How technology is shaping our payment choices.
Samsung announced yesterday that they were bringing their mobile payment service Samsung Pay to Brazil on July 19, the first market within South America to do so. Just in time for the Rio Olympics, it will hopefully encourage their existing users in one of the six other nations already connected to Samsung Pay to part with their cash at the touch of a button. “As the first market in South America to roll out our mobile payment service, Brazil will pave the way for the region’s adoption of Samsung Pay,” said André Varga, Product Director of Samsung’s Mobile Devices Division in Brazil. It is another milestone in the direction of contactless only payments, especially considering Apple Pay is yet to infiltrate the Brazilian market, a dominating “mobile wallet” in at least the United States and the United Kingdom.
Only last month at the Apple WWDC event it was declared that Apple Pay would be branching out to internet payments, and entering into competition with Paypal and other online payment systems. This was just another of many recent reminders of how streamlined our purchasing experiences have become.
With approximately 55% of Brazil still receiving their salaries in cash, there remains emphasis on having some cash in your wallet in case of emergencies. Harking back to a survey by The Central Bank of Brazil (Bacen) in 2013, cash is still the preferred mode of payment in Brazil for goods or services up to a total cost of BRL 50 (€13.81, $15.24). In 2013, 55% of merchant transactions were still made by cash, with credit and debit card trailing behind at 26% and 14% respectively. It is indeed these purchases, that smartphone and card contactless payments aim to replace, such as the morning coffee, the after work supermarket dinner dash or a quick top up at the petrol pump. Last year, there was an increase in 1.2 billion credit and debit card transactions in the country, totally 11.4 billion, which highlights the declining preference for the use of cash in the country. Point of sale transactions aside, the Brazilian Federation of Banks (Febraban) stated that 11.2 billion banking transactions were made using mobile banking in 2015 compared to 4.7 billion the previous year. Clearly, Brazilians in keeping with the increased digital development of the country are craving the convenient and easy experiences that they already have through non-financial digital channels in their banking and payment methods.
Looking to other countries’ payment habits highlighted interesting differences, not only between them and Brazil but between each other. Consider that 85% of transactions are still made in cash worldwide.
Here in the Netherlands in 2015, debit card (Pinpas) payments overtook paying with cash instore. The “Stichting Bevorderen Efficiënt Betalen” and other retail lobbies have encouraged the public to use card over cash for security purposes and convenience for both merchant and buyer. Clearly, it has paid off. Noncash payments made up 60% of Dutch consumer payments in a study carried out by Mastercard Advisors 2013. In comparison, Sweden, considered the closest to a “cashless society”, made 59% of payments using noncash payment methods. Sweden’s central bank Riksbank (2014) reported that the amount customers were paying in a single transaction with a credit or debit card had decreased, suggesting that the preference was to pay for low cost items using plastic rather than cash. Back in the Netherlands, there is a proposal to remove cash payments on buses in Amsterdam within two years, with many retailers and restaurants at present accepting only card payments.
The supermarket, Marqt is cashless, requiring its customers to pay with debit card, with the popular supermarket Albert Heijn, opening card only self-checkouts within their stores. Rather than entering a pin, consumers can use a contactless debit or credit card to pay for purchases up to 25 euros in numerous stores, tapping it against a Near Field Communication (NFC) supported card reader, cutting yet more time spent at cash registers and appealing to those with busy lives. It is understandable then, that whilst the main three mobile wallets are not yet available nor supported in the Netherlands, 10% of payments in the country are made using mobile payments using numerous other applications currently supported in the Netherlands such as iDEAL, which scans a QR-code on a receipt.No doubt the introduction of one of the big three mobile wallets into the currently open Dutch market will knock the use of cash down another notch.
What about Safety?
Safety is a substantiated concern for those new to contactless payment as well as privacy. Concerns were raised about Apple Pay earlier this year when it was noted that adding a card to an Apple Pay wallet didn’t require much authentication, depending on the issuing bank. In theory, nimble fingers could pinch a card and simply insert the stolen card number and CVV code into the wallet, and then use the application to make a payment with this card in any store accepting Apple Pay.
