Banks in South Africa hold the key to whether mobile payment systems like Apple Pay could be widely adopted in the country, writes DUNCAN ALFREDS.
Apple Pay and Google Wallet enable users to make payments directly and securely from smartphones. Both of these payment systems use the Europay, Mastercard and Visa (EMV), or chip-and-PIN, standard.
This means that an Apple Pay or Google Wallet could be simply linked to a credit or debit card, and users pay by tapping their NFC (Near Field Communication) enabled phone on a point of sale terminal. With the iPhone 6, users can also authorise payments with their fingerprints.
Apple Pay has recently been launched in the UK after it received a cool reception in the US. Meanwhile, Google Wallet is also slowly rolling out with a limited number of merchants. Google, though, has built the technology into its online Play Store system as well.
South Africa has adopted the international EMV standard, meaning that Apple Pay and Google Wallet could work in the country especially with regard to processing contactless payments.
But unlocking Apple Pay and Google Wallet for South African consumers requires the approval of local banks.
“There is however a big catch before Apple Pay and Android Pay will work in South Africa. The customer’s bank that issued their card must give permission to Apple and Google to allow their cards to be loaded to the Apple Pay or Android Pay application,” Craig Kilfoil, managing director of ExactConsult, told Fin24.
“In summary, if the big five banks don’t want Apple Pay or Android Pay to work in South Africa then it simply won’t happen because the big five banks control the merchant card acceptance infrastructure and completely dominate card issuance in South Africa and as much as Apple and Goggle might make the mobile payment technology available, it just won’t work without the permission and co-operation of the banks,” said Kilfoil.
Even though the payment systems from Apple and Google are advertised as unique, Kilfoil argued that they may be far in common than initially thought.
“While neither obvious nor advertised by Apple and Google as such, I have concluded that Apple Pay and now Android Pay are 100% interoperable as they are both built on Visa and MasterCard Chip card technology called EMV.”
In some markets, the technology is already in use, but roll-out in SA has been delayed because of the lack of devices that support the standard.
In the meantime, banks have marketed cards with so-called “tap-and-pay” technology, but it is not a huge jump to expand the functionality to appropriate smartphones.
Ultimately, the banks hold the cards in terms of the roll-out of mobile contactless payments, said Kilfoil.
“FNB, Absa, Standard Bank, Nedbank and all the others would need to allow for their cards to be loaded to the mobile phone apps in order for them to work.”
A survey has found that few companies are ready for mobile e-commerce, despite the massive handset penetration in the country.
The wiGroup Fast Company SME Mobile Readiness Survey found that 35% allowed customers to make purchases on mobile devices.
But mobile payments are likely to increase in importance as more people turn to smartphones to transact.
Globally, Juniper Research reports that mobile e-commerce sales amounted to $1.5 trillion in 2013, and is projected to hit over $3.2 trillion by 2017.
Convenience, cost, risk
Kilfoil said that the key for retailers was to balance convenience, cost and risk to encourage consumers to adopt mobile payments.
“If convenience is a key factor and the added cost is minor with little perceived additional risk then consumers that value convenience will adopt new payment method.”
Kilfoil will be presenting his findings into the mobile payments industry at Cashless Payments Summit on June 25 – 26 2015 at Emperors Palace Hotel in Johannesburg.
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VoD cuts the cord in SA
Some 20% of South Africans who sign up for a subscription video on demand (SVOD) service such as Netflix or Showmax do so with the intention of cancelling their pay television subscription.
That’s according to GfK’s international ViewScape survey*, which this year covers Africa (South Africa, Kenya and Nigeria) for the first time.
The study—which surveyed 1,250 people representative of urban South African adults with Internet access—shows that 90% of the country’s online adults today use at least one online video service and that just over half are paying to view digital online content. The average user spends around 7 hours and two minutes a day consuming video content, with broadcast television accounting for just 42% of the time South Africans spend in front of a screen.
Consumers in South Africa spend nearly as much of their daily viewing time – 39% of the total – watching free digital video sources such as YouTube and Facebook as they do on linear television. People aged 18 to 24 years spend more than eight hours a day watching video content as they tend to spend more time with free digital video than people above their age.
Says Benjamin Ballensiefen, managing director for Sub Sahara Africa at GfK: “The media industry is experiencing a revolution as digital platforms transform viewers’ video consumption behaviour. The GfK ViewScape study is one of the first to not only examine broadcast television consumption in Kenya, Nigeria and South Africa, but also to quantify how linear and online forms of content distribution fit together in the dynamic world of video consumption.”
The study finds that just over a third of South African adults are using streaming video on demand (SVOD) services, with only 16% of SVOD users subscribing to multiple services. Around 23% use per-pay-view platforms such as DSTV Box Office, while about 10% download pirated content from the Internet. Around 82% still sometimes watch content on disc-based media.
