From cashless to cardless: the future awaits

Published at Oct 31, 2017, in Features

“The piece of plastic is going away,” Michael Corbat said earlier this week.

You may think that the chief executive of Citigroup was referring to the demise of the plastic bag, but it’s the future of credit cards that is being called into question.

Corbat, who took the reins at Citigroup in 2012, believes the continued evolution of technology will drastically change the way we pay.

“We know, at some point, cards are going to go away,” he said. “And it’s just going to be digital wallet, digital payments. This is why Citi is putting a major emphasis on fintech.”

Corbat’s theory is already materialising. This month, three of Australia’s largest banks — Commonwealth Bank, Westpac and NAB — joined forces to develop their own mobile payment app called Beem.

Beem promises to deliver instant transactions, in stark contrast to the current 2-3 days it takes to approve transactions between different banks. The digital wallet will be available to iOS and Android users and may be used by any customer, irrespective of their bank.

Commonwealth Bank retail boss Matt Comyn said the development would provide big savings for small businesses.

“We want this to be a ubiquitous service that’s available to all Australian banking customers and small business to provide free instant payments,” he said.

The chief executive of Westpac’s consumer bank, George Frazis, indicated that Beem was a result of a boom in mobile banking by customers.

“Customers will soon be able to ‘Beem’ free payments instantly using any smartphone, regardless of who they bank with and without the need to add account details.”

Anthony Cahill, NAB’s chief operating officer, indicated that the app was another step in a global shifts towards cashless societies. “Over time, this may well become a wallet with additional features where you can load and hold different types of information,” he said.

The joint venture was conceived after the trio unsuccessfully negotiated to use Apple’s Apple Pay platform.

What about ANZ?

ANZ’s absence from the joint venture is glaring, but the bank isn’t shunning the world of fintech.

Unlike its peers, ANZ was able to strike a deal with Apple. It became the first bank in Australia to offer Apple Pay as a service this year, with some 1.6 million customers now taking advantage of the popular platform.

ANZ customers can now make payments from Apple’s digital wallet on their phone, bypassing the need for credit or debit cards.

The bank’s landmark deal with Apple is significant, as it provides Australians with their first alternative over the Visa and Mastercard systems. Until Apple Pay reached our shores, merchants were slugged higher fees for contactless payments through Visa and Mastercard.

As a general rule, contactless payments attract a 0.5-0.6 per cent surcharge, while EFTPOS surcharges are only 0.10-0.15%.

“[Today] marks a significant milestone for EFTPOS as we move from our traditional card-based payment method into mobile, enabling customers with an iPhone or Apple Watch to choose the EFTPOS account they wish their mobile payment to be made from, [cheque or savings]” EFTPOS acting chief executive Paul Jennings said.

“Customers can set their account preference out of CHQ/SAV and then save themselves entering their account each time they pay. After providing trusted, secure card-based payment for 30 years, EFTPOS can now also be used to make mobile payments.”

When to expect the transition to a cardless society

With Beem arriving soon and Apple Pay proving to be a significant drawcard for ANZ, the dependency on physical cards is waning.

Beem is scheduled to debut on Australia Day next year and with its arrival, credit cards may be set to go the way of chequebooks — a relic of the past.

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