Wallet warriors wait for their moment

Australia's big banks have a better chance of winning the digital wallet wars than their peers in more fragmented markets, according to MasterCard Australia's new head of market development and innovation.

Garry Duursma said the influence Australia's major banks had over consumers should not be underestimated. Wielded intelligently, it could make it more difficult for digital giants such as Apple, Google or Samsung to dislodge the banks from the mobile payments space.

In its most recent global payments report CapGemini indicated that, although mobile payments are expected to grow by 61 per cent to US$47 billion this year, banks will retain the lion's share, controlling around 40 billion of the transactions compared to the seven billion controlled by non-banks.

Local banks, Duursma said, should concentrate on developing "their own strong product, make it really attractive, easy to use and secure" which would make it less likely that they would "get swamped by one of the global giants."

That's when the digital giants actually make it to Australia.

There is still no word on when Apple will bring ApplePay to Australia. Reports over the weekend on the online site 9to5mac.com suggest that the payments service will launch in the UK next week, followed by Canada, China and South Korea later this year.

Google has ruled out bringing its digital wallet to Australia any time soon.

Meanwhile, Samsung, which bought LoopPay in February (which allows contactless payments to be made using magnetic stripe payments terminals), is reportedly finalising its Samsung Pay digital wallet ahead of a launch later this year.

Australians' appetite for contactless payment has been demonstrated already by the rapid uptake of tap and pay cards. Demand for digital wallets has been more restrained.

RFI Group statistics suggest that, although 68 per cent of the population have a smartphone, only 11 per cent of those that do have ever used a digital wallet. However, 18 per cent of Australians say the concept of digital wallets is "very appealing".

Duursma, who joined MasterCard three months ago, has an extensive payments background including seven years with sector disruptor, Tyro.

He refused to say whether MasterCard had held discussions with Apple locally about the rollout of ApplePay, although he acknowledged Australia was one of the identified target markets.

ApplePay relies on tokenisation to secure the process; this replaces credit card numbers and expiry dates with unique 16-digit tokens which can't be transferred to another device.

MasterCard has rolled out its tokenisation service locally; Visa has yet to do so. Even so, international visitors to Australia who have ApplePay loaded on their smartphone have still been able to use the service to make payments when visiting Australia according to Duursma, who noted that "once it's in the phone it doesn't care if you are in Sydney or Seattle."

He said that although the payments loop for international ApplePay users needed to be completed with the US bank that had issued the payments instrument on the phone, an ApplePay payment made in Australia typically concluded in the sub 500 millisecond range.

Duursma believes that, while smartphone based payments are interesting, the bigger impact of digital wallets will be in the ability to forge relationships with consumers and have access to data all the way through their purchasing activities - from online research and  online purchase, through in-app mobile purchasing, to in-store digital payments.

While the so-called 'wallet wars' focus on which organisations will own the payments real estate on a consumer's smartphone, Duursma said the real prize lay in the data.

"Our challenge is to take the network effect and deliver value in the pre and post purchase component," he said.  The winners will be those that use the granular understanding of consumer patterns gained to drive repeat business and loyalty by, for example, sending coupons or alerts direct to consumers' smartphones.