decision in March 2017.

Apple hits back against banks

From ComputerWorld.

Even if the Australian Competition and Consumer Commission (ACCC) authorises collective negotiations between a group of banks and Apple over the use of the Apple Pay platform, the iPhone maker says that it “will not and cannot” agree to the conditions likely to be sought by the banks.

MobilePay

Bendigo and Adelaide Bank, the Commonwealth Bank of Australia, National Australia Bank and Westpac last month applied to the ACCC for authorisation to collectively negotiate with mobile wallet providers, with the application naming Apple’s service as well as Google Pay and Samsung Pay.

The banks argue that Apple, Google and Samsung are potentially in a position to negotiate terms for use of their mobile wallets that “likely to result in reduced competition and innovation, and increased risk in the security and transparency of mobile payments.”

Currently in Australia only American Express and ANZ customers offer Apple Pay support for their customers, but worldwide more than 3000 issuers support the platform, according to Apple.

Apple says that based on the banks’ application to the ACCC, the applicants will not agree to support Apple Pay unless it allows them to charge consumers for the use of the platform, it provides access to the iPhones Near Field Communications (NFC) antenna, and it agrees to security guidelines drafted by the applicants that will only apply to third party mobile wallets (not the banks’ own offerings).

These terms will “undermine the availability, security and privacy our customers expect when using Apple devices to make payments,” Apple argues in a submission to the ACCC. The submission follows on from an interim submission that “strongly urged” the ACCC to reject the banks’ application.

Apple says that it has attempted to negotiate agreements with each of the applicant banks bar one (which was not willing to sign a confidentiality agreement). The inability of the banks to reach agreement with Apple “demonstrates that each individual applicant bank possesses a significant amount of bargaining power against Apple,” the iPhone maker argues.

“As each of the banks has individually resisted serious engagement with Apple for the past two years, collectively negotiating will further entrench the applicant banks’ position by ensuring that all of them can only advance in lockstep with the slowest, least willing member,” the submission argues.

“The applicant banks would know that they can continue to hold out without the threat that one of their competitors will introduce Apple Pay for their customers, which could result in the loss of some customers who will switch banks in order to access Apple Pay.”

Apple in its submission takes particular umbrage to banks seeking access to the iPhone’s NFC capabilities.

“This is not open to negotiation with any bank,” the company argues. “Apple designs its products to provide very secure experiences, especially where payments are concerned. Apple has been able to provide the required level of security with tight integration of hardware, software, and services such as Apple Pay. Apple does not provide banks access to the NFC radio because doing so would undermine the security our customers expect when using Apple devices to make payments.”

As justification, the submission cites examples of security vulnerabilities in Android.

Apple adds that just because it will not support use of NFC by third parties, there are alternative technologies that can be used for contactless payments, for example QR codes.

“Apple’s desire to protect the integrity of its own proprietary hardware installed within its own devices is not anticompetitive,” the submission argues. “It is not ‘exclusive dealing’ conduct to which Australian competition law applies.

“What the applicant banks are seeking is the right to impose a collective boycott for the purpose of putting pressure onto Apple to grant them access to proprietary hardware and software. Apple has invested significant financial and other resources developing a simple and convenient mobile wallet service with the highest security and privacy protections available. This is also the basis on which Apple seeks to differentiate its mobile wallet from those offered by other mobile wallet providers.”

The full submission is available online.

Another Bank Wants To Outplay Apple Pay

According to Computerworld, Heritage Bank has endorsed an application by some of the nation’s biggest banks lodged with the Australian Competition and Consumer Commission that seeks the right to form a cartel to collectively negotiate with, and engage in a boycott of, mobile wallet providers including Apple, Google and Samsung.

Data-Grapgic

The Toowoomba-headquartered mutual bank is the biggest issuer of prepaid cards in Australia.

Last month the Commonwealth Bank of Australia, National Australia Bank, Westpac, and Bendigo and Adelaide Bank submitted the application to Australia’s competition watchdog.

