tag:theconversation.com,2011:/au/topics/eftpos-12296/articlesEftpos – The Conversation2023-11-14T19:07:09Ztag:theconversation.com,2011:article/2175202023-11-14T19:07:09Z2023-11-14T19:07:09ZCash may no longer be king, but the Optus debacle shows it is still necessary<figure><img src="https://images.theconversation.com/files/559240/original/file-20231114-19-t3ysht.jpg?ixlib=rb-1.1.0&rect=19%2C261%2C6421%2C3909&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/search/australian-dollars?image_type=photo">Shutterstock</a></span></figcaption></figure><p>A simple software upgrade went wrong. Across the country economic life ground to a halt. Groceries were abandoned at supermarket checkouts. Commerce was paralysed as the nation waited for its payment system to be brought back on line.</p>
<p>The Optus outage lingers fresh in our minds yet the scene described here is not Melbourne or Sydney in November 2023, but Zimbabwe four years ago when the southern African nation suffered a 72-hour <a href="https://www.herald.co.zw/business-suffers-as-ecocash-still-down/">outage</a> of the mobile money service known as Ecocash.</p>
<p>At a time when up to 96% of the country’s transactions were cashless, EcoCash, owned by the privately held telco, EcoNet, boasted more than three times the number of registered users than there are Zimbabweans who hold traditional bank accounts, and a near monopoly on mobile money payments.</p>
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Read more:
<a href="https://theconversation.com/optus-has-revealed-the-cause-of-the-major-outage-could-it-happen-again-217564">Optus has revealed the cause of the major outage. Could it happen again?</a>
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<p>Occurring soon after a deeply unpopular move towards a cashless economy, this outage, along with a shorter one due to rolling blackouts earlier that same year, exacerbated concerns about the reliability of non-cash payments.</p>
<h2>Abandoning the cashless experiment</h2>
<p>Four years on, Zimbabwe has retreated from cashlessness, with the pandemic facilitating a return to cash in US dollars as the preferred means of payment. While the 2019 outage was not the only reason Zimbabwe returned to a cash economy, increasing frustration with mobile phone transactions contributed to it. </p>
<p>When I talk informally to Australians about these events and their possible implications for our own economic behaviours, I commonly hear some variant of the reply “but Australia isn’t Zimbabwe!” </p>
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<span class="caption">The Optus and other outages raise questions about the benefits of becoming a cashless society.</span>
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<p>But the Zimbabwean case holds some important lessons for us about the undesirability of eliminating cash in the aftermath of the latest Optus outage. </p>
<p>First, these outages highlight a key advantage of physical cash - it never goes down. We can rely on it to be there when we need it in contrast to cashless payment systems such as EFTPOS which suffered disruptions during the <a href="https://www.smh.com.au/money/planning-and-budgeting/in-case-of-emergency-cash-is-gold-20200109-p53q5t.html">2020 fires</a> in NSW and Victoria.</p>
<h2>We’re using less cash but we still won’t let go</h2>
<p>Many Australians might argue for the need to keep cash as a fall back in the event of future natural and technical disruptions but the main reason they want to hang onto it has nothing to do with using it to buy and sell.</p>
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<a href="https://theconversation.com/optus-said-it-didnt-have-the-soundbite-to-explain-the-crisis-we-should-expect-better-217302">Optus said it didn't have the 'soundbite' to explain the crisis. We should expect better</a>
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<p>Indeed its use in buying and selling has been in decline for 20 years and continued to decline during the pandemic. The total percentage of economic transactions cash accounted for dropped from 69% in 2007 to 13% in late 2022 according to the Reserve Bank’s <a href="https://www.rba.gov.au/publications/bulletin/2023/jun/consumer-payment-behaviour-in-australia.html">June Bulletin</a> on Consumer Payment Behaviour in Australia. </p>
<p>By contrast, much of the continuing demand for cash can be attributed to its use as a store of value — something you hold onto rather than spend. During the pandemic there was more cash being kept under metaphorical mattresses as a source of security and comfort, than was being spent. </p>
<p>A <a href="https://www.rba.gov.au/publications/bulletin/2021/mar/cash-demand-during-covid-19.html">March 2021 RBA report</a> found from March 2020 to February 2021, the value of banknotes in circulation rose 17.1% to A$97.3 billion because people were holding onto money at home. Moreover, even as its <a href="https://www.rba.gov.au/publications/bulletin/2023/jun/cash-use-and-attitudes-in-australia.html">most recent</a> report on cash usage highlights decreased reliance on cash across all demographics, the percentage of respondents stating they would “experience a ‘major inconvenience’ or ‘genuine hardship’ if cash was hard to access or use” has remained unchanged since 2019 at just over a quarter.</p>
