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Moving to a post-plastic world - the end of the credit card

Paul Brislen, Editor. 13 September 2016, 8:17 am

Bank technology is heating up in the Australasian market with Apple taking on the four big Aussie banks, striking a deal with ANZ to offer Apple Pay and an intriguing rumour on Reddit about the death of the headphone jack.

Apple has refused to allow competing payment gateway apps on its iOS platform as it makes the move from telco disruptor to banking industry disruptor with its Apple Pay product.

Aimed at consumers, Apple Pay will allow customers to store credit card data on their smartphones and use existing contactless terminals to pay for devices, thus removing the need for small pieces of plastic with SIM cards embedded in them.

The contactless model is considered far more secure than either the original magnetic stripe cards or even the newer chip and PIN models because a large percentage of credit card fraud occurs when cards are handed over to service staff - at restaurants or in shops, for example. A quick swipe of the card through a secondary reader secures the card's details for future, nefarious purposes.

While that type of fraud is not common in New Zealand the move to contactless payments has been stymied somewhat by the decision to allow transactions under $80 to proceed without requiring PIN authorisation. Many feel this makes the cards a target for thieves, although credit card scheme operators and banks are at great pains to point out the "zero liability" clauses in customer contracts that mean any money stolen in this manner will be returned to a customer's account.

By taking the extra step of embedding the payment capability within the phone, Apple and other smartphone vendors hope to make the process even more secure on the basis that customers don't hand over their phones to anyone and will retain control of the data throughout the process.

Apple has long eyed the Australian banking industry as its next logical stomping ground, but has come up against what can only be described as cartel behaviour from the Aussie banks. The four banks have approached the regulator seeking permission to work together as a block in negotiations with Apple. Apple's submission on the matter makes it clear where the US-company stands on the matter.

Negotiating the interchange fees with the banks and credit card schemes will be the next big hurdle for Apple and one both sides will fight tooth and nail because a tiny fraction of a percent on every transaction that passes through Apple's hands is worth billions of dollars a year.

However, it's all somewhat moot as ANZ has made a break from the pack and signed a deal with Apple to offer the service in both Australia and, apparently, New Zealand on its Visa credit and debit cards.

The scallywags at Reddit point out the "real" reason Apple got rid of the headphone jack and it's nothing to do with wireless audio. Most of the new payment systems being introduced in the US market include a strange dongle device that connects to the iPhone to enable cards to be swiped through to enact payment. Think of your iDevice as a handy way of carrying your chequebook around with you and you get some idea.

All of these dongles plug in through the headphone jack.

Meanwhile ANZ is shuffling its tech team line up and competitor Commonwealth Bank of Australia (owner of New Zealand's ASB) has signed a deal with Barclay's Bank to work together on mobile payments.

The days of carrying your cards around in plastic form could well and truly be coming to an end.

DISCLAIMER: Brislen does some PR and communications work for Paymark, which operates in this space


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