In its submission to the ACCC Heritage argued that the restrictions imposed by Apple on third-party mobile payment apps for the iPhone reduce competition. Apple does not allow services other than its own Apple Pay offering to use the iPhone’s Near Field Communication antenna for contactless transactions.

In the ACCC application the banks indicate that one of the issues they would seek to collectively bargain over is access to the iPhone’s NFC capabilities. For its part, Apple has argued opening up access to NFC would undermine the security of mobile payments on the iPhone.

So far, in Australia only American Express and ANZ customers are able to use Apple Pay after the two companies struck agreements with the iPhone maker, Heritage Bank’s submission notes.

“Those with NFC enabled Android phones can choose from a broad range of issuers who support mobile payments,” Heritage argues. “iPhone users are consequently disadvantaged by the lack of access provided by Apple to issuers who offer their customers the option of a mobile payment wallet other than Apple Pay.”

Heritage adds that currently the industry “is not able to develop and enact agreed Australian standards relating to the safety, security and stability of mobile payments systems for which issuers, not Third Party Wallet Providers, primarily hold the risk.”

Finally, the submission adds, “Fees and other charges levied by Third Party Wallet Providers on issuers may not be able to be passed through to users of the service. This reduces competition since the decision to pass fees to customers of issuers (or not) and the level of those fees may not be negotiable when contracting with Third Party Wallet Providers who control mobile devices.”

EFTPOS provider Tyro has also indicated it backs the banks’ application.

“It is in the Australian public interest to maintain choice for consumers, merchants and banks as to mobile wallet solutions and the applications that they enable,” a submission from the company argues.

“While Apple allows third parties to connect free of charge via Wi-Fi, 3G, Bluetooth and other network protocols to its phone product range, it does not do so for NFC.

“Eliminating third party access to the Apple NFC function is particularly effective in stifling innovation and competition, because it is the only available and highly secure connectivity option that is ubiquitously available across the entire card payment infrastructure and terminal fleet.”

ANZ and Amex the winners in Australia’s banks’ fight with Apple over payment apps

However, South Australia’s Small Business Commissioner, John Chapman, expressed a different opinion: “In my view, this is simply a case whereby powerful banks are simply not used to having to accede to another, more powerful organisation — Apple — a global company that has the smarts and the resources to be able to simply ignore the banks’ demands.”

Apple rejects banks’ ploy for access to iPhone NFC capabilities

From Computerworld.

Apple says it “strongly urges” the Australian Competition and Consumer Commission (ACCC) to reject an application from three of the four major banks that would see them able to band together in order to negotiate access to the company’s digital wallet system.

MobilePay

Last month the Commonwealth Bank of Australia, National Australia Bank and Westpac, as well as Bendigo and Adelaide Bank, applied to the ACCC for the right to engage in collective negotiations over, and potentially boycott, third-party digital wallets including Apple Pay, Google Pay and Samsung Pay.

One bugbear of the banks outlined in their application is the refusal of Apple to open up access to the iPhone’s NFC antenna in order for third party iOS applications to be used for contactless payments.

So far ANZ is the only one of Australia’s big four banks to strike a deal to offer Apple Pay to its customers. “Apple has struggled to negotiate agreements with the Australian Banks and only recently signed an agreement with ANZ,” Apple said in a response lodged with the ACCC that was first noted by the AFR.

The other banks “based on their limited understanding of the offering… perceive Apple Pay as a competitive threat”, Apple argued.

The goal of the banks banding together “is to force Apple and other third party providers to accept their terms, allow them to charge consumers that choose to use Apple Pay, and force Apple to undermine the security of its mobile payment service by opening access to the NFC antenna, placing at risk the consumer experience of a simple, secure, and private way to make payments in store, within applications or on the web.”

Apple said it could not identify any public benefits that could arise from the banks being authorised to engage in a collective boycott.

The banks’ application to the ACCC notes: “Some issuers in other countries have expressed concern that Apple has not allowed other mobile payment apps to use the iPhone’s NFC payment functionality…”

“Providing simple access to the NFC antenna by banking applications would fundamentally diminish the high level of security Apple aims to have on our devices,” Apple argued in response.

