Contactless to Drive Payments


In the second instalment of our two-part series on the evolution of payments in Ireland, Ulster Bank’s head of payments, Celine Singleton, explains how businesses have embraced contactless payments.

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Data from Banking & Payments Federation Ireland covering the second half of 2017 shows that the value of contactless payment (comprising contactless card and mobile wallet payments) reached €1.6bn, with more than one in four card payments made using contactless technology.

There were 129.1m contactless card payments made in Ireland in the second half of last year, which equated to a year-on-year increase of 109%. Celine Singleton, Ulster Bank’s head of payments, answers some questions on this growing trend.

Following our previous conversation about trends and adapting businesses, which sectors in particular are seeing most change concerning methods of payment?

“Small value purchases in places like coffee shops where people ‘tap and go’ have really appealed and we are seeing strong growth in contactless payments, which account for 30% of our total point-of-sale transactions – 10% of these being attributed to Samsung and Apple Pay.

“We spoke previously about the high level of digital adoption in Ireland and now we have the development of wearables, making it even easier to make a payment. Although this trend is in its infancy, it is sure to attract the younger demographic over time.

“The €30 limit on contactless payments is a limiting factor in some environments, but this is less of an issue in bars or coffee shops, where the typical purchase would be well below that level. However, we are confident that if the limit on the contactless payment amount is increased we will see a fresh wave of innovation.

“During a panel discussion on the future of cash and retailing at The Cash Cycle Seminar event in Dublin in April, Tara Buckley, director general of the Retail Grocery Dairy & Allied Trades Association (RGDATA), mentioned that her members were embracing technology changes because they recognised that customer behaviour was changing and that they needed to offer customers the payment options they were looking for.

“There are some technology issues for rural businesses in Ireland in terms of access to broadband, but in urban areas many point-of-sale terminals have been upgraded to accept new forms of payment.”

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Can you identify some of the sectors that will see early adoption of new payment methods and thrive as a result?

“If you look at the education sector, for example, it has a huge dependency on cash and cheques for payment. Schools and colleges are investing in apps as a way of communicating with students and parents and enabling them to make payments for school fees and excursions.

“Another sector with considerable potential is the motor trade. A typical process for someone thinking of buying a car is to go online and check their finance options, test-drive the car and then wait for their finance to clear and for the payment to clear before they can drive the vehicle away, which can take up to a week or more. In the world of instant payments it is only a matter of time when instant credit will follow and the whole process could be completed within a couple of hours.

“The public transport network could have much to gain by adopting contactless payments along the lines of the system adopted by Transport for London.”

What safety nets are in place should any problems arise?

“In an open banking environment where payment service providers can access customer bank accounts, security is the primary consideration – every bank in Europe will have to comply with the same standards to ensure their customer data is secure.

“There are also restrictions on retaining customer data as a result of the implementation of the GDPR. It remains to be seen whether people will trust third-party providers (TPP) with whom they have no prior relationship.”

What is the future of payments for business?

“The account aggregation facilitated by PSD2 is a major opportunity for both SMEs and multinational companies. Post-PSD2, corporates with accounts in multiple countries in Europe could have a single view of their overall position and move money across accounts where the rates are more favourable. This could also be done in a matter of seconds via instant payments 24 hours a day, 365 days a year.

“If we look to Germany, Aldi has indicated that it will apply to become a TPP service provider. Every time a customer goes into an Aldi store and pays for their purchase by card, the company has to pay acquiring and merchant fees. Aldi is exploring the options of setting up an app through which its customers can make payments, with payments going from the customer’s current account directly to the retailer’s account in an instant manner, thus reducing the fees they have to pay.

“For small businesses, instant payments will enable them to receive payment on receipt of goods or services, rather than waiting 30 days or more. It is ironic that new technology could move business back to the days of ‘cash on delivery’, which will help small businesses with their cash flow. If customers are demanding receipt of their goods or services as soon as payment is made, it is reasonable for the company providing these goods or services to demand the same from its suppliers.”

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