The world of payments has been clearly regulated for a long time, particularly for Swiss consumers for whom the most important thing was to have cash in their wallets. Aside from that, they had a debit card for small amounts and a credit card for large amounts and abroad. In the past, this trio always stood the test against innovative ideas. However, now digital solutions are presenting competition for cash. The latest is the realistic vision of Head of Swatch, Nick Hayek. At the beginning of the month, he announced that a smart watch will be released in three months, which can also be used to pay in stores. Apple wants to market its version of the smart watch in April. But how does the money get into the watch? Many stakeholders have recently launched digital solutions or are preparing them for the coming year. Michel Rudin, General Manager of Switzerland’s Consumer Forum says: «Those who are searching for a new card solution should wait if they can and see what the year brings.»
NFC registers are conquering Switzerland.
Without Near Field Communication (NFC) technology, this dynamic would be inconceivable in the card market. This wireless transfer technology enables the contactless exchange of small amounts of data over short distances. An NFC register can already accept payment from corresponding cards now - these must be held flat against the device for data transfer. And in Switzerland, the NFC network is very close-knit. It is being provided by big retailers, such as Coop and Migros, the SBB and chains, such as McDonald's. At no extra cost to the customer, soon all Swiss cards should be NFC-enabled. According to industry statements, over 83,000 terminals are currently contactless and around 2.5 million cards - just under 50 percent of cards - are NFC-enabled. However, depending on the card issuer, the proportion is much higher. One in five customers paying by card at one of the 8,500 NFC registers at Migros does so using contactless payment. Migros measured the best values at the Subito self-checkout stations, where smaller purchases are usually made. Ninety percent of purchases were for an amount less than 40 Francs; a PIN must only be entered when it gets more expensive.
Tapit requires its own SIM card.
«All well and good, but the real added value for customers comes when they no longer need to take out a card,» says Thomas Fromherz, Head of Payment & Card Services at the Zürich-based software house, Netcetera. According to industry forecasts, there is huge growth potential for making payments using a smartphone. Theoretically, this has been possible at NFC registers in Switzerland since July 2014: Swisscom has launched its App called Tapit. Currently, the service works with Cornècard and Viseca cards and on many Android models. In the meantime, the app has been downloaded around 10,000 times, but Tapit is still slow to get off the ground. This is no surprise to industry insider Fromherz. For him, the payment solution is quite mature, but the customer must cross a high threshold in order to register credit cards, e.g. request a special SIM card for their mobile phone. Meanwhile, Apple has demonstrated how easy it can be to get going. Since September 2014, Apple Pay has been off to a successful start in the US market. The customer can digitally store different cards in a wallet and pay using a fingerprint scan. Fromherz says: «Integrating the cards took me a few minutes. Payment is intuitive and secure with the fingerprint scan.»
Developments in full swing
It should get just as easy in Switzerland - for this reason, the Swiss card industry have joined forces. Under the project name Swissalps and with high pressure they are working on the technical implementation of a neutral wallet solution. Apple Pay should also be integrated into the standardized ecosystem for online and mobile payments. The project is led by the Zürich-based Aduno Group; the financial services provider provides cards through its subsidiary, Viseca. All Swiss credit card issuers (Mastercard, Visa and American Express) are involved in Swissalps. Meanwhile, Migros and Postfinance are also tinkering on their own applications for mobile payments. At Migros, it will deal with the payments in its own stores; specific information is not yet known. Postfinance is currently allowing its subsidiary, Twint, to develop an identically named app, which will be introduced this summer. Completely independent of credit or debit cards, the free app should work as a prepaid wallet with different charging options. However, Twint does not rely on NFC technology, but rather Bluetooth on a different wireless standard. The stores must once again be equipped for it.
Consumers decide
Until now, the consumers have kept up well with this dynamic, points out Sandro Graf, an expert from the Zurich University of Applied Sciences (ZHAW): «Since 2013, many people were afraid to pay by smartphone without a PIN code. Now, our studies show that the knowledge has grown rapidly.» There will be a great deal more for consumers to learn about in 2015. Ultimately, only they decide what will prevail and which provider they will entrust their sensitive customer data.