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<a href="https://theconversation.com/going-cashless-isnt-straightforward-ask-sweden-or-zimbabwe-146187">Going cashless isn't straightforward. Ask Sweden, or Zimbabwe</a>
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<p>This desire to access cash even as its circulation declines highlights the degree to which doing away with it might be ill-advised and potentially destabilising. Indeed, this is exactly what happened in Zimbabwe — the country went cashless very quickly and without buy-in from most people.</p>
<h2>Other reasons to keep cash, apart from dodgy technology</h2>
<p>Other concerns about going cashless include the lack of privacy in the electronic payment system plus it being more difficult to control spending.</p>
<p>Even as some Australian banks move away from handling cash, other countries, Sweden most famously, have been forced to walk back such measures to respond to the needs of communities left behind by the shift to cashless payments.</p>
<p>These include the elderly, people in regional and remote areas, migrants and people who don’t have a bank account. While these groups are <a href="https://www.rba.gov.au/publications/bulletin/2021/mar/cash-demand-during-covid-19.html">decreasing in size</a> we ignore people who don’t have the knowledge the confidence or reliable access to cashless payment systems at our peril.</p>
<p>The financial transaction process needs to be inclusive. Standard, state-issued currency has historically been a public good that is accessible to all and ideally not a source of profit.</p>
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Read more:
<a href="https://theconversation.com/depending-on-who-you-are-the-benefits-of-a-cashless-society-are-overrated-113268">Depending on who you are, the benefits of a cashless society are overrated</a>
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<p>Going cashless is a form of privatising money. It moves transactions into a world where you must rely on banking institutions to buy and sell things while someone is making money off your financial dealings through fees. We wouldn’t usually think about this as similar to selling off the power grid but in some ways it is.</p>
<p>And as we saw all too vividly with the Optus debacle, a transition to privatised payment infrastructures opens up new kinds of vulnerability to go along with their convenience.</p><img src="https://counter.theconversation.com/content/217520/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This article draws on research funded in part by a Macquarie University New Staff Grant and the Wenner-Gren Foundation. </span></em></p>Electronic payments are convenient and are increasingly replacing cash, but when a network fails, the impact can bring a country to a halt.Chris Vasantkumar, Lecturer in Anthropology, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/672392016-10-19T04:07:05Z2016-10-19T04:07:05ZApple Pay dispute may mean less opportunity to pay with your mobile<p>As people increasingly reach for their phone to pay for goods in Australia, existing players in the contactless payment industry are trying to seek competitive advantage. Four of Australia’s leading banks are trying to secure collective bargaining rights for technology that grants access to Apple Pay.</p>
<p>This service is currently is only available to customers with American Express proprietary cards and ANZ American Express companion cards and ANZ Visa cardholders.</p>
<p>The Reserve Bank of Australia’s (RBA) <a href="http://www.rba.gov.au/publications/annual-reports/psb/2016/pdf/2016-psb-annual-report.pdf">Payments System Board noted</a> that innovations in mobile wallets can boost consumer choice and convenience. Cardholders may be able to consolidate a range of payment cards into a single app on their mobile device. </p>
<p>Australia is one of the <a href="http://www.nfcworld.com/2015/05/13/335191/australia-leads-the-way-for-contactless-ownership-and-usage/">leading countries</a> in the take-up of contactless payment transactions. If Apple is blocking banks from offering this service to their customers, it should be questioned. </p>
<h2>Australia ahead when it comes to contactless payments</h2>
<p>The way that Australians pay for the goods and services that they consume is rapidly changing. The use of cash as a payment mechanism <a href="http://www.rba.gov.au/publications/annual-reports/psb/2016/pdf/2016-psb-annual-report.pdf">has continued to decline</a> as consumers shift to electronic payment methods, especially for smaller transactions. </p>
<p>Credit and debit cards are the most frequently used non-cash payments methods. In the financial year 2015-16, Australian cardholders made around 6.9 billion payments, worth $538 billion. That is an increase in value on the previous year of around 7%.</p>
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<p>This trend is largely due to the prevalence of contactless technology at the point-of-sale. For example, some Australian <a href="https://www.bankingday.com/nl06_news_selected.php?act=2&nav=13&selkey=21635&utm_source=daily+email&utm_medium=email&utm_campaign=Daily+Email+Article+Link">banks claim that 74% of all MasterCard in-store transactions are now contactless</a> and that per capita, contactless payments in Australia are amongst the highest in the world. Added to that, the A$100 cap on such transactions is the highest in the world.</p>
