Westpac (ASX: WBC) has highlighted the extent and the speed at which the use of contactless transactions have grown, with David Lindberg, the bank's chief product officer for its Australian financial services division, admitting that he has never seen consumers change their behavior so quickly.
The new technology is referred to as "tap and go", whereby customers are able to hold their credit cards above a 'contactless terminal' that makes transactions much more quick and convenient for both customers and merchants.
Referring to data regarding MasterCard and Visa transactions, Lindberg stated that the number of contactless transactions had grown from virtually zero prior to 2010 to around 35 million per month today.
Whilst the use of this new technology boosts the banks' earnings, it is mainly pleasing as it acts to fight off the growing threats posed by technology giants such as Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG) or eBay's (Nasdaq: EBAY) PayPal business, which are developing their own mobile payments systems using 'near field communication' technology. These systems allow consumers to use their mobile phones to make payments, reducing the need for services provided by the banks.
Commonwealth Bank's (ASX: CBA) CEO Ian Narev has recognised the threats and potential benefits of this new technology, stating that consumers want to "do everything they can do but on their mobile as well", admitting that technology must be a major focus in order to maintain competitiveness. Meanwhile, Mike Smith, ANZ's (ASX: ANZ) CEO, has described the potential for these behemoths to take business away from Australian banks as "terrifying".
Lindberg said "the name of the game is innovation and if you don't innovate, then somebody else will… What we've learned as an industry is we have to lead in order to maintain our positions as the most structured financial institutions in the country and if we let somebody else lead, then they're going to start to give propositions to our customers."
According to The Australian, a global survey of 700 consumers undertaken by IMS Research revealed that 60% were either "very interested" or "interested" in a mobile phone that could replace their bank cards.
Foolish takeaway
Consumers today are obsessed with technological advances and, as such, the banks must stay a step ahead regarding the services that they provide. Out of the big four banks, Commonwealth Bank and NAB (ASX: NAB) are the furthest along with developing their new technology systems, whilst Westpac has admitted that it is behind its competitors in this regard.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.
