First National Bank this week lifted the lid on a new payment mechanism that uses the GPS feature in modern smartphones. It won’t result in the much-hyped cashless society, but it could greatly reduce South Africans’ reliance on cash over time.
The new payment feature, which is included in an update to FNB’s smartphone banking application for Apple’s iPhone, BlackBerry and Android-powered devices, allows FNB clients to send money electronically to someone in their vicinity. The recipient doesn’t have to be an FNB customer or, it seems, even have a bank account.
FNB CEO Michael Jordaan was set to take the wraps off the new product at a presentation on Wednesday, after this column was written, but we already have a fairly good idea of how it works after the updated app was released in the Apple and Android app stores earlier than intended.
To make a payment, an FNB account holder opens the app on their smartphone and asks the recipient to do the same. The phones then use GPS — and possibly cellular “triangulation” — to determine that both parties are within 500m of one another. If they are, a payment can be made immediately.
If the recipient is an FNB customer, the deposited money is sent automatically to their bank account. Only the person making the payment needs to log on to their bank account using their password. If the receiver banks with another bank or doesn’t have a bank account, they must still download the FNB app but they receive the money in an “e-wallet” (an electronic store of funds) and can withdraw it at an ATM as cash.
Because it uses GPS, this “geo-payments” technology is not yet applicable to the mass market of consumers using older “feature phones”. But given the speed at which smartphones are being adopted, it won’t be long before this becomes a mass-market banking tool. And surely the other banks will now be forced to release similar products, encouraging uptake of the technology.
FNB is stealing a march on its rivals when it comes to technological innovation in customer-facing retail banking. Oddly, apart from its sister, RMB, it’s still the only bank in SA that has an application for smartphones.
Its launch of geo-based payments raises some interesting questions about whether another promising technology, near-field communications (NFC), is going to wither on the vine. Standard Bank and Absa have both been running limited trials of NFC, which is a set of standards that allows for contactless payments and data sharing between users in close proximity. One of the problems with NFC, at least in the short and medium term, is that there are relatively few NFC-enabled smartphones in the market. GPS, on the other hand, is already a standard feature in most smartphones and even some feature phones. Millions of such devices are already in the hands of South Africans.
Technology entrepreneur Stafford Masie thinks NFC is doomed as a payment technology. He said recently that local banks’ attempts to implement systems based on it are “farcical” and “offer no value” and that geo-based payments would “nuke the value proposition of NFC”. This is because it perpetuates a complex, unnecessary back-office payment system. He is probably right, at least in the short term, given the widespread use of GPS in modern handsets.
Plenty of promising technologies have been stillborn and there’s every chance NFC will be one of those if a cheaper and less complicated alternative comes along. Geo-based payments may be that alternative, especially if banks can get this technology into the hands of merchants. The truly cashless society is probably still decades away — old habits die hard — but this technology represents a big step forward to that future.
- Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail
