Mobile payment breakthrough coming

IN RECENT years, banks and mobile operators have brought lots of new technologies and improvements for contactless mobile payments. Although these kinds of payments still account for just a small portion of all payments, more options and increased usage are expected in the coming year.As in the case of debit and credit card payments, security is also paramount in using NFC technology. There are various features for users to protect smartphones in paying via NFC.

“The technology has ripened over the last few years,” Martina Jamrichová, spokeswoman of mobile operator O2, told The Slovak Spectator, adding that it is accessible at mobile phones, SIM cards, card readers in buses, payment terminals and others. “Clients who have come across it like it and like to use it.”

Financial expert Maroš Ovčarik sees the usage of mobile phones for contactless payments as an interesting service which further integrates the wallet into a mobile phone. “It especially attracts people seeking innovations,” Ovčarik told The Slovak Spectator, adding that it will take some time until the general public start to use it.

Alexandra Piskunová, spokeswoman for mobile operator Orange Slovensko agrees that even though Slovakia belongs at the top of Europe in terms of the kinds of contactless payment cards and payment terminals, contactless payment via mobile phones still belongs to so-called “image services”.

Orange provides contactless payment in cooperation with Tatra Banka. To use this service the client needs a special NFC SIM card enabling Near Field Communication (NFC), a mobile phone able to cooperate with the mobile payment application and an account at Tatra Banka. So far roughly 3,000 Orange clients have activated such a card, Piskunová said.

Tatra Banka, which also provides contactless payments by mobile via O2, said such payments are increasingly popular, Marína Masárová, spokeswoman for Tatra Banka, told The Slovak Spectator. During the first 10 months of 2014, contactless bank card transactions numbered about 11.44 million at a total value of €92.8 million. Meanwhile, contactless payments via mobile phone numbered 71,068 while their value exceeded €1 million when only during last three months they made up over €0.5 million. In total the bank has issued more than 13,500 cards for mobile payments, as of mid-November of this year.

Other banks offer similar services for contactless payments. Slovenská Sporiteľňa offers payment via the MasterCard Mobile application and VÚB bank offers clients paying through a contactless sticker as an intermediate stage from traditional paying cards to NFC payment. ČSOB has launched a Quick Response (QR) code for contactless paying. Another possibility is to send money via the mobile phone app VIAMO.

Slovak Telekom’s clients can use NFC payments when they use a mobile phone supporting this service and a special SIM card enabling NFC payments, spokesman Michal Korec said.

“Spreading any new technology takes some time because people usually accept innovations gradually,” Korec told The Slovak Spectator, adding that the extension of contactless payments depends not only the number of used mobile phones supporting this technology, but also the availability of compatible payment terminals.

In Slovakia there are 20,000 such terminals at present. While the number continues to grow, it lags behind European averages, claimed Marcel Gajdoš, Visa Europe regional manager for Slovakia and the Czech Republic.

Safety above all

“First of all, clients should comply with exact instructions for installation of applications,” Ovčarik said, underlining that users should use only their own mobile data services or home secured Wi-Fi networks for such installations and payments.

“It is also important to not install applications and software from untrustworthy sources,” Milan Bednár, head of card products department in Slovenská Sporiteľňa, told The Slovak Spectator.

According to Jamrichová of O2, consumers should be sure to pay only via official logo marked payment terminals.

International standards specified by financial services corporations determine the limit of 20 euros for transactions without a PIN code and also 60 euros cumulatively on contactless payments.

“Different passwords for applications and a PIN code for payments above €20 guarantee that any payment cannot be realised incidentally, for example in a situation if a customer moves around the terminal,” Korec said.

Ovčarik advises using the PIN code for every payment for more security. Furthermore, clients should set up adequately strong PIN codes and an automatic screen lock on smartphones.

“Clients should not write the PIN code directly on the phone,” Richard Walitza, vice-president for mobile innovations of Mastercard Europe in Slovakia, the Czech Republic and Austria, told The Slovak Spectator.

The arrival of innovations

The Slovak market is feeling an arrival of new NFC payment options. At present, financial service corporations, along with banks, are developing another, more flexible way called Host-based Card Emulation (HCE).

VÚB bank and SanPaolo Card introduced a pilot program in September,” Visa’s Gajdoš said.
According to Bednár, in the case of this technology, there is no need for additional hardware. Consumers will simply activate the card online.

“The HCE solution is limited only to the latest versions of operating systems Android 4.4 KitKat, Blackberry OS 10 and above,” Bednár told The Slovak Spectator, adding that Slovenská Sporiteľňa plans to launch its commercial solution in 2015.

VÚB bank launched the commercial operation of this service in selected branches in late November, while it plans to extend it nationwide in December.

Regarding this technology Alena Walterová, spokeswoman of VÚB bank, points out that all card details are securely stored at the bank and that they are sent to the smartphone only at the moment of the payment.

On the other hand, Piskunová of Orange recalls that NFC without a special SIM card is only a communication technology.

“Only a special SIM card can add the dimension of security to NFC communication – all top-secret data necessary during communication, for example with a payment terminal, are stored on a special, safe part of the SIM card,” Piskunová said.

Another new technology using NFC was invented by Apple. Apple Pay is based on a special chip implemented in Apple products including iPhone 6, iPhone 6 Plus, iPad Air 2, iPad Mini 3 and Apple Watch compatible devices. The first wave of Apple Pay was launched only in the United States.

“For now the strategy of the entry of Apple and their Apple Pay solution for Europe is not clear,” Bednár said.

Walterová added that Apple Pay is in technological principles the same as NFC and HCE, while VÚB is prepared to support this service; however, no negotiations have been held between VÚB and Apple in this matter so far. Tatra Banka, which also wants to make this service available to its clients, expects that Apple would make this service available in Europe in 2015.

Masárová recalled that the world of mobile technologies and mobile payments is very dynamic and that increased payments via mobile devices depend on various factors including increased willingness to accept them from merchants.

“We believe that the year of 2015 will be a breakthrough year in this field,” she said.

Disclaimer: The articles included in the “Finances” supplement were created by authors enrolled in the “Focus on business and economy” programme organised by The Slovak Spectator in cooperation with the University of Economics in Bratislava, with the support of the VÚB Foundation. The programme seeks to train journalism students on how to cover business- and economy-related issues. The articles were prepared in line with strict journalistic ethical and reporting standards.

Author: Natália Križanová and Peter Adamovský