Cards & Payments Australia is the region’s largest and most established cards and payments event, bringing together leading global technology innovators with payment leaders to explore the changing face of payments. Currently in its 20th year, Cards & Payments Australia was held in Melbourne over 20th-21st May, 2015. Euromonitor International ANZ retailing analyst Julia Illera attended both days of the event, and reports back on its key technology, innovation and regulation findings, and assesses how they will impact on banks, retailers and their customers.
“Speed” and “real time” emerged as key themes for the event, with both concepts relating heavily to technological innovation and the New Payments Platform (NPP).
The New Payments Platform (NPP)
The NPP is new infrastructure for Australia's low-value payments. It will provide Australian businesses and consumers with a fast, versatile, data-rich payments system for making their everyday payments.
The NPP is an industry initiative that responds to the new needs of a changing payments industry in terms of speed, flexibility and information. Although most technology innovation in the industry has focused on enhancing end users’ payment experience, the NPP will allow other stakeholders to benefit of the technological innovation, while supporting the new needs of Australians.
The end product of the initiative will be an infrastructure that will allow all financial institutions, businesses and consumers to connect. Among the key benefits offered by the NPP is that it will provide speed to payment processes, for example users will be able to access funds almost as soon as these are received, while ADIs will be able to process different payments for their customers. In addition, the new platform will support additional developments thus encouraging innovation and healthy competition among financial institutions, as these will be able to leverage the platform and offer better/personalized services to their customers.
Being on its third phase (“Design, Build and Test”) the NPP initiative is expected to be in operation in 2017.
Who talked about this:
Panel discussion: Payments Modernisation and New Payments Platform (NPP) Priorities for Faster and More Flexible Payments
The NPP was born out of industry collaboration. One of the most interesting aspects of the platform is that the original concept, first discussed in 2012, has not changed. The NPP project is currently at phase 3 of its “Design, Build and Test” approach, and still the underlying concept remains unchanged. The process has demanded significant collaboration to reach to this point, but at the same time competition around how to use the platform and leverage for the development of new products and services is also increasing.
Australia’s approach to the modernisation of its retail payment platform (NPP) has been quite unique in the sense that industry players are trying to develop and launch products parallel to the roll out of the platform. A key source for differentiation and innovation will be the amount of information available, which will allow companies to tailor better solutions.
In terms of technological innovation, the payments industry is facing digital disruption and technology is now at the centre of most companies’ strategy. Investment in technology, particularly customer-facing technology, has increased significantly, with industry sources reporting investment in technology by the big 4 banks surpassing A$8.6 billion. Furthermore, competition within the industry in terms of technological innovation has not been limited to banks; the number of non-traditional players including tech companies has been increasing significantly.
Who talked about this:
‘Leveraging Technology to Build Great Companies and Brands’, Bob Schwartz Former EVP & Founder, Nordstrom.com, Former President, Magento (USA)
Companies are investing significant resources to leverage and integrate technology into the business value chain. Technology has become an integral part of the customer’s experience, and this has further encouraged companies to invest in technology. However, in Bob Schwartz’s view, technology is a great tool but it tends to commoditise processes and services. In this sense, first movers might be able to differentiate their product or service through technology, but with time followers can easily replicate that comparative advantage as competitors also have access to technology. To overcome this trap, companies need to invest more in their brands - or as defined by Schwartz they need to create companies with a soul.
According to him the most successful companies are not those that are the most innovative or those that invest in the most in technology, but those that can better connect with customers through experience. Customers always remember their experiences and