ANZ and Amex the winners in Australia’s banks’ fight with Apple over payment apps

From The Conversation.

Australia’s banks have always enjoyed a lucrative income from credit card “interchange fees”, the charges that the banks levy on merchants’ sales. These fees amount to AU $2.5 billion a year which are ultimately passed on to consumers.

MobilePay

Unwilling to share any of this revenue with Apple, all but ANZ and American Express have refused to adopt Apple Pay. Instead, four of the largest banks, NAB, Westpac, Commonwealth and Bendigo and Adelaide have asked Australia’s competition regulator, the ACCC, for permission to act collectively to negotiate with Apple over access for their own digital wallet products on its phones, tablets and watches.

The banks, along with their industry representatives are claiming that they are taking this action in the interest of providing “Australians with real choice and better outcomes”. They are also allegedly concerned about security and standards surrounding the way in which customers add their cards to Apple Pay.

Even if granted, the likelihood of Apple negotiating access to the underlying payment mechanisms in the phone to the Australian banks is zero. Ceding on this would not only require Apple to create the mechanisms by which third parties could integrate with the hardware and software in their devices but it would essentially be giving up on the substantial global revenue derived from Apple Pay that is only set to grow.

Giving in to Australian banks, which in total represent a small fraction of their overall Apple Pay earnings, would mean opening up access to Apple Pay to every bank globally. Something that Apple would never do. Apple would be more likely to forego Australia altogether before taking that radical a step.

If anyone had an anti-competitive complaint to make, it would be Google and Samsung whose Apple Pay alternatives, Android Pay and Samsung Pay are also not compatible with the iPhone platform. The fact that they haven’t complained about this as such is because it wouldn’t be worth their while competing with Apple Pay which is integrated into the underlying operating system.

The banks would like to claim that their own technology somehow would be better than using Apple Pay. The banks’ tap and pay apps however require opening them up and entering a PIN, logging in or using a fingerprint login, rather than simply holding the phone against the tap and pay terminal with your thumb on the home button. The banks’ apps have also been historically beset with issues and delays in supporting new versions of Android in particular.

Perhaps Apple should not feel particularly victimised however. The Commonwealth Bank, Westpac and NAB have rejected any support for Android Pay or Samsung Pay as well.

ANZ is the only Australian bank to have taken on Apple Pay after originally being part of the other banks’ initiative to collectively bargain with Apple. The move by ANZ CEO Shayne Elliott to be the bank to adopt the latest mobile digital technology is a smart one because it has clearly differentiated ANZ as a technological leader in this space. Elliott claims that the support of Apple Pay has attracted new customers to the bank.

ANZ’s and American Express’s support for Apple Pay and Android Pay has actually given customers what they want. What they want is to be able to use what large numbers of other people in other countries can use. Being part of the “Apple” or “Samsung” or “Android” group forms part of a user’s self and social identities and fulfils a psychological need of relatedness. Being excluded from this group by banks whose predominant consideration is profits will only cause dissatisfaction and resentment amongst their customers.

ANZ’s acceptance of Apple Pay will presumably also weaken the case of the other banks that they are being disadvantaged by Apple’s closed payment system. The brinkmanship of the banks will come to a head next year when the NSW transport system starts trialling the use of tap-and-pay cards to pay for travel. If the experience in London is anything to go by, this will drive even greater use of mobile tap-and-pay which for iPhone or Apple Watch users benefits only ANZ, American Express and Apple.

Author:David Glance, Director of UWA Centre for Software Practice, University of Western Australia

Apple Pay in Play With More Banks

From Business Insider.

ANZ Banking Group says its recent deal with Apple to provide Apple Pay in Australia has sparked a surge in applications for credit cards and deposit accounts, which has forced the other major banks to re-enter negotiations with the technology giant.

The main sticking point continues to be how to divide up the billions of dollars of fee income banks earn from processing payments.

ANZ chief executive Shayne Elliott said at the bank’s interim results last week that online credit card applications were up 20 per cent since the deal with Apple was announced on April 28.

