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Whose payment is it anyway?

It seems 1985 was a pretty big year for innovation. The CD, Microsoft Windows, Jem and the Holograms and the Nintendo games system all turn 30 this year. Very quietly though, sitting in the background of our everyday lives is another invention celebrating three decades – Eftpos.

“Eftpos stands for electronic funds transfer at point of sale,” says Pete Hansen, general manager of Eftpos New Zealand. The name is an acronym for what the system does. “Eftpos instantly takes the money from the consumer’s bank account and places it in the hands of the merchant the next day”.

After being piloted at petrol stations in 1985, Eftpos went nationwide with two providers, Paymark, jointly owned by the major banks, and Eftpos New Zealand, owned by ANZ and sold to Verifone in 2012.

Eftpos New Zealand might be the smaller of these two companies today, but it’s played a key role in shaping the way the technology is used. In America, where Eftpos originated, it was common for merchants to buy the hardware, then liaise with third parties for servicing and network.

“We don’t just sell hardware,” says Hansen. “We provide a payment solution with ongoing support.” This ‘payment as a service’ model has really shaped consumer expectation when it comes to retail transactions over the last 30 years.

Early adopters

Kiwis are known to be early adopters of new technology, to the point where many international companies use New Zealand as a testing ground. From Facebook software updates to Google’s balloon-powered WiFi network, our relatively small, geographically isolated and connection hungry market loves everything cutting-edge – and retailers need to keep up.

For Eftpos New Zealand this means continually developing and changing its product to meet the diverse needs of a market worth $6 million in September 2015 alone. Currently it offers a variety of different units, from counter-top to mobile 3G, with supporting software relevant to your business. Plus, it integrates with over 50 POS systems. Another important feature that comes as standard is the ability to accept contactless payments.

“In August 2015 alone there were over 8.5 million contactless transactions, compared to just 4 million in August 2014,” says Hansen. This is a rise of 53 percent. General card transactions have increased by just 0.7 percent over the last year.

“Contactless is gaining popularity, it’s expected,” says Hansen. “It’s a way of saying, ‘It’s easy to shop with me’”.

Craig Kirkland, vice president of acceptance development at Mastercard agrees. “We’re one of the top countries in the world for customer adoption, which means it’s even more important we meet the needs of the consumer, not our own.”

Kirkland believes that contactless isn’t just a new way to pay, it’s the future, and to not offer contactless payment now is to render yourself obsolete.

“If you don’t have contactless, you’re missing out,” says Kirkland. “With the release of Semble technology, and the upcoming release of Apple Pay, we have to prepare for the fact physical wallets will become virtual wallets – your card will be part of your phone and contactless will become the norm. Retailers need to future-proof.”

Mobile money

Launched in March this year, Semble is a joint venture by Paymark, Vodafone, Spark and 2degrees. Using the same NFC (Near Field Communication) technology as contactless cards, it enables BNZ and ASB customers to pay for their purchases with a digital version of their Visa or Mastercard stored on their Android smartphone. It works even if your phone is turned off or the battery is flat, and is as secure as using a contactless-enabled debit card.

“Semble is a free app available to download from Google Play,” says Semble CEO Rob Ellis. “Kiwi early adopters have responded well. Our focus right now is on developing further service categories to increase the convenience, utility and everyday use for New Zealanders.”

Semble’s app partnership with contactless payment system Snapper is a great example of this, Ellis says. “Just 16 weeks after it was launched the app was contributing 15 percent of all services, with customers enjoying the convenience of tagging on and off participating Snapper buses, parking meters, taxis and the cable car around Wellington with their phones.”

Like PayPass and payWave, though, using Semble incurs a fee per transaction from the banks, and this has resulted in many smaller merchants choosing not to activate the contactless element of their Eftpos terminal.

“It’s a misconception that it is more expensive for small and medium retailers to accept contactless credit card transactions,” says Kirkland, who is concerned merchants may dismiss the opportunity without fully researching the costs and benefits. “They have the same interchange rate as major merchants, plus MasterCard have reduced fees on sub-$15 transactions as well as providing better interchange rates for contactless debit and credit.”

Kirkland also notes that retailers offering contactless are laying the foundation for the next wave of payment solutions coming to the market. “A recent MasterCard survey showed only one in five Kiwis carry cash, and 45 percent believe we will be a cashless society in 10 years time.”

As we stand on the threshold of this technology, Kirkland urges retailers currently not using contactless to have a re-think.

“Speak to your bank, find out the charges – you’ll be surprised that they’re not as high as you think”. The cost of not remaining competitive and service oriented could be much greater.

What’s the alternative?

As contactless and mobile money become more prevalent, alternative hardware is beginning to emerge. While Eftpos have coverage and service down pat, the point of difference for many of these new providers is lower upfront costs.

ANZ FastPay is probably the best-known alternative to Eftpos. Launched in December 2013 as an app that allowed mobile businesses to take payments from their smartphones, they’ve recently upgraded their technology to make it easier and more familiar to Eftpos users on both sides of the counter.

The updated version of the app, released in October 2015 includes a card reader so the merchant no longer has to manually input a customer’s card details into their phone. As well as being faster, it’s technology that inspires consumer confidence.

Swipe HQ is another Eftpos-style service that’s perfect for the smaller or mobile trader. Launched in 2012 by Optimizer HQ, these mobile units allow merchants to accept credit card and contactless payments using smartphone technology. Swipe HQ also integrates with Xero accounting software.

“I previously had an Eftpos terminal and it really improved my business,” says market trader Totaea Rendell, who takes his clothing business, Paua Frita across the North Island. “But I had to reduce my costs. I bought the Swipe HQ card reader and app for $400; there are no monthly charges, just the transaction fee.” However it can take a couple of days for the money to arrive in his account.

Whatever your views on contactless technology, It doesn’t appear to be going away. According to American information technology research and advisory firm Gartner, mobile payment technology will be worth a whopping $721 billion by 2017, with the Asia Pacific region leading the way on uptake. It’s clear this techology is the future and embracing it now is the key to yours. 

This content originally appeared in the December 2015/January 2016 issue of NZRetail magazine.

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