Low-cost contactless payments are on the way for Kiwi shoppers. From next year, a virtual bank card stored in digital wallets will allow tap-and-go payments – unlikely to attract a surcharge and with lower fees for merchants.

It’s taken a team effort, a significant investment by payments experts Worldline, and some Kiwi ingenuity, but this new low-cost contactless payment technology is set for launch in the near future.

Part of the reason for the new payment product is the continuing decline in the use of traditional Eftpos payments – which now account for only 23 per cent of in-store electronic transactions. There are a number of reasons for this, says Bruce Proffit, Chief Sales Officer at Worldline, among them a heightened appetite for contactless payments emanating from Covid.

The new contactless product was recently trialled at several selected Auckland merchants, and the payment experience was so seamless it was “remarkably unremarkable”, Proffit says: “The transactions were seamless, taking just 1.5 seconds to process – the same time as for a standard contactless credit card payment.”

Proffit says the locally developed technology worked perfectly each time and merchants didn’t need to train staff or make changes to hardware or software, as the secure app-based solution held on the customer’s phone utilises existing contactless technology on the merchant’s terminal.

But aren’t phone-based payment options already available in New Zealand? What’s so new and different about this Worldline product and why is it needed?

Currently there’s friction that occurs at points of sale all over New Zealand. Merchants don’t appreciate high card fees associated with the major scheme cards, like those issued by Visa and Mastercard, so they tack on surcharges or disable contactless payments entirely.

Shoppers like to pay contactlessly where they can – and many try to avoid paying a surcharge, as these can often be surprisingly high and significantly raise the cost of a transaction.

“In our consumer group research, 70 per cent of participants told us they’d either switched payment methods or walked out and gone to another store to avoid paying a surcharge,” says Proffit. “It’s a basic conflict - people love using contactless payment, but they hate surcharges!”

Merchants are perhaps even more enthusiastic about the potential for low-cost contactless payment options that bypass the big offshore schemes. One major Kiwi retail brand told Worldline that, if all their contactless payments switched from credit card to bank-issued digital cards, it would save them a lot of money.

Proffit says one large merchant told him: “We would cut our merchant fees between $1-2 million a year without any significant costs. Obviously, we would love to see this available for all our customers and being used across our stores.”

For small merchants, like the corner dairy, fees can have an even bigger impact – which is why you often see ‘No payWave’ signs on dairy EFTPOS terminals. Those operators tell Worldline they know customers want to tap and go, but it’s simply not worth the cost to them as merchants. So, a low-cost alternative would be a welcome innovation.

“We’re seeing very high demand and extremely positive feedback from merchants,” says Proffit. “The beauty of this technology is that merchants don’t have to change anything. There’s no new hardware or software needed at the point of sale, and no staff training required.”

There’s another factor: if traditional Eftpos continues to decline it puts New Zealand in a vulnerable position – as it may affect the viability of the current local debit solution, giving retailers and consumers less access to cheaper debit solutions. 

Millions for the economy

It’s also an undeniable fact that a considerable proportion of merchant fees head offshore, so preventing that would help improve profits for Kiwi businesses of all sizes, says Profft.

“Every business currently paying merchant fees could see these reduce significantly thanks to this new technology. These costs have already been cut by the latest interchange fee regulations, which according to the Commerce Commission estimate will lead to total savings of $105m for local merchants.”

Loyalty & age verification

“Merchants find only 30 per cent of customers use their loyalty cards at the time of payment,” Proffit says. “That means the customer misses out on discounts and the merchant doesn’t collect that valuable data that allows them to tailor a better customer experience.”

If consumers agree to link a merchant loyalty scheme to their card and allow age verification, a single tap could pay for their groceries and collect their loyalty points at the same time. It could also allow them to include a bottle of wine in the order without needing to show a driver’s licence. This would have clear benefits for both shoppers and merchants.

Open banking

This technology is possible thanks to existing API integration between Worldline and the big four banks, plus a few smaller banks. Each bank that offers this to their customers would issue its own branded virtual digital card, with a Worldline logo into an Apple or Google Wallet.

“We’ve invested a significant amount of money and resource in getting to this point and are committed to a lot more to launch the product,” says Proffit. “We need the industry to drive this forward, we need all Kiwis and merchants to be able to access the product.   We believe banks are ready to step up. “

“Momentum is building quickly because this technology is a win-win-win. It’s going to be a good experience for shoppers, low cost for merchants, and it’s going to help banks keep all their customers happy. So naturally, we’re excited to be ready to launch this.”