Forget tech toys, tap'n'go payment is what will replace cash

Every day there appears to be new payment technology being developed and it is easy to get excited – well, as a payments wonk anyway - at the prospect of a less-cash, more-digital payments scenario.

However, I have spent the last two weeks taking RFi Group's 2015 Global Payments Evolution Study findings around the world to our clients and some of the greatest interest still focuses on the take-up and success of contactless card payments.

"Contactless is effectively the gateway mechanism by which to eventually replace cash."
Alan Shields, Managing Director, Research and Advisory, RFi

That is, now established technologies on plastic such as tap'n'go – not smart watches, mobile wallets or the more exotic devices.

The report focuses on the way consumer payments are being driven away from the traditional and into the electronic and digital realm.

RFi Group has long-promoted the fact contactless is effectively the gateway mechanism by which to eventually replace cash. We have found time and again issuers and payment networks around the world are keenly interested in how to drive greater contactless adoption and therefore less reliance on cash payments.

This 2015 Global Study explored the payments behaviour and attitudes of 32,000 banked consumers across 16 markets. The report has a strong Asian influence, with 12 of the markets covered being from the Asia-Pacific region - Australia, China, Hong Kong, India, Indonesia, Korea, Malaysia, New Zealand, Singapore, Taiwan, Thailand and Vietnam

(It is worth noting here that in China, Indonesia, India and Vietnam and Thailand the consumers were largely taken from the major urban centres.)


Clearly consumers need to have access to a contactless-enabled debit or credit card. When we look across Asia we find 'recognised ownership' is disappointing in many of the countries. As we would expect, Australia leads the way, however, there are still 35 per cent of Australians who either don't have or don't know they have a contactless card.

In all of these countries there is a need for further issuance and increased information/ awareness campaigns if contactless growth is to continue.

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The next step is to drive usage of contactless cards. A comparison of penetration rates shows outside of Australia, Taiwan and Singapore, fewer than 40 per cent of banked consumers have even used a contactless card.

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So why have so few bothered to use their contactless card? The barriers as articulated by consumers, centre on understanding, need and trust. It is interesting to note the more mature the market from a contactless perspective (Australia, Singapore and New Zealand being the most mature in Asia), the less likely non-contactless users were to agree they needed and trusted contactless payments while they were as likely to agree they understood the technology. Essentially, the last barriers to fall in these markets are utility and security.


Experience tells us once a consumer uses contactless payments they realise the benefits of speed and convenience. So how do we convince them to use it for the first time? The answer is to create incentives for the initial payments. A good example of incentivisation comes from the UK market where contactless debit and credit cards are now accepted on the London Underground network and there is no need to purchase an Oyster card. Shortly after the initial launch of this functionality, consumers were offered 'Fab Free Friday' whereby they could ride for free on the tube network if they used their contactless debit or credit card to tap on and off the network.

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Once we have issued the cards and incentivised consumers to use them, we must crack the nut of acceptance and importantly, the perception of acceptance. In our study we asked consumers whether they agreed there were 'many merchants that accepted contactless payments'.

The results are telling, fewer than a 35 per cent of consumers in any of the countries agreed merchant acceptance was abundant and the correlation between perception and reality was flimsy – i.e. the countries with the greatest acceptance were not necessarily near the top of the list, with Singapore sticking out with just 15 per cent agreement.

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In order to improve acceptance, issuers, acquirers and card networks need to initially work with large 'weekly purchase' merchants to accept contactless cards by informing them of the benefits of increased throughput.

This will not reduce cash per se but will drive regular usage and ensure that the behavioural transition from PIN or Signature is smooth and becomes habitual. Once this area of acceptance has been cracked, then the focus should turn to smaller 'daily purchase' merchants - which is where the erosion of cash will begin.

So what about improving the 'perception of acceptance'? This is where merchant training and education comes in. Ensuring terminals are on, pointed to the customer and in obvious positions is clearly key but the key factor in driving consumer awareness lies in 'inviting' the customer to pay contactlessly – “Can I payWave/ PayPass that for you?" – at the point of sale.

The payments industry is clearly in agreement that contactless payments are both the key to cash erosion and the gateway to digital payments. The barriers to usage remain high among non-users but they are clearly not insurmountable as the Australian, New Zealand and Singaporean markets are proving.

However, more needs to be done to drive further uptake and at RFi we believe that the key to adoption lies in the four “I's" – Issue, Incent, Inform and Invite. Repeat.

Alan Shields is Managing Director, Research and Advisory, for global banks and financial services business intelligence provider, RFi.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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