How 'tap and pay' can move from buses to retail

Thursday, June 8, 2017

Contactless payment technologies for the 'tap and pay' model have taken off in Latin America's public transport sector, but have failed so far to break into the region's retail industry.

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Several Latin American countries have a significant base of point of sale (POS) machines installed and ready to process payments by proximity. In Brazil, 90% of POS machines accept contactless payment via near-field communication (NFC) technology.

Nevertheless, contactless payments have seen limited adoption by the retail sector, an issue debated at this week's Ciab Febraban tech banking event in São Paulo.

"NFC did not take off here despite having a huge park installed because people in retail still have difficulty guiding clients and handling the technology," said Carlos Neves, CEO of Banco CBSS.

Rubens Fogli, credit card product and digital director at Itaú Unibanco, which accounts for 40% of all card payments in Brazil, said the main obstacle to tap and pay in Brazil is the region's custom of asking clients whether payment will be made with credit or debit and in installments.

"It would be interesting to set the payment parameters beforehand, such as pre-defining credit or debit," Fogli said. He also questioned whether the best strategy for leveraging contactless adoption is offering contactless payment in smartphones or in plastic cards.

"Older people are heavy users of banking services and have purchasing power, but also have more difficulty adopting to mobility. Cards may be a more appropriate strategy for this age group," he added.

In Mexico, a recent study from Spanish firms Tecnocom and Analistas Financieros Internacionales showed that bank account holders prefer payment cards over mobile payment methods. In spite of the increasing variety of mobile payments, 72% of Mexican bank account holders use plastic cards as their preferred means of cashless transactions.

Questioned about mobile payment solutions, Banco CBSS' Neves said Apple Pay requires a toll, whereas Samsung Pay is toll free, which is the reason why it is being adopted by local banks.

Itaú, Intermedium, Banco do BrasilCaixa Santander, Brasil Pré-Pagos and Porto Seguro, as well as MasterCard and Visa, all accept Samsung Pay, which was activated in Brazil in June 2016.

According to Rogerio Panca, means of payment director at Banco do Brasil, the answer for tap and pay's more widespread adoption is simply scale.

"Plastic has a certain cost. If we switch to plastic cards with NFC technology, the cost increases. With biometrics, the same thing. But with scale, cost falls," he said.

So, how can tap and pay extend its reach beyond the mass transit bus and into the retail stores of Latin America? "The more standardization we have, the easier it will be," Panca said.