A mobile wallet isn’t your purse on roller-skates. It’s your physical wallet in digital form and is touted as the next step in consumer shopping.

In theory, you could use your smartphone to pay for all your goods and services, file loyalty cards and vouchers, save receipts, and receive and redeem personalised offers. In practice, there are many hurdles – technology, security, accessibility and acceptance by consumers and retailers – that need to be overcome before this can be a reality.

Contactless payments

How can your phone pay for your weekly groceries? Contactless card technology.

Entering the market in 2013, contactless cards have been heavily promoted. Twenty-two percent of retail payment terminals have the capacity to accept contactless transactions, which rely on near field communication (NFC) technology.

Contactless payments are still the exception rather than the rule. According to industry figures, 7.6 percent (93 million) of all card transactions in 2015, to the end of October, were contactless.

But banks are predicting use will grow and are already investing in smartphone payment options as the next step. However, offerings available so far are a mixed bag. While the technology has potential, consumers can’t throw out their old wallets quite yet.

PayTag:

Offered by: ASB and Westpac.
What you need: An ASB or Westpac debit or credit card.
Compatible phones: All phones.
How it works: PayTag is a sticker you attach to your phone. It works in the same way as a contactless card.
Cost: $5 for ASB sticker, $4.99 for Westpac sticker or free with Westpac Airpoints debit card. Free to use except for any associated account transaction fees.
Security: All information is encrypted as with a contactless card. Zero liability guarantees for fraudulent transactions. Internet or mobile banking activation. PIN required for purchases more than $80.
Overview: While a sticker might seem like a low-tech solution, it does have the advantage of working on any device. However, it’s likely to be phased out as wallet technology evolves.

ANZ goMoney:

Offered by: ANZ.
What you need: ANZ goMoney app. Personal ANZ Visa credit or debit cards – MasterCard may be added in future.
Compatible phones: Approved Android phones using operating system 4.4 or above.
How it works: “Wake” your phone screen and hold it over the terminal for NFC payment.
Cost: Free to use except for any associated account transaction fees.
Security: Card information encrypted and stored by ANZ. No card information stored on phone. Zero liability guarantees for fraudulent transactions. Wallet can be disabled through goMoney app. PIN required for purchases more than $80.
Overview: This wallet is a new feature of the goMoney app. It uses “host card emulation” (HCE), an alternative mobile wallet technology that replicates the physical contactless card. No new SIM card is needed. Westpac is also working on a mobile wallet using this technology.

Where to from here?

For mobile wallets to catch on they need to be secure, reliable, well supported by banks, credit card companies and retailers, and available on various smartphones. None of the options available tick all these boxes.

Some banks, cards or smartphones have no mobile payment options. Many retailers also don’t have terminals that accept contactless payments. And even some that do, don’t allow contactless debit card transactions due to merchant fee costs.

Globally, these same acceptance problems are affecting mobile wallets. The technology is offered in many countries, but the availability of contactless terminals varies, as does support from phone developers, banks, retailers, and telcos.

Ironically, the security features designed to ease fears about paying with a smartphone may also inhibit uptake. If a mobile wallet requires activation or signing in before making a low-value payment, why not just use a physical card?

Once mobile wallets can offer features beyond payments, such as loyalty schemes, transport cards or even your library card or driver's licence, they may become more attractive to consumers. For now, they’re merely a supplement to a card or cash.

Security and reliability

New Zealand wallet developers say they’re meeting multiple international and local security and certification standards for mobile payments

If your phone is stolen, fraudulent transactions are covered by the banks’ zero liability policies – you’re covered for any losses. But, as with physical cards, the customer can’t have contributed to the loss by being careless. Lost or stolen phones must be reported to the bank and/or telco so the cards can be blocked and wallet suspended. It’s a good idea to check your transactions regularly for anything that looks odd.

Security measures such as phone locks, app logins and being able to turn off the wallet are intended to provide additional protection.

If the phone network goes down, you can still pay with your mobile wallet. Wallets using NFC don’t need the phone network or data to work.

As with physical contactless cards, developers say you can’t be charged accidentally while walking past a terminal, or charged twice if you hold your phone to the terminal too long.

If you have an issue with a contactless payment or fraudulent transactions, talk to your bank. If you can’t resolve the problem, you can take your complaint to the Banking Ombudsman.

Privacy

What information are we sharing when using a mobile wallet, and how is it used? Could our wallet provider see what we’re buying?

Information about our shopping habits is valuable and consumers need to be confident they’re protected. Unguarded, a mobile wallet could potentially reveal our location and shopping habits, which means businesses could target advertising to consumers with pinpoint accuracy.

Tim Henwood, policy adviser at the Office of the Privacy Commissioner, said “the holy grail” in this space is bridging the digital and physical advertising divide. “Mobile wallets are not just a digital payment service ... apps are loaded on to a device that already contains so much data about individuals and the people they interact with.”

He believes the analytics behind the scenes is where consumer attention needs to be focused. “People need to know what information is being collected, how it is being collated, stored, inferred and passed on.”

Mobile wallet providers must comply with the Privacy Act. The Act covers how information is collected and used. The Privacy Commissioner can investigate complaints about any breaches and potentially “name and shame” companies.

Update July 2016: Semble, a collaboration between Spark, 2degrees, Vodafone, and Paymark, has announced it will discontinue its mobile payment services. It had been offered by ASB and BNZ, and could also be used with Snapper cards.

by Kate Sluka