<p>The contactless payments industry has made substantial investments in the technologies that underpin convenient and secure payments. In particular this has seen the deployment of Near Field Communications (NFC) technology, used to accept both contactless card payments and mobile wallet payments. </p>
<p>Merchant terminals that accept contactless payments via the NFC technology are now commonplace in Australia. Mobile payment applications such as Apple Pay, Samsung Pay and Android Pay have all been recently launched in Australia. </p>
<p>Apple Pay arrived in November 2015, originally only for proprietary American Express cards. In April 2016, it was made available also for ANZ issued American Express companion cards and Visa cards. </p>
<p>In June 2016, Samsung Pay launched its mobile wallet application in Australia, in partnership with American Express and Citibank. Finally, Android Pay launched in July 2016 with ANZ, American Express, Macquarie and a wide range of credit unions and mutual banks, using Cuscal as their service provider.</p>
<h2>The Apple dispute</h2>
<p>Four banks – the Commonwealth Bank of Australia, Westpac, National Australia Bank and Bendigo and Adelaide Bank – have applied to the Australian Competition and Consumer Commission (ACCC), to collectively negotiate with Apple Pay in Australia. </p>
<p>In their evidence to the ACCC, the banks accuse Apple of trying to piggyback on their investment in Australia’s contactless payment infrastructure, <a href="http://www.afr.com/business/banking-and-finance/apple-is-closed-and-controlling-say-banks-as-iphone-dispute-heats-up-20161017-gs4590">while remaining “intransigent, closed and controlling”</a>, in dictating terms for access to Apple Pay.</p>
<p>The banks <a href="http://news.nab.com.au/australian-banks-respond-to-submissions/">claim</a> that Apple is seeking for itself the exclusive use of Australia’s existing NFC terminal infrastructure, “which has been built and paid for by Australian banks and merchants for the benefit of all Australians”. </p>
<p>This negotiation is worth a lot to the banks, <a href="http://www.paymentscardsandmobile.com/apple-pay-arguments-oz-banks-superficial-unconvincing/">the banks claim</a> Apple has approximately 40% of the smartphone market in Australia. </p>
<p>The banks dismiss Apple’s claim that opening up access to the NFC function would undermine the security of mobile wallets. The banks point to the experience of Apple in China and Japan, where Apple Pay was forced to modify its demands in order to maintain parity with Samsung Pay.</p>
<p>Besides seeking non-exclusive access to the NFC and standardised security for all mobile payment systems, the four banks want price transparency on transaction costs for mobile payments within Australia. This is an ongoing objective for the RBA.</p>
<p>In its recent <a href="http://www.rba.gov.au/payments-and-infrastructure/review-of-card-payments-regulation/pdf/review-of-card-payments-regulation-conclusions-paper-2016-05.pdf">review of card payments regulation</a>, the RBA set out to ensure that its reforms would promote competition and efficiency in the payments system by improving price signals and thus encouraging efficient payment choices for consumers. </p>
<p>Apple Pay derives most of its income from taking part of the Merchant Service Fee (MSF) that merchants pay to the card issuers. In the USA, where contactless payments have yet to take off, MSF’s are much higher than in Australia. According to <a href="http://www.nfcworld.com/2014/09/16/331523/apple-pay-get-0-15-transaction-fee/">media</a> <a href="http://www.techtimes.com/articles/58654/20150608/googles-android-pay-will-not-charge-transaction-fees-now-what-apple-pay.htm">reports</a>, Apple Pay take around 0.15% of the value of every credit card transaction via its mobile wallet in that country.</p>
<p>In Australia, the average fee paid by merchants to the financial institution for <a href="http://www.rba.gov.au/publications/annual-reports/psb/2016/pdf/2016-psb-annual-report.pdf">transactions on MasterCard and Visa cards was 0.72%</a> of the value of the transaction in June 2016. This followed a review of the calculation of the interchange element of the MSF’s in November 2015. </p>
<p>These interchange fees are now 0.50% of the value of the transaction for the credit card schemes and 12 cents per transaction for the debit card schemes. So there is not as much interchange revenue to share in Australia as there is in the USA.</p>
<p>In its deal with Apple Pay, <a href="http://www.afr.com/technology/in-the-fight-for-electronic-payments-the-banks-have-met-their-nemesis-apple-20160901-gr6x2p">media</a> <a href="http://www.smh.com.au/business/banking-and-finance/apple-payled-surge-in-anz-card-customers-drives-rival-banks-to-renegotiate-20160509-goppf0.html">reports</a> say that ANZ has given up some of its interchange fees to Apple, but the actual amount has not been disclosed. </p>
<p>In a submission to the ACCC, the four banks’ pointed out if Apple Pay were to gain a dominant share of all mobile wallet transactions in Australia, then consumers would not be aware of the costs that are associated with this method of payment.