“Linear and non-linear television both play significant roles in South Africa’s video landscape, though disruption from digital players poses a growing threat to the incumbents,” says Molemo Moahloli, general manager for media research & regional business development at GfK Sub Sahara Africa. “Among most demographics, usage of paid online content is incremental to consumption of linear television, but there are signs that younger consumers are beginning to substitute SVOD for pay-television subscriptions.”
New data rules raise business trust challenges
When the General Data Protection Regulation comes into effect on May 25th, financial services firms will face a new potential threat to their on-going challenges with building strong customer relationships, writes DARREL ORSMOND, Financial Services Industry Head at SAP Africa.
The regulation – dubbed GDPR for short – is aimed at giving European citizens control back over their personal data. Any firm that creates, stores, manages or transfers personal information of an EU citizen can be held liable under the new regulation. Non-compliance is not an option: the fines are steep, with a maximum penalty of €20-million – or nearly R300-million – for transgressors.
GDPR marks a step toward improved individual rights over large corporates and states that prevents the latter from using and abusing personal information at their discretion. Considering the prevailing trust deficit – one global EY survey found that 60% of global consumers worry about hacking of bank accounts or bank cards, and 58% worry about the amount of personal and private data organisations have about them – the new regulation comes at an opportune time. But it is almost certain to cause disruption to normal business practices when implemented, and therein lies both a threat and an opportunity.
The fundamentals of trust
GDPR is set to tamper with two fundamental factors that can have a detrimental effect on the implicit trust between financial services providers and their customers: firstly, customers will suddenly be challenged to validate that what they thought companies were already doing – storing and managing their personal data in a manner that is respectful of their privacy – is actually happening. Secondly, the outbreak of stories relating to companies mistreating customer data or exposing customers due to security breaches will increase the chances that customers now seek tangible reassurance from their providers that their data is stored correctly.
The recent news of Facebook’s indiscriminate sharing of 50 million of its members’ personal data to an outside firm has not only led to public outcry but could cost the company $2-trillion in fines should the Federal Trade Commission choose to pursue the matter to its fullest extent. The matter of trust also extends beyond personal data: in EY’s 2016 Global Consumer Banking Survey, less than a third of respondents had complete trust that their banks were being transparent about fees and charges.
This is forcing companies to reconsider their role in building and maintaining trust with its customers. In any customer relationship, much is done based on implicit trust. A personal banking customer will enjoy a measure of familiarity that often provides them with some latitude – for example when applying for access to a new service or an overdraft facility – that can save them a lot of time and energy. Under GDPR and South Africa’s POPI act, this process is drastically complicated: banks may now be obliged to obtain permission to share customer data between different business units (for example because they are part of different legal entities and have not expressly received permission). A customer may now allow banks to use their personal data in risk scoring models, but prevent them from determining whether they qualify for private banking services.
What used to happen naturally within standard banking processes may be suddenly constrained by regulation, directly affecting the bank’s relationship with its customers, as well as its ability to upsell to existing customers.
The risk of compliance
Are we moving to an overly bureaucratic world where even the simplest action is subject to a string of onerous processes? Compliance officers are already embedded within every function in a typical financial services institution, as well as at management level. Often the reporting of risk processes sits outside formal line functions and end up going straight to the board. This can have a stifling effect on innovation, with potentially negative consequences for customer service.
A typical banking environment is already creaking under the weight of close to 100 acts, which makes it difficult to take the calculated risks needed to develop and launch innovative new banking products. Entire new industries could now emerge, focusing purely on the matter of compliance and associated litigation. GDPR already requires the services of Data Protection Officers, but the growing complexity of regulatory compliance could add a swathe of new job functions and disciplines. None of this points to the type of innovation that the modern titans of business are renowned for.
A three-step plan of action
So how must banks and other financial services firms respond? I would argue there are three main elements to successfully navigating the immediate impact of the new regulations:
Firstly, ensuring that the technologies you use to secure, manage and store personal data is sufficiently robust. Modern financial services providers have a wealth of customer data at their disposal, including unstructured data from non-traditional sources such as social media. The tools they use to process and safeguard this data needs to be able to withstand the threats posed by potential data breaches and malicious attacks.
Secondly, rethinking the core organisational processes governing their interactions with customers. This includes the internal measures for setting terms and conditions, how customers are informed of their intention to use their data, and how risk is assessed. A customer applying for medical insurance will disclose deeply personal information about themselves to the insurance provider: it is imperative the insurer provides reassurance that the customer’s data will be treated respectfully and with discretion and with their express permission.
Thirdly, financial services firms need to define a core set of principles for how they treat customers and what constitutes fair treatment. This should be an extension of a broader organisational focus on treating customers fairly, and can go some way to repairing the trust deficit between the financial services industry and the customers they serve.