Westpac's Mobile-Pay Projects Keep the Bank in Control

Westpac New Zealand plans to leverage mobile technology on several fronts in the coming year, powering contactless payments while maintaining more control over customer relationships than it would have if it signed on to a telco-led venture.

Westpac is competing in a market that also includes a mobile wallet created by Paymark, Vodafone, Telecom and 2degrees. Called TSM New Zealand, the NFC-based mobile payments initiative has recruited a number of other local banks.

As part of its strategy, Westpac is testing host card emulation (HCE) by partnering with Carta. HCE emulates a Near Field Communication transaction without requiring access to a phone's secure element, which is typically guarded by mobile carriers.

"HCE is really flexible, and we can move at our own pace as we develop other mobile services over time," said Shane Howell, chief product officer at Westpac.

Westpac is using HCE to develop its own mobile wallet, giving the bank direct control over how customers are enrolled. Westpac is starting with payments, and hopes to add loyalty, marketing and other functions. Its wallet may someday double as an ID card, transportation fare card and building access card.

"We'll define success as when the consumer leaves their wallet at home and uses their mobile devices for everything," Howell said. "We're their bank so we have a real opportunity to meet their needs."

Westpac's pilot is limited to New Zealand. The underlying HCE technology is still relatively new to payments; it became part of Google's Android mobile operating system in November. A few months later, Visa and MasterCard announced formal support for the technology; MasterCard is testing HCE with Capital One and Banco Sabadel, while Visa is running a similar test with BBVA.

Erik Vlugt, a VeriFone vice president, and Michelle Evans, a senior analyst at Euromonitor, both said HCE technology can have a dramatic impact on mobile payments in separate columns written for PaymentsSource.

Isis, the U.S. telecom-led mobile wallet initiative, has said NFC payments enabled by credentials stored on the phone are safer than HCE, though it plans to use HCE for some ancillary services such as marketing programs. TSM New Zealand did not return a request for comment by deadline.

Westpac's goal is to launch its mobile wallet across the country in 2015, nearly the same time as a broader relaunch of the bank's full mobile financial services suite.

"Mobile banking and payments are on separate development tracks right now, but I think the two will meet sometime next year in a single-sign on solution," Howell said. "You don't want to be giving people 15 different apps. You want it to be simple for them."

Westpac is also planning to use other new technology to attract merchants, such as Bluetooth Low Energy beacons, which have a longer range than NFC and can be used to deliver real-time marketing to consumers while in a store.

Westpac is testing BLE beacons in its branches, Howell said. The bank is also exploring alternatives to passwords, such as biometrics, which it hopes to deploy when Westpac's broader mobile banking/payments relaunch is ready in 2015.