The banking industry is set to face new competitive disruption as it scrambles to preserve its stake in the growing mobile payments market. New figures show that worldwide mobile payments are expected to increase by nearly 61 per cent to 47 billion transactions by 2015.
Figures in the World Payments Report 2014 from Capgemini and the Royal Bank of Scotland suggest the number of electronic payments made in Australia in 2013 rose by 12 per cent.
Philip Gomm, director of core banking at Capgemini and a co-author of the report, told The Australian Financial Review the rate of mobile payments in Australia may actually grow at an even higher rate given quick take-up levels.
The new trend means banks are under more pressure to keep their payment systems up to date and across the latest technological advancements.
“The banks will argue that so long as the primary vehicle for their customer funds remains their bank account, they are less inclined to be challenged by the alternative solution providers,” Mr Gomm told the AFR.
“To a degree, that argument is sustainable, but over the long term, banks have to offer the same level of convenience to encourage you to stay with them and not risk disintermediation.”
According to the report, Australia ranked fourth globally in terms of the most number of non-cash based transactions over the previous year with Finland taking first place and the United States taking second place.
However, non-banks are expected to benefit more from the rapid uptake of mobile payment systems with PayPal processing more than $27bn in mobile payments in 2013.
In Australia, the switch to PIN based credit cards has already seen some in the restaurant industry embrace new innovative solutions where customers can pay for their meals from their mobile phones. For example, in March this year, PayPal launched its Pay at Table option allowing customers to check-in, enter their table number, pay for their meal and leave a tip without having to stand up or call over a waiter.
Restaurant and Catering Australia chief executive John Hart told Dynamic Business the transition to the PIN credit card system had not been completely smooth and some of the point of sale terminals had experienced difficulty, particularly in remote locations.
He said the banks have wireless terminals available, but most of them are utilising early generation 3G technology and only a few have 4G.
“I think a couple of things have come to light,” he told Dynamic Business. “One is that many of the wireless terminals have had problems with range… and a lot of them have gone down and transactions have not been processed.”
“A very large number of cards are still not chip compliant, in particular a number of Amex cards are not chip compliant.”
The World Payments Report forecasts that the banks’ traditional market share in the mobile payments space will drop to about half of the predicted 800 billion transactions in 2024.