iPhone users will still need the Commonwealth PayTag sticker for now.
Commbank’s latest mobile banking app opens up tap-and-go payments for Android phones, replaces the need for a pay sticker for phones, and launches a further assault on cash payments.
The bank’s latest Tap and Pay app, released on Wednesday, is available for all brands of Android phones with near-field communications (NFC) running 4.4 and above. In the past Android phones other than Samsung Galaxy S4 and S5 required a bank-issued PayTag sticker.
But it is now a clunky process. The app requires a PIN to be used for every transaction, not just those above $100.
No card: Commonwealth Bank says 60,000 tap-and-pay transactions are taking place in Australia each week using smartphones, worth $1.25 million.
The bank has worked with MasterCard to deliver the mobile payment solution which relies on technology known as host card emulation (HCE) to transmits payment information and replace the 16-digit number of a credit or debit card with a 16 digit unique token to secure each transaction.(Tokenisation is also a key feature of the ApplePay service which is yet to launch in Australia).
Instead of requiring a secure element actually on the phone – such as the phone’s SIM card or the bank’s previous PayTag sticker – to handle card emulation, this is handled by the cloud service.
Google introduced HCE in version 4.4 of its Android operating system, also known as Kitkat, with Visa and MasterCard throwing their weight behind it a year ago.
While the Commonwealth Bank is the first local bank to offer the service, Westpac New Zealand has been trialling HCE since mid 2014. Cuscal and CUA launched the redi2PAY service which relies on HCE, in July.
Lisa Frazier, executive general manager for digital channels at the Commonwealth Bank said that to use the contactless payment capability users would launch the app, see details of the payment on their screen and input a PIN, then pass the phone over a payments terminal to complete the transaction.
Frazier said the bank would still support iPhone users who make up about half of the 3.2 million users of the bank’s app – but that to make a contactless payment iPhone users would still need an NFC sticker.
She would not be drawn about Commbank’s plans for smartwatch apps.
Besides extending the reach of its digital wallet solution the announcement lobs another grenade at cash which is feeling the heat from a range of digital payment solutions.
ANU economics professor Rabee Tourky earlier this month predicted that cash as we know it would be phased out within a decade, and replaced by electronic alternatives, including a Government backed virtual currency.
“Money will not disappear – but cash in a paper form will disappear. You can exchange Bitcoin without a bank or a third party. The advantage is that you can make very small and very large payments with almost zero fees,” said Tourky.
He predicted that within a decade; “The Australian government will certify and issue a trusted digital cash.”
The Reserve Bank declined to comment on such a possibility, but in its submission to the Senate inquiry into digital currency, noted that uptake of virtual currency was slow and had thus far no significant implications for the RBA’s ability to manage monetary policy.
Governor Glenn Stevens has however previously noted the displacement impact of contactless payments on cash.
In a speech to the Australian Payments Clearing Association last October Stevens said however that the uptake of digital wallets had been slower than expected – but acknowledged that could change rapidly as new solutions emerged.
That’s what the banks and payment disruptors such as PayPal are hoping.
Frazier said demand for mobile banking was exploding. She said Commbank’s user base has grown from 1.76 million a year ago, to 3.2 million today, and that in the last 12 months the app had been used to complete $100 billion worth of transactions.
Even before the launch of the HCE enabled app tech she said 60,000 tap-and-pay transactions were taking place each week using smartphones, worth $1.25 million.
Update: The first version of the story said an NFC chip was not needed for the new app to work. The mistake was a technical misunderstanding.