The digital wallet era is set to begin in Israel in coming weeks following news (Jpost) that Apple Pay will be rolling out a digital wallet in the country
Bank HaPoalim has beaten them to the punch, however, after launching a digital wallet and credit card (Bitcard) of its own.
Digital wallets allow users to pay for items, at compatible points of sale, by using their smartphone. The wallet, stored electronically on the phone, connects to the user’s conventional payment methods, but the transaction doesn’t require the card to be physically present.Instead, the transaction is processed using a close range communications technology such as NFC.
For Android aficionados, the good news is that both Google and Samsung are also expected to join the fray and roll out their own digital wallet products later this year, alongside several major Israeli retailers.
How are digital wallets different from Bit, Pepper, etc?
Digital wallets are designed to make it extremely convenient for consumers to pay for goods and services by presenting their smartphones, rather than payment cards, for transactions.
Instead of reaching for your credit card, or fumbling around your wallet for cash, you simply need to hold your smartphone up to a reader and the transaction is processed. Better again, you can approve the transaction and receive the receipt directly on your handset.
Bit and Pepper are bank-owned payment interfaces (HaPoalim and Leumi respectively) whose primary purpose is making it easy to transfer sums of money between individuals.
Essentially they are frontends to the traditional banking system that just make it easier for users to move money between the payment cards that they have attached to their bank accounts. Although some service providers have been accepting payment via Bit for some time, compared to holding your phone to an NFC terminal, the process is slow and cumbersome. Additionally, you need to manually input the transaction details into your phone.
What happens if my phone is out of battery?
Yeah …. that would be a problem. Digital wallets are unlikely to completely displace traditional payment solutions until such time as smartphone battery life is not a common constraint. Think of digital wallets as another more convenient way to pay for goods and services.
Is this different to paying “via Wifi”?
Paying “by WiFi” is an “Israel-ism” to refer to contactless payment technology which recently launched in the country. Contactless payments typically work with RFID, another close field communications technology. While contactless technology is great, you still ultimately need to present your physical payment card to a special point of sale (POS) terminal that is equipped with an RFID reader. In a sense ‘contactless’ is something of a misnomer: you still need to press your card to a terminal! It is also a card present payments solution (although technically digital wallets are too, but that’s for another day….).
(You also have our permission to berate the next individual you hear talk about paying for something ‘by WiFi’. This is not accurate!)
Is this some newfangled technology?
While we hate bursting anybody’s bubble, digital wallets are not brand new technology. They’re also not an Israeli invention. While Israel supports some truly cutting-edge FinTech, products can take longer to launch in Israel. This is due to the fact that its market is small but well-regulated, making it comparatively unattractive compared to launching in an EU member state (the EU supports a legislative framework called passporting which allows for relatively seamless regulatory approval for products between member states) . Similarly contactless technology was available in Europe and the US for some time before it finally hit this side of the Med.
On the plus side this means that the technology is well-established and supported by merchants. Apple Pay, for instance, is already operating in the UK, Australia, Brazil, among other countries.
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