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Apple Pay may just liven up mobile payment in S'pore

Saturday, October 11, 2014 - 05:50
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Apple CEO Tim Cook speaks about Apple Pay during an Apple event at the Flint Center - PHOTO: REUTERS

Singapore

THAT Apple Pay has been heralded as a sparkling form of innovation does not speak as much to the cult of the brand (this time) as it points to the slow take-up of mobile payment.

Apple Pay - which effectively allows users to pay for their shopping by waving their phones at payment terminals - is a new boon for the US market. But questions surround its impact if it is brought to Singapore, and the region.

What Apple promises through its new payment system is security - an issue that has dogged the United States. Just last month, Home Depot was hit with a hacking attack on its payment system, with over 55 million credit and debit cards compromised. The scale was even bigger than the security breach at Target in December, which affected 40 million cards.

Like that meme of a polite T-Rex using the potty and struggling to reach for the toilet roll, the US payment system is hampered by its age and size. US card issuers are only starting to introduce chip-embedded cards that are harder to forge. Transactions in the US are still being logged through a swipe of the magnetic stripe on cards - a technology developed in the 1970s by IBM.

Given the cost of fraud, retailers also want to keep these transactions secure. Home Depot said that the security breach would cost it over US$60 million, with just about half covered by insurance.

Apple Pay capitalises on the chance to play peacemaker among retailers, customers and banks: by using a unique device account number for transactions - in the way that security tokens function. The card numbers are not shared by Apple with the merchants. It now has the support of retailers, banks and Wall Street which mobile wallet players such as Google did not seem to have.

But in Singapore, credit cards have been chip-embedded for years. This makes contactless payment less relevant for security needs. And even if Apple Pay does come a-knocking, said one industry source, it is unlikely to be compatible with existing services also powered by near field communication (NFC) technology.

Banks and telcos here are keen to muscle in on the contactless payment market. The service keeps their customers locked in and could become a revenue stream once fees are levied on consumers.

SingTel looks to use NFC to make the mobile phone an "all-in-one tool for payments, banking and shopping", a spokesman said. UOB is also monitoring the use of NFC closely, Gilbert Chuah, head of Internet channels, told BT.

For about two years now, all three telcos have offered their versions of mobile payment systems on Android devices, which account for a higher percentage of mobile traffic here than iPhones. But judging by the take-up rates for NFC capabilities, customers haven't been sold yet.

As at April last year, or about a year into the launch, just 15,000 people had swopped their phone SIM cards for NFC- enabled ones, for use at some 30,000 points of sale in Singapore. That hassle was likely one deterrent.

The telcos' contactless payment systems were linked to a virtual credit card from DBS, which earlier this year said the take-up has not been as anticipated.

"Customers are not going to a store, and walking out if it doesn't support NFC," another source noted.

But there is a turning point, if Singapore finally gets to it. It is still working to get NFC on Android phones available for trips on buses and trains - an overdue move given Singapore's digital push. (Lest there be protests this only benefits the proletariat, there are plans for NFC to be used for ERP fees.) A seven-party consortium formed three years ago is still working around issues that presumably include security, legality and cost.

Apple Pay may not kickstart NFC adoption in Singapore, but it is hoped the renewed focus on mobile payment will shift some gears here and create real scale. And if nothing else, Apple offers several lessons on consumerism. In this case, there are two: ubiquity is key, and in the words of Steve Jobs, "people don't know what they want until you show it to them".