On that day, online deposit applications were the highest on record – more than double the average – Mr Elliott said and “that higher level [is] continuing”.

It is understood that under strict confidentiality agreements imposed on ANZ by Apple, the bank is not able to disclose how many of its Visa debit and credit cards have been loaded up onto Apple Pay.

But ANZ’s Apple Pay microsite had 61,000 unique visitors over four days, and traffic to the bank’s main anz.com website has been 6 per cent higher than average since the launch.

Mr Elliott said “the vast bulk of this increased activity comes almost purely from social media engagement.”

Of the ANZ customers using goMoney internet banking, 69 per cent have an Apple iPhone, providing “a rich source of existing customers who want Apple Pay,” Mr Elliott said.

“Plus [there is] a vast number of new customers. Whilst it is early days the results have been outstanding.”

ANZ is ramping up its marketing of the deal, using its Apple Pay capability in a television advertising campaign while advertisements are adorning bus shelters around Sydney.

In interviews last week, the chief executives of Westpac Banking Corp, Brian Hartzer, and National Australia Bank, Andrew Thorburn, said negotiations with Apple will continue.

Westpac had struck a deal with Samsung two years ago to offer tap and go on Samsung phones “which is essentially the identical experience” as Apple Pay, Mr Hartzer said.

“It would be nice for us to offer [Apple Pay] in the context of what we are doing but in the end it has to be commercially sustainable. We will continue to talk to [Apple] and other wallet providers and see where we get to.”

Mr Thorburn pointed to NAB Pay, which was launched in January for Android phones and has been enabled by 25,000 customers and processed 100,000 transactions, according to a slide in NAB’s investor pack last week.

“We are going to look at ways to deploy NAB Pay,” Mr Thorburn said.

“We would like to deploy it with Apple. But obviously that is an important conversation that we will have to have with them. We think NAB pay is strong and easily deployable on any device, we just need to work with the providers to get that to be the case.”

Dividing the pie

Apple’s deal with ANZ was reached after the bank agreed to give up some of its interchange fees to Apple, and Apple was willing to compromise and reduce the level of fees it demanded from US banks, but confidentiality agreements imposed prevent discussion of the details.

Australian banks earn around $2 billion a year in interchange fees, which are paid by merchants for use of payments infrastructure.

But the fees are being pushed down by caps that have been imposed by the Reserve Bank of Australia. The major banks reported lower interchange fee income as a result of these measures last week.

The RBA is pushing to lower interchange fees to 30¢ for $100 of transactions, down from 50¢ for $100 of transactions.

In the United States, Apple is believed to earn about US15¢ on every $US100 of transactions. But in the US, the bank interchange fee is $1 for $100 of transactions.

However, given that ANZ debit cards are part of the deal, ANZ may have negotiated a flat fee for each transaction rather than one based on the volume of transactions because debit card interchange fees are flat, in contrast with credit card fees based on transaction volume.

ANZ Offers Apple Pay In Australia

The first major Australian bank to offer Apple Pay, ANZ, today announced it will offer the service to its five million customers in Australia.

ANZ customers in Australia are now able to use Apple Pay to make quick and secure purchases wherever contactless payments are accepted with either an ANZ Visa debit or credit card or an ANZ American Express credit card.

ANZ Chief Executive Officer Shayne Elliott said: “The introduction of Apple Pay is a significant milestone in our strategy to use digital technology to provide our customers with a superior experience and will be a watershed moment in the adoption of mobile payments in Australia.

“I’m proud we’re the first major Australian bank to offer Apple Pay and we are confident the convenience, security and privacy will be well received by our customers.

“With the high adoption rates of contactless payments in Australia, our customers will be world leaders in their ability to use their mobiles to make the vast bulk of essential payments,” Mr Elliott said.

More than 60% of all card transactions in Australia are now contactless and accepted across in excess of 70% contactless merchant payment terminals.

Security and privacy is at the core of Apple Pay, so when used with a credit or debit card, the actual card numbers are not stored on the device, nor on Apple servers. Instead, a unique Device Account Number is assigned, encrypted and securely stored in the Secure Element of the device. Each transaction is authorised with a one-time unique dynamic security code.