This would conflict with the RBA’s objective of improving signalling to consumers the price of each payment option.</p>
<p>The four banks have received support for their bid to negotiate collectively with Apple from a number of card schemes, merchants, other banks and payment associations. The ACCC is expected to give its decision on their claim in November 2016.</p>
<p>Is Australia is serious about offering consumers as wide a variety of payment options as possible and making consumers aware of the costs of each option? If so, then everyone should be able to use whichever payment method suits them best, no matter which mobile phone or bank they use.</p><img src="https://counter.theconversation.com/content/67239/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steve Worthington does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The competition in Australia’s contactless payment industry is heating up as Apple Pay sets up in Australia. However some banks claim the company is making the system less competitive.Steve Worthington, Adjunct Professor, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/490392015-10-13T19:25:25Z2015-10-13T19:25:25ZWhy the Reserve Bank isn’t the right regulator for our payments system<figure><img src="https://images.theconversation.com/files/98193/original/image-20151013-17807-55qje9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Reserve Bank regulates interchange fees - the credit card fees paid by merchants - but why?</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>Sometimes boring debates are important. Mind numbing detail gets in the way of good policy. So it is with an obscure feature of credit cards known as “interchange fees”.</p>
<p>At the moment these fees are both highly regulated, and inappropriately regulated by the Reserve Bank of Australia (RBA) and not the Australian Consumer and Competition Commission (ACCC).</p>
<p>People tend to overlook the complexity of the market economy. It seems all so easy. People trade goods and services all the time. The <a href="http://www.rba.gov.au/payments-system/">Payments System</a> is how we actually pay for things. It isn’t simply a matter of handing over cash - the Payments System is a complex technological infrastructure, a web of interconnections and protocols between consumers, merchants, and banks. Cash makes up a part of that system but most of it runs on payments technologies that include debit cards, eftpos, and credit cards.</p>
<p>Here is where things get wonky – how many people actually understand how their credit card works? Most people simply swipe their cards and all the “backroom stuff” that actually facilitates the transaction happens. Card payments are very convenient for everyone.</p>
<p>But there is no such thing as a free lunch or a costless transaction. All the technology and organisation that underpins the credit card system has to be paid for. The costs can either be paid by consumers, or merchants, or some combination of the two. That is where the so-called interchange fee comes in – historically merchants have paid the costs of operating the credit card system.</p>
<p>All that started changing in 2003, however, when the RBA began regulating interchange fees. The rationale being that interchange fees were somehow monopolistic and the costs of operating the Payments System too high. We <a href="http://www.afr.com/opinion/rba-got-it-wrong-and-regulated-credit-card-fees-upwards-20150928-gjwlhv">have argued that this policy was a mistake</a>.</p>
<p>Here we want to address a more general question: Why is the RBA regulating interchange fees at all?</p>
<p>At first glance this seems a bit trivial. After all the RBA is responsible for the conduct of monetary policy and it sets the overnight interest rate. Credit cards are about money too, so it’s obvious that the RBA should be involved in regulating them too.</p>
<p>Actually, no.</p>
<p>The main argument for why the regulation of the payments system remains with the RBA can be summarised, in essence, as “because it has been with the RBA since 1959”. There is no strong or explicit case for positioning the oversight and regulation of the payments system within the RBA. There are a number of implicit arguments that can be approximated as follows:</p>
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<li><p>That the payments system has some connection with the monetary system – payments are made in money, and because the RBA controls money, it should also control payments.</p></li>
<li><p>Interchange fees are connected to credit cards and credit cards involve interest rates – monetary policy involves interest rates, ergo the RBA should regulate interchange fees. (This is a variant of 1 above).</p></li>
<li><p>The payments system is a utility, (albeit run by the banks) or <a href="http://www.econlib.org/library/Enc/PublicGoods.html">public good</a>. Therefore the central bank should regulate this.</p></li>
