Australia may lack the scale and “burning need” to support a business case for contactless mobile phone payment technology, an industry analyst has suggested.
According to Lance Blockley of financial services consultancy Edgar, Dunn & Company, local banks and telcos faced the theoretical prisoners’ dilemma, refusing to cooperate fully on NFC.
NFC (near-field communications) was playing a growing role in facilitating transit, bill payments, and marketing elsewhere in the Asia Pacific region, with Japan and South Korea leading the charge.
More basic, SMS-based technologies are being used in the transfer of more than US$1 billion a month across the Philippines’ 7,107 islands, where 80 percent of residents were unbanked.
“Asia has pioneered the use of mobile phones for payments,” Blockley told a Sybase customer conference in Sydney this week.
But while individual telcos, governments and financial institutions have led international rollouts, the local industry was “dancing around” Australia’s relatively small market, 99 percent of which use banks.
Blockley said there were 16 million Australian adults with payment devices, “only a segment” of which would use contactless mobile phone payment technology.
Banks and telcos claimed to be deterred by a lack of NFC standards, but according to Sybase’s mCommerce senior Vice President Matthew Talbot, “that’s not stopping them”.
“There are enough standards out there now to get that to happen,” he told iTnews at the conference. “There are examples [of NFC offerings] around the world, but it takes a lot of time.”
Blockley blamed a lack of cooperation between Australia’s finance and telecommunications sectors for preventing the takeoff of NFC despite various local trials since 2007.
He described the prisoners’ dilemma, in which players were rewarded if they all cooperated, rewarded more if they did not cooperate while others did, and punished if they cooperated but others did not.
“If everybody clubbed together, so we have all carriers and all the banks on one ecosystem, then maybe you’d get a critical mass [of customers] much faster,” he told iTnews.
“Banks have to be telco-agnostic. Telcos have to be bank-agnostic. But each player wants an advantage over the other.”
Defining a business case for NFC was complicated by the fact that benefits would be shared by merchants, technology vendors, mobile network operators, banks, and users.
The Philippines’ GCash service – now used for salary remittance and bill payments – was launched in 2004 by Globe Telecom in attempts to grow SMS traffic, Blockley said.
Last week, Google unveiled contactless payment app, Google Wallet, from which the search giant could profit by combining it with coupon listing service, Google Offers.
Blockley said NFC proponents needed to identify “what the gap in the market is”, noting that “you don’t see people walking around the streets in Australia wondering how to pay for things”.
Sybase’s Talbot said new mobile payment offerings had to add value to existing services in developed markets, where “you aren’t going to replace the Visas and Mastercards of the world”.
He highlighted an Austrian SMS-based parking payment method that contacted drivers before their permits expired, and cigarette vending machines that could use stored data to verify customers’ ages.
“There’s always a value-add there,” he said.
Neither Talbot nor Blockley were aware of industry-wide NFC discussions. Both declined to speculate on when the technology would take hold in Australia.
“As the need is a bit nascent, hard to quantify, and hard to build a business case around, everyone is dancing around the perimeter without grasping at it,” Blockley said.
“When that’s going to happen is anyone’s guess.”
Talbot said contactless credit cards from Visa and MasterCard would likely pave the way for mobile phone NFC – especially after retail giant Woolworths rolled out contactless terminals this year.
“You may find that we’re being led in this country by the MasterCards and the Visas,” he said. “This market is going to be driven by the cards initially, and slowly, [mobile NFC is] going to happen.”