Apple Pay is easy to set up and users will continue to receive all of the rewards and benefits offered by credit and debit cards.

In stores, Apple Pay works with iPhone SE, iPhone 6s, iPhone 6s Plus, iPhone 6, iPhone 6 Plus and Apple Watch.

Online shopping in apps accepting Apple Pay is as simple as the touch of a finger with Touch ID, so there’s no need to manually fill out lengthy account forms or repeatedly type in shipping and billing information. When paying for goods and services within apps, Apple Pay is compatible with iPhone 6 and later, as well as iPad Air 2, iPad mini 3 and iPad Pro.

Google trumps Apple for Australian mobile payments, but for how long?

From The Conversation.

After failing to come to agreement with Apple to enable mobile phone payments, six of Australia’s biggest financial institutions this week signed on with Android Pay. The service will go live in Australia in the first half of 2016.

Both Android Pay and its competitor Apple Pay allow consumers to pay for purchases using a card-linked mobile phone by tapping their phone in the same way you would tap your card at the point of sale. The services also work with smart watch devices, and in the case of Apple Pay, by holding the fingerprint on the phone.

Apple Pay had first mover advantage in the mobile payments space, having launched in the US in October 2014 and then in Britain in July 2015, before entering the Australian market this November.

To achieve traction in the US Apple Pay relied on the major American payment card issuers, earning money by taking a slice of the interchange fees that American card issuers gained from merchants. Interchange fees in the US average out at about US$1 for every US$100 of transactions and Apple Pay is believed to earn about US15 cents on every US$100 of transactions.

Apple Pay had been asking for the same slice of the interchange fees that are earned by the card issuers in other countries. In Britain the banks were able to negotiate Apple Pay’s slice to a much lower fee, believed to be only a few pence per one pound transaction, partially because interchange fees in Britain are much lower than in the US. Apple Pay originally wanted the same 15 cents for every $100 spent on its platform in Australia. But Australia’s main banks would not agree to this, given interchange fees in Australia are on average 50 cents for every $100 spent.

Apple Pay boxed in

When Apple Pay finally launched in Australia it was in tandem with American Express, which at that time was not subject to the RBA imposed interchange fees that applied to MasterCard and Visa payment cards. Since then the RBA’s Review of Card Payments Regulation suggested bringing so-called American Express “companion cards” into the interchange regulatory fold. This would make them subject to the same interchange fee cap as MasterCard and Visa. This would help the RBA to achieve its aim of “competitive neutrality” between the various card schemes.

At first Apple Pay’s choice of American Express seemed like a good one. American Express has around 6.8 million credit and charge cards in circulation, of the total of around 42 million payment cards in Australia. But Apple Pay can only be used on American Express’s “proprietary” cards (not on its “companion cards”) and an RBA survey in 2014 found companion cards are now more widely held than American Express proprietary cards. So in reality Apple Pay can only be used on a minority of American Express cards in Australia.

And since American Express charges a higher average merchant service fee (1.7%), more retailers accept MasterCard and Visa. Small to medium sized enterprises are also less likely to accept American Express and this may prove to be an Achilles Heel for Apple Pay.

Deal breaker?

Imagine going into your local café to buy two coffees, using Apple Pay via your American Express card, say at $3.80 per coffee. Total cost to you $7.60. If the café charges a 2% surcharge for accepting American Express, then you will pay $7.75. Why pay 15 cents more, when you could use your MasterCard or Visa, credit or debit card? You can easily avoid the surcharge and still “tap and go”.

In Australia almost 70% of credit card transactions are now “tap and go”, and Australia is thought to be the world leader in the adoption of contactless payments. This is thanks to a simultaneous push to encourage merchants to use terminals that accept contactless cards and the willingness of the banks to issue these cards to customers. The “tap and go” functionality that Apple Pay offered as an innovation in the US was already a feature of the market here in Australia.

And despite initial enthusiasm for Apple Pay, persuading US consumers to switch from using physical cards or cash to using Apple Pay has been tough going. A recent survey found Apple Pay use was declining. Indeed shoppers used it on “Black Friday” (November 27, 2015) for only 2.7% of their transactions.

