The announcement just before Christmas that Android Pay will arrive in Australia in early 2016 is big news for payments, but it’s also another significant step that’s slowly, but inevitably, taking mobile payments from niche to mainstream. There has been a lot of chatter about mobile wallets being the future of payments in Australia, but so far we haven’t seen many people actually use their mobile phones as wallets.
2016 is looking like the year that will change this – why?
Apple’s here, Android’s coming and Samsung won’t be far behind
Many Australian iphone users have been patiently waiting for the chance to use Apple Pay to make payments and it finally arrived in November last year as part of a deal with Amex. What has made the arrival of Apple Pay less of an event in Australia than in other countries is that it can currently only be used by people who have an iphone 6 or 6+ and an American Express card that’s issued by Amex (the Amex ‘companion’ cards, issued by banks, aren’t able to be used). This means that only a very small amount of iphones in Australia can actually be used with Apple Pay right now.
Google has announced that Android Pay will be here in early 2016 and it’s rumoured that Samsung won’t be far behind. Google, Apple and Samsung (aka “The Pays”) are already involved in the war for mobile handset prominence and the next frontline is the mobile wallet where The Pays will all be competing for prominence. The Pays are slick, work well and their functionality is continually being enhanced as usage increases. While Australian mobile banking apps are some of the best in the world, take-up from similar overseas markets (like the UK) indicates that The Pays are already having significant uptake within a short space of time after launch.
The Pays all have similar functionality, Android and Samsung are usable on many of the same devices, and all are likely to arrive in Australia at roughly the same time. Without many clear differences between the products they will be battling to win their place in the wallets of customers through their marketing and advertising spend.
Banks will be competing to be ‘top of wallet’
Just the same as banks currently compete to be the card of choice in customers’ physical wallets, the same thing will soon be happening in the mobile world. Although you will be able to store multiple cards in some mobile wallets, all of The Pays will have a default card installed in the app. So whichever banks are more successful at having their cards installed as the default card will earn the lion’s share of the income generated by processing the transactions through the wallets. For banks which aren’t the default card it will be much harder for them to overcome customer change inertia and get their card ‘top of wallet’.
This means that banks are likely to use their own considerable marketing budgets and strong customer relationships to try to get their customers to install their card as the default. This will increase the noise around the arrival of The Pays and increase customer uptake.
Fully integrated mobile wallets are starting to become a reality
Part of the reason that Australians continue to pay with their credit and debit cards instead of their phones is that at the moment mobile tap and pay doesn’t offer a compelling proposition over and above card tap and pay. Also, as banks generally earn the same amount if a cardholder uses their card or their mobile to make a payment, they have had no particular incentive to migrate people from cards to mobiles.
Mobile wallets will really take off when they offer something different, and better, than cards. Eventually we will see mobile wallets incorporate all of the cards in our wallets including ID cards, medicare and health insurance cards and travel cards like Opal and Myki (as is already happening in the UK). We’re starting to see the first stage of this in Australia with the incorporation of loyalty cards into mobile wallets (all of the Pays will have this capability, although not necessarily at launch). This means that people won’t have to remember to carry their various loyalty cards and their credit/debit card – everything will be stored in the same place, their mobile wallet.
The battle to be top of wallet has started and we don’t know who will win.
Now that the battle to be top of wallet has commenced, things will heat up quickly. And as many of the competitors have very deep pockets and aren’t used to losing, it’s likely to be long and fierce. The only definite winners will be consumers as banks, mobile companies and merchants improve the user experience and functionality of their offerings.
At Cuscal we are working with our financial institution clients to connect them to Android Pay from Day 1 (and the other Pays when they arrive). We want to ensure all of our clients can compete on a level playing field for their place in the wallets of the future.