In the case of Samsung pay, three levels of security are brought together to ensure payments are secure; fingerprint authentication, tokenization and Samsung Knox. Similar security measures are utilised by Apple and Android Pay. Whereas losing a wallet full of currency leaves you out of pocket, losing or damaging a card or phone still maintains the integrity and value of your money, acting just as a vehicle to your account and its contents.
How beneficial are non-cash payment methods?
For many, cash offers a quick and easy way to control and keep tabs on their spending, although mobile banking is rapidly providing the same role, allowing users to transfer money between personal accounts, set saving targets and pay-back friends instantaneously with the use of a smartphone. Then there’s the matter of accessibility and privacy that cash provides. The fear of being caught out with no spare change to pay for a travel ticket, access to a public toilet, or being unable to use your card to withdraw money and pay in-stores is still a reason to cling onto cash. This was the case last year in the United Kingdom, when banks Natwest and Royal Bank of Scotland were hit by glitches that prevented customers using their cards. Privacy is also a draw for those using cash. Every payment made using a card or mobile wallet payment is stored digitally, showing information on price and where the purchase was made.
Speaking to people regarding contactless card and smartphone payments recently highlighted some apprehension in trying these methods. A family member stated, “I’m wary of smart phone as I don’t understand it, I prefer card to cash has its more secure, especially credit card. You have insurance with credit card and some can use commission free abroad.” Amy (25), from Scotland commented, “I don’t trust having it on my phone, I worry enough having my card being contactless”.
The sentiment is not echoed unanimously, however. Frances (25), a New Zealander having recently lived in Italy, says the following,
I have a preference for card. This is particularly because I’m a New Zealander weirdly enough. New Zealand is a strange country in that it’s so small we often get things last because we lack power or we things early because we’re a good small place to test things out, like card payment. We refer to it as EFTPOS because it’s the acronym and company name for the electronic payment method and has been in NZ since 1985. The norm in Bologna is definitely cash. I must say I enjoy using cash for the novelty of having something in my hand but overall, I prefer card and being able to use it, because I know I won’t be caught short by forgetting to visit the atm.
In the United States where both Apple Pay and Samsung Pay are widely supported by retailers, customers seem to be shunning contactless for plastic and cash. Whilst contactless cards flopped in the States several years ago, PYPMPNTS’s quarterly survey on mobile wallet adoption shows that the number of users installing Apple Pay and using it for the first time is increasing. However, repeated usage is declining and was down to 3.5% from 5.9% just over a year ago. Speaking to a family member based in the United States, she states that she prefers to use a credit card over a mobile wallet due to a loyalty point system which she would be unable to cash in on with Apple or Samsung Pay. It is this point that moots an opportunity for both these providers, who only need to look at the success of the Starbucks Wallet Application to see the benefits of incorporating an incentive system of this kind.
Another potential option for those who like their plastic is to use a Coin or Plastc Card, both are a “smart” card that hold the information of all your debit, credit and even travel cards on a single device, allowing you to carry a single payment method, pressing a button on the card to change your payment account. You can wave goodbye to a bulky wallet or purse, a single card holder is all you need to store this new technology.
With between 300,000-500,000 visitors expected to descend upon Rio for the 2016 Olympic Games in just three weeks, they will bring with them a financial boost to the city’s economy, due to their expenditure on accommodation, food and drinks as well as local goods and gifts.
However, this will only be a drop in the ocean for the overall financial health of Brazil. With a struggling economy expected to fall 3.7% this year, the collaboration with mobile wallet providers such as Samsung Pay and six of the country’s banks might instill confidence in investors, encourage consumers to spend more, and in line with Brazil’s increasing digital environment, seek out non-physical means of financial transactions.
Feature Image (Samsung Newsroom Flickr)