Near-field communication, or NFC, is taking the mobile world by storm, with operators and payments companies predicting it will change the way people buy and sell goods, potentially replacing plastic cards and cash at the point of sale.
What’s not well known is that the technology is already starting to take off in SA, albeit not in mobile phones just yet.
Standard Bank subsidiary Beyond Payments plans to showcase the technology at this year’s Oppikoppi music festival north of Pretoria. Vendors at the event will only accept NFC-based payments — the organisers will be handing out NFC-enabled cards to everyone attending the festival. Cash will not be accepted as a payment instrument.
It’s a pilot for Standard Bank and comes ahead of plans by the bank to deploy the technology across the Ethekwini (Durban) municipality’s transport system.
Geraldine Mitchley, business development manager at Beyond Payments, says of the Oppikoppi pilot that it gives the company a “closed-loop system” it could use to experiment with NFC payments.
The technology, she says, will help the event’s organisers to get a better understanding of how much money is spent at the festival, and with which vendors. “Cash handling was risky, there was theft and there was frustration from festival-goers about long queues, limited ATMs and ATMs that stopped working or ran out of cash,” she says.
People attending Oppikoppi will be able to load money onto NFC cards — mobile phones won’t be supported at this year’s event — at special load stations. There is no minimum required transaction value — payments of as little as 1c can be made — and festival goers don’t have to be Standard Bank customers.
Beyond Payments CEO Herman Singh says the purpose of the trial at Oppikoppi is to “demonstrate the business case to everyone, to get a whole bunch of learnings from it, and then roll it out to other events.”
The bank has a three-year contract with Oppikoppi and although it has invested in infrastructure that it won’t recover from the festival itself, it expects to generate revenue from other events.
“It’s not limited to events only,” says Mitchley. “It’s for closed-loop ecosystems and could be an office canteen, a rugby festival or a deployment on a university campus.”
Though this year’s Oppikoppi will make use of an NFC-enabled card, Standard Bank plans to issue a wrist bangle for next year’s festival with an NFC chip and aerial embedded in it. Singh says the technology can be embedded in phones, cards, bangles or just about anything. “We may just give you a sticker for the back of your phone,” he says. “We want to see what consumers want and choose.”
The pilot comes just months ahead of a much bigger roll-out of NFC technology in Durban, where Standard Bank has won a contract to manage all transit payments of the more than 1m daily public transport users across the city.
The Ethekwini Transit Card, issued by Standard Bank and powered by Beyond Payments’ virtual currency, Mimoney, will contain two virtual wallets. One will be a store of value, the other will be an electronic ticket. Standard Bank has already placed an order for 100 000 cards.
Commuters in Durban will be able to buy a one-off ticket, or select day, week, month, student, pensioner or tourist passes. The conductor will electronically “clip” the token. Only buses will use the system initially, though it will eventually be extended to other forms of transport, including taxis and trains.
If consumers want to get cash out of the card’s wallet, they can convert it to Mimoney and spend it, or convert it to cash, at outlets that accept the virtual currency.
The Ethekwini Transit Card is will be fully compliant with MasterCard’s NFC technology, called PayPass.
Singh says the advantage of the technology is that it eliminates the need for drivers to handle cash, which means no “shrinkage” (theft).
Though there is no issuing fee, Standard Bank will make money through interest on a float account.
Over time, merchants will also accept NFC payments, especially in places like bus, taxi and train stations. “That’s how systems like this gradually penetrate the consciousness,” Singh says. “We will talk to Gautrain about interconnecting the cards.”
Because NFC technology is designed for offline transactions, there’s no need for payments to be preapproved on a server. It’s like carrying cash in a wallet, so transactions can happen almost instantly. “The entire Oppikoppi system is offline,” says Singh. “It’s ironic in the 21st century, but we are rolling out offline systems because it’s the most logical way to make payments fast.”
Singh says NFC will also take off in smartphones in due course. Some of the latest-generation devices natively support NFC; in other cases, the banks will issue customers with NFC stickers that can be stuck on the back of the phone, or on anything else for that matter.
However, Singh believes it will still be some time before general retailers will accept NFC as a means of payment. He says it’s expensive to deploy point-of-sale devices that support the technology, and with retailers under pressure in a weak economy, they may not be keen for an investment of this sort right now.
“It’s a R250m hardware upgrade collectively for retailers [that own their own point-of-sale machines],” he says. “Why would they spend that money? No one has NFC cards with which to spend, so it will be a very gradual upgrade.” — Duncan McLeod, TechCentral