<li><p>The RBA has acquired historical experience in oversight and regulation of the payments system, and so it should continue in this role.</p></li>
<li><p>The RBA should regulate the payments system because it can regulate the payments system.</p></li>
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<p>It does not require a great deal of logical skill to disassemble these arguments: (1) and (2) are fallacies of composition; (3) is an empirical claim; (4) is the induction problem, and (5) is the naturalist fallacy. The point is that none of these are solid economic arguments, each can be picked apart logically and empirically, and all carry a large amount of expediency.</p>
<p>The Payments System is not a public good and not a utility. Rather it is a suite of technologies and organisations, that is, an industry. It is useful to think of the payments system as a network infrastructure that has cumulatively emerged from entrepreneurial actions, as the economy has grown and developed, in order to facilitate the transaction needs of a market economy.</p>
<p>By contrast monetary policy is a utility, and monetary stability is a perfect example of a public good. It is both non-rivalrous and non-excludable.</p>
<p>While there is no good economic argument for the RBA to regulate interchange fees, there are good arguments why it shouldn’t. In short – it is likely to be a distraction from the RBA’s main function.</p>
<p>Monetary policy is a specialisation based on the theory of both monetary economics and macroeconomics. It is built around the analysis of interest rates and various indices (inflation, asset prices, aggregate demand, GDP, unemployment, industrial production) and involves an understanding of emergent aggregates, transmission mechanisms, and macro-econometric models of economic systems.</p>
<p>Regulatory economics is, in essence, the study of the social control of business and is a very different branch of economic theory and practice to monetary economics. It is entirely based in microeconomic theory (not macroeconomics) and is focused on private market behaviour under different degrees of competition (from perfect competition to monopoly).</p>
<p>So the RBA has no comparative advantage or good reason to regulate the Payments System. Australia already has a specialist agency to regulate industry – the ACCC. So in the first instance we argue the RBA should be stripped of its regulatory powers and focus its entire attention on monetary policy.</p>
<p>Of course once we recognise that the Payments System is an industry rather than a utility, the question arises why government would fix prices in that industry. So whether the ACCC should fix prices is an open question of competition policy. Our argument here is that the RBA has no business in regulating industry.</p><img src="https://counter.theconversation.com/content/49039/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sinclair Davidson has received funding from the Australian Research Council. He is a senior fellow with the Institute of Public Affairs. His report "Who should regulate the bank interchange fee" (joint with Jason Potts) will be published by the Australian Taxpayers' Alliance. </span></em></p><p class="fine-print"><em><span>Jason Potts receives funding from the Australian Research Council. He is an Adjunct Fellow at the Institute of Public Affairs. His report "Who should regulate the bank interchange fee" (joint with Sinclair Davidson) will be published by the Australian Taxpayers' Alliance.</span></em></p>RBA has no comparative advantage or good reason to regulate the Payments System. Australia already has a specialist agency to regulate industry – the ACCC.Sinclair Davidson, Professor of Institutional Economics, RMIT UniversityJason Potts, Professor of Economics, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/315092014-09-10T04:23:39Z2014-09-10T04:23:39ZWith Apple Pay, Apple just took payment security to the banks<p>Today’s <a href="https://theconversation.com/apple-launches-smart-watch-new-iphones-and-mobile-payment-system-31482">launch</a> of the Apple Pay mobile payments service has the potential to eliminate the need for us to carry payment cards in our purses or wallets - but as always converting potential to reality is not a given.</p>
<p>The new service will be available on the iPhone 6 and the Apple Watch and is activated by the customer taking a photo of their payment card(s) on their iPhone which then verifies the card with their card-issuing bank. The customer can then hold their device near a contactless reader and verify the payment with their finger, using Apple’s Touch ID system.</p>
<p>The biggest US banks and the major payment card acceptance marques, such as MasterCard, Visa and American Express have agreed to be part of the Apple Pay service. The banks will however have to give up some of the merchant service fee they currently charge the merchants for accepting payment cards. </p>
