The Future Will Be Tokenised
With Samsung Pay having taken the lead with contactless payments, Apple Pay has (finally) joined the race enriching customer’s options for alternative payments methods.
Having been available to users since 2018, Fitbit Pay, Garmin Pay and Samsung Pay have been the only contactless payment providers in South Africa — with Samsung Pay being the clear market leader. What is tokenisation you ask? To summarise Forbes’ definition:
“Tokenisation is the process where sensitive data (i.e. credit card numbers) is replaced by a unique identifier, whilst retaining all essential information which is recovered via secret key stored in a secured platform (i.e. payment wallet). To further explain this concept, using a credit card transaction as an example, imagine tokenisation as a secret code used to retrieve a coded message. A tokenised card would only have the last four card digits visible, while the remaining numbers remain masked — this means that anyone who can access the token alone, would be unable to retrieve the valuable data needed to compromise the credit card. To conduct a transaction, the token needs to be mapped to the original credit card data, usually done by a third-party provider”.
Available across 40 devices and recording over three million transactions to date, the Korean electronics giant was not only first out the gate, but has also demonstrated that South African consumer preferences are changing, most of which has been fueled by the pandemic. According to the 2020 Mastercard study of 17 000 participants, across 19 countries, consumers confirmed:
- 46% of participants have made the shift to contactless payments, hosted in-app by various wallet providers
- 82% of the group prefer the payments method, citing it as a “cleaner way to pay”, undoubtedly prompted by the ongoing Covid-19 pandemic
- 74% of users stated that they will continue to use contactless, even after the pandemic
Visa also confirms the payment trend with a study of their own across 26 countries, with one in every three transactions conducted through the global network, is contactless. Interestingly, Central Europe, Middle East and Africa boast substantially higher numbers of use where more than seven out of 10 transactions are made using contactless cards and/or devices.
After many project delays and launch postpones, Apple Pay is finally available to its users, positively contributing to the payments infrastructure landscape in empowering new payment methods and behaviours. These newer consumer behaviours were predominately driven by the effects of the ongoing pandemic and the global efforts to end it — with a focus on providing more convenient payment methods, with a focus on improving overall hygiene practices.
As these two major payment advances start to take shape, a question arises: What’s happening with Google Pay and Huawei Pay in South Africa? In December 2020, Huawei also launched their mobile payment service with a two-pronged approach, starting with a partnership with Zapper, to enable QR code-scan-to-pay functionality. The second step will look to integrate near far communication (NFC) functionality to allow users to conduct tap-and-pay transactions at merchant card terminals. While Huawei's service launch is a positive step for the payments industry, the ongoing battle with the U.S. government only adds to the complications in launching mobile applications. With regards to Google Pay, there seems to some “scepticism” in enabling the service in South Africa, with product development updates nor release dates announced. However, their steady expansion across banking institutions in 26 (and growing) countries, could be a signal that an inevitable launch is near. Until then, Google users will need to wait with bated breath.
Whilst Samsung Pay will enjoy contactless payments dominance for while longer, Apple Pay’s market entry illustrates the need for this payment method. Even though Android devices hold a larger market share than Apple’s in South Africa, the need for contactless payments should be seen as a viable service that can be offered to all smartphone-wielding South Africans to not only enable a safer, more convenient way to transact but to be adopted in their purchase habits in minimising the spread of Covid-19. Much more work needs to be done by banks, third-party payments enablers and retailers/merchants in chartering the more frequent use of this payment method
This article was written by the Editor of PaySpective, Ayakha Moloko. Having been involved in the fintech industry from 2013, by first building a payments solution and now currently working for a leading payments processor, Ayakha’s passion revolves around the ever-changing fintech landscape. PaySpective was formed from a need to address societal payments issues and inspired by the Creators who build interesting platforms to solve them. Happy to connect on Twitter or LinkedIn, where I share further information insights, opinions and current affairs around the exciting fintech space. For more personal thoughts and musings on African current affairs, family and friends, as well as navigating the journey on fatherhood, be sure to check out the Medium blog too :)