Wireless spells 'end of card era'
The syndication of WiFi and cellphones could spell the end of debit and credit cards in today's mutable financial services environment - driven by wireless technologies like near-field communication (NFC) and geo payments.
This is according to professional services firm Deloitte, which says the pressure is on for financial institutions, business and retailers to prepare for the impending payment revolution.
Deloitte says NFC - the ability to conduct everyday banking transactions with the swipe of a cellphone - will be the next fundamental step in the evolution of financial services and banking systems, as increasing merging of financial services with mobile technology takes effect.
Jonathan Houston, digital marketing lead with Deloitte's consulting technology division, says rival technologies are already beginning to square up against each other, as they take exploratory steps towards turning cellphones into passports for making transactions.
The result, says Deloitte, could be that current retail payment systems will be pushed into redundancy and even bank-issued cards will be a thing of the past.
Houston says, although a payment pilot project has been launched in Stellenbosch, linked to a WiFi network covering the entire town, routine adoption of the technology could take several years.
Deloitte cites examples of technologies that are presently being trialled in the mobile space - NFC applications and Gust, Mxit's cellphone-based geo payment system, launched in May.
“Gust burst on the scene while business was still trying to get to grips with the NFC technology. Essentially, the difference between the two is that with NFC, a mobile phone has to be enabled with an NFC chip and mated with an NFC reader to facilitate payments. The paying party, however, does not require a credit card to make a payment, only a bank account that has e-wallet functionality.
“The NFC-equipped mobile communicates with another device with NFC capabilities. When within a certain distance of each other, the field within range is activated and payments can be made. After communication is established electronically and the identity of the parties is established, payment is made after the phone is placed on the NFC reader and the payment is expedited.”
Geo payments, says Houston, have an advantage over NFC technology in that they can be linked at two different levels, namely GPS and WiFi.
“The GPS application is limited by the fact that GPS coverage can be lost in areas covered by a roof - making use in shopping centres and malls problematic. In the 'open' GPS transactions can be made over a distance of about 500m between devices.”
He says the advantage of WiFi is that, unlike with NFC, a device can be a generation or two old - and still log onto the system. No special chip is required. “It is because of this advantage that geo-payments will probably win the day in SA.”
Houston says advances in mobile payments - underpinned by wireless technology - represent a significant change in society. “[These developments] herald the approach of a truly cashless environment.”
The benefits, says Deloitte, will be felt by consumers and merchants alike. “Consumers will be able to make payments using their phones and no longer carry cards. Merchants will be able to operate more securely, [because] crime will recede as the volume of cash on premises is vastly reduced.”
Houston says the onus ultimately rests with fiscal bodies, businesses and retailers to ensure they are equipped and ready for future transformation in the payment sphere. “There is no doubt that consumers, especially early adopters of technology, will be demanding these services the minute they become commercially viable.”