<p>It is uncertain whether Apple Pay will be widely accepted by merchants, as their acceptance might trigger even more use of payment cards and hence even more fees. Fast food chain McDonalds has signed up to accept Apple Pay in the USA, although there are some <a href="http://www.slashgear.com/apple-pay-removes-the-hassle-from-online-payments-09345426/">suggestions</a> that rather than being a feature at the point of sale (POS), Apple Pay’s advantage might lie in online shopping, where the need to type in payment card information is an annoyance for consumers.</p>
<h2>Australia vs the US</h2>
<p>Apple’s target in the US is the five-decades old magnetic strip which is on the back of payment cards, Instead, Apple Pay will use Near Field Communication (NFC) technology to effect the payment. This may hinder its acceptance as the US has yet to fully adopt the <a href="https://www.pinwise.com.au/">“Chip and Pin”</a> technology that underpins the use of payment cards in Australia, in particular the use of “contactless” cards, which the consumer merely waves at the POS terminal in what is called a “Tap and Go” transaction. </p>
<p>Some Australian retailers and banks are already trialing their own online payment technology, with for example <a href="http://www.arnnet.com.au/article/553981/eftpos_launches_online_payment_trial_coles_supermarkets/">Coles testing an eftpos system</a> for web purchases, which allows users to make online payments with a username and password, without having to enter their payment card details. </p>
<p>This system, which will compete with PayPal, also allows both merchants and consumers to set heir own limits, which will trigger additional security features. In July, Coles also launched the <a href="http://www.itnews.com.au/News/389666,coles-launches-a-mobile-wallet.aspx">Coles Mobile Wallet</a> which enables their customers to make contactless payments, using a Coles Pay Tag, which is attached to their mobile phone.</p>
<h2>Competing on security</h2>
<p>In their responses to the interim report of the ongoing <a href="http://fsi.gov.au/">Financial System Inquiry</a>, both PayPal and eftpos stress that while new technologies such as mobile payments enable innovation, this should not be at the expense of the security, integrity and reliability of payments. This is particularly pertinent given the <a href="http://www.reuters.com/article/2014/09/09/us-usa-home-depot-databreach-idUSKBN0H327E20140909">news</a> earlier this month that US DIY retailer Home Depot had its payment systems breached by hackers and data stolen from customers who shopped at any of its US or Canadian stores. This could compare in scope to the <a href="http://www.zdnet.com/how-hackers-stole-millions-of-credit-card-records-from-target-7000026299/">theft that hit US retailer Target</a> earlier in 2014, in which data on 40 million credit and debit card transactions at their stores was stolen. This resulted in the banks having to re-issue cards to all of the affected customers and offer redress to any cardholder whose data had subsequently been compromised.</p>
<p>The question of customer redress is a challenge to any new innovator in the mobile payments space. If a physical payment card held by a customer is compromised through no fault of the cardholder, then redress is a relatively simple process of contacting the card issuer and letting them deal with the fraudulent use of the card and to reimburse the cardholder. </p>
<p>For a mobile payment transaction the redress process is less clear - does the customer contact the phone network who is their service provider? Or the payment system that the compromised transaction took place on? The US currently has the world’s biggest card fraud problem, with <a href="http://www.economist.com/news/finance-and-economics/21596547-why-america-has-such-high-rate-payment-card-fraud-skimming-top">losses up 14.5% to US$5.3 billion in 2012</a>. This is one of the attractions of Apple Pay, in that it does not transmit the card details, thus making card fraud less likely.</p>
<p>The traditional suppliers of payment services be they financial institutions, acceptance businesses or relatively new entrants such as PayPal, may have to step up their focus on the security, integrity and reliability of their systems, to persuade both consumers and merchants that their products are inherently safer than Apple Pay.</p><img src="https://counter.theconversation.com/content/31509/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steve Worthington does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Today’s launch of the Apple Pay mobile payments service has the potential to eliminate the need for us to carry payment cards in our purses or wallets - but as always converting potential to reality is…Steve Worthington, Adjunct Professor, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.