Contactless card and mobile payments are set to see significant uptake in Australia, already a world leader in contactless card acceptance, as the country starts to implement open transit payments.

When the U.K. began to deploy open transit payments, starting in London in 2012, this led to a major growth in contactless acceptance at the point of sale in the country. And while contactless card payments have proved very popular in Australia, there has been much slower adoption of mobile payments, not helped by the refusal of three of Australia’s largest banks to participate in Apple Pay because of a dispute over fees.

A third of all POS transactions in Australia were conducted using contactless cards in 2016, according to the Reserve Bank of Australia’s 2017 report based on the central bank’s 2016 Consumer Payments Survey. This figure is three and a half times the share reported by participants in the 2013 survey. As a share of card payments only, nearly two-thirds of all POS payments were contactless in 2016.

Melbourne Australia commuters
Pedestrians and commuters in Melbourne, Australia. Bloomberg News

According to a March 2018 survey by market research firm Roy Morgan, in the previous 12 months, 7.3 percent of Australians had used their bank’s proprietary mobile payment solution, with Commonwealth Bank of Australia’s CommBank Tap & Pay the most used by Australians (4.3 percent). Just 6.1 percent had used mobile payment services such as Apple Pay, Google Pay and Samsung Pay in the past 12 months, with Apple Pay usage almost twice as high as Google Pay.

Currently, the only top four Australian bank to offer Apple Pay is ANZ. In addition, Amex, Citi, HSBC and Bendigo Bank offer the mobile wallet.

Diverging tracks
As in the U.S., Australian transit schemes are administered by individual states. This makes it tougher to get any national agreement for open transit payments, said Grant Halverson, CEO of Australian payments consultancy McLean Roche.

“There’s no commonality between states or even between toll roads, most of which have been built and operated independently," Halverson said.

While San Diego-based Cubic built the “go” contactless closed-loop transit card system for the state of Queensland and the Opal system for the state of New South Wales (NSW), NTT Data Systems provides the Myki contactless ticketing system in the city of Melbourne.

"Australia has been a bit slow coming to the party on contactless transit payments generally and is finally catching up with open-loop transit payments,” said Australian banking consultant Brad Pragnell. “Closed-loop contactless systems such as Opal and Myki are still relatively new, having only been introduced over the past decade. However, Australians have embraced contactless open-loop payments generally. So giving Australians the option of using their open-loop contactless cards for transit makes a lot of sense."

In June 2018, the Department of Transport and Main Roads in the Australian state of Queensland contracted Cubic to develop a mass-transit ticketing system supporting contactless payments and real-time rider account information for public transit in the state capital, Brisbane. The contract is worth around US$276 million.

Cubic will upgrade the “go” closed-loop transit card system it created in 2003 to enable Queensland commuters to pay on all local public transport with payment cards, mobile phones and wearables. The firm is also installing contactless payment technology within mass-transit systems in Boston and New York.

Cubic is working with Transport for New South Wales on the rollout of contactless payments across the entire ferry, light rail, train and bus fleet in the greater Sydney area. Consumers will be able to use open-loop payment cards in addition to the popular Opal transit card in Sydney.

In March 2018, Transport for NSW expanded its open contactless transit payments trial that it launched on the Manly Ferry with Mastercard in July 2017. Over 15,000 fares on the Manly Ferry were paid with open-loop tap-and-go cards by the end of January 2018.

Passengers can pay for transit on all Sydney ferries and the L1 Dulwich Hill light rail using their contactless Mastercard, Amex or Visa card, smartphone or wearable. This is similar to the model adopted in London by Transport for London (TfL), where open-loop contactless technology was first launched on buses and then expanded to Tube and rail.

Half of all pay-as-you-go Tube and rail journeys across London on TfL’s network now involve contactless cards or mobile devices, TfL said in April 2018.

“The rollout in Sydney appears to have gone well,” said Pragnell. “However, the ferries and light rail carry far fewer passengers trips than the main Sydney rail system."

Deployed in 2012, Cubic’s Opal system in Sydney was designed to allow new technologies such as contactless payments to be incorporated into the system. However, in several other Australian capital cities using older smart card ticketing systems, such as Melbourne and Perth, the switch to contactless will be more difficult and expensive, necessitating the replacement of current card readers and major upgrades to technology.

Olga Cahill, marketing coordinator at Australian payments association AusPayNet, said that the state of Victoria is investigating new contactless technology including the ability for passengers to touch on and off with their credit card or smartphone. The state of Western Australia is investigating flexible payment options such as smartphone or debit or credit card tag-on capabilities.

The main issues cited as barriers to adoption of open transit in Australia include the speed of an open-loop contactless payment transaction as well as the complexity of distance-based ticketing systems, Pragnell said. “The extension of Sydney’s open-payments trial to more lightly used modes of public transit is undoubtedly designed to gather more data before any more general rollout," he said.

“The migration to open-loop contactless transit payments often involves a refresh of technology so that transit card readers are EMV-capable and back-office systems can cope with open-loop payments,” said Cahill. “The migration therefore tends to form part of a wider technology refresh. AusPayNet’s Open Loop Transport Payments Framework exists to help transport authorities and their partners manage their implementation of open loop.”

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