• Markus Sander, Senior Consultant at Capco


• 09:00 am
mobile payments , Mobile banking , online banking

In the third of a four-part series, Markus Sander tests the latest payments innovations. This week: cashless and cardless payments.

Having equipped my phone with an NFC sticker (there are smartphone manufacturers that don’t see the need to integrate NFC into their ecosystem), I updated my six money apps, activated four mobile wallet solutions and was good to go.

My user experience
Monday morning. First stop - Starbucks. To satisfy my green tea addiction I use their loyalty program with a prepaid rewards card (I would almost count this as a cardless innovation as it works perfectly fine on my mobile and even my Pebble smartwatch in the US. Sadly the app is unavailable in Germany. A negative point, especially for international travellers who get an uneven customer experience from country to country.)

Shopping for groceries with a mobile device was a piece of cake compared with my NFC experience. To begin with, things went well. For my lunch break I chose a cafe that had an NFC-enabled acquiring terminal. There weren’t many places to choose from, but the NFC sticker on my mobile did the job of paying for my lunch. Some mobile phone providers refuse to support NFC on the device, so using a sticker linked to my bank account is the next best thing.

In the evening I went out for dinner with a friend and that was when I had the first real problem. My friend picked a restaurant that didn’t accept anything other than debit cards or cash (fairly normal in Germany). In the end, my friend paid and I had to use a credit transfer to pay him back. Unfortunately he had no peer-to-peer payments platform on his mobile device, so none of the 10 (!) apps that I had were of any use.

Later on, public transport tickets were easy to acquire. Three minutes of research, one downloaded app plus a sign-up procedure and I was able to buy tickets online using a SEPA-enabled current account. Not bad. But circumventing the cafes and restaurants that didn’t support my idea of cashless and cardless environment left me largely frustrated.

What did I learn?
You need to be prepared to overcome several hurdles to stay cashless, let alone cardless in today’s Germany. It works better in larger cities, but I can hardly think of a shop in my small home-town that would even accept a credit card.

Merchants with POS terminals that support new payment models are a scarce commodity at the moment. Despite the effort from large card networks to make that mandatory for merchants, adoption is slow. In the end, every new payments system is only as good as the infrastructure and ecosystem it operates in. And that’s why this experiment was such a disappointment.

Ready to adopt?

What’s the situation in other parts of the world?

From my experience, the situation is similar in the US, where spending without cash and cards is equally problematic. There are a few options however. You can use Uber via your phone to pay for taxi rides to get around in NYC. You can also sign up for one of several peer-to-peer platforms to share dinner bills with friends (i.e. Venmo). And, if you’re prepared to search, you can order food from platforms that accept a form of non-card payments or even buy your next Dell computer from an online shop using bitcoins.

Hong Kong probably has the most consistent local payments system with major stores, shops and even office buildings accepting the local pre-charged Octopus (travel) card. A similar system called Suica is used in Japan. Japan adopted Osaifu-Keitai as early as 2004, and formed in principle the first form of mobile payments system that was interoperable.

But for the rest of the world, the story is different. In 2014, with so many other innovations in the world of finance, cardless and cashless payments are inconsistent both in terms of interoperability and the overall customer experience. (But let’s see how Apple Pay will perform over the next few months).

Have you tried a life without cash and cards? Comment on your experience and your verdict.

In the final part of his four blog series, Markus will sum up the opportunities and the challenges for participants in the German mobile payments ecosystem.