Australian challenge

In Australia, Android sales beat out Apple in the three months to October 2015, with Android operating system sales at 54.9%, compared to 37.9% for Apple’s iOS. So the decision by a group of Australian bank card issuers to go with Android Pay seems to make sense. ANZ Bank, Westpac (including Bank of Melbourne, Bank of South Australia and St George), Bendigo and Adelaide Bank, ING DIRECT, Macquarie Bank and the credit union payments provider Cuscal will be the first to offer eftpos, MasterCard and Visa on Android Pay from mid-2016.

Apple’s first mover advantage may turn out not to be so critical in Australia, but watch this space!

Author: Steve Worthington, Adjunct Professor, Swinburne University of Technology

US Lesson On Mobile Payments

Interesting interview from eMarketer, showing how customer centricity transforms mobile payments.

Panera Bread, the fast casual bakery-café with more than 1,900 locations in North America, was among the first wave of brick-and-mortar merchants to accept in-store and in-app payments with the Apple Pay mobile wallet in 2014. Blaine Hurst, Panera Bread’s chief transformation and growth officer, spoke with eMarketer’s Bryan Yeager about the adoption of Apple Pay and other mobile payments among the company’s customers.

eMarketer: Slightly more than a year has passed since Apple Pay launched. What does adoption look like among Panera Bread’s customers?

Blaine Hurst: I am very pleased with the in-app usage, which is in the 20% range [of total in-app transactions]. For in-store, we assumed that for people to change their habits you have to have a much better experience. We’ve paid with mag stripe-based cards for a long time and this is a better experience. Is it enough better to get me to stop using mag stripe cards and overcome that built-in reluctance to change?

It is difficult to get the consumer to change behavior without a material improvement in the experience.

eMarketer: Do you see traction with customers using Apple Pay in your app translating to greater in-store mobile payment usage?

Hurst: We do. When we launched with Apple Pay we saw there was a spike in both methods. Anything that creates new habits or requires us to create new habits, that habit then begins to spread in everything we do. I don’t think that happens overnight because consumers are so used to swiping mag cards, but I believe it will occur.

I don’t know how long it will take, but I think proximity payments where I don’t even have to take my phone out or my wallet, smartwatches, the impact of chip-and-pin cards—the combination of those things will begin to drive adoption of mobile-related payments.

Part of it is the merchants have to get on board. But with many merchants re-terminalizing to accept chip-and-pin anyway, it’s relatively easy to do [mobile payments] at the same time. That’s my No. 1 objective: If customers want to pay with their phone or their watch or chip-and-pin, I want them to be able to pay.

I’m open to any and all comers because this is about Panera Bread adapting to the consumer rather than the company trying to force the consumer in terms of how they pay.

eMarketer: What is Panera’s approach to training front-line staff like cashiers to help mitigate issues with customers using proximity mobile payments?

Hurst: We build it in as part of our overall training program and then whenever there is a new release like Google just did [with Android Pay], we then go back through and update the training. When we rolled out Apple Pay last year, we pushed pretty hard to make sure the cafés were ready for it because we assumed that we would go from few transactions to quite a few transactions. Not huge percentages, but when you start from zero, you’re going to see a pretty big [increase]. We do 8 million transactions a week, so even a small percentage [using mobile payments] is a lot.

eMarketer: How does loyalty and rewards factor into Panera Bread’s approach to mobile payments?

Hurst: Let’s just say we have been working with Apple on some of the loyalty integration since it began. And we are working with both our point-of-sale vendor and Verifone on that integration. We’re not announcing when and where it might be available, but I do believe the ability to include loyalty information as part of the transaction is very important to our guests, and I think it is one more step.

Today, Panera has almost 50% of our transactions where the consumer gives us their rewards number. Clearly, we do that in-app and we see about 70% of those transactions with the loyalty identifier. So we will continue to do that. We have a well-accepted, perhaps industry-leading program, with 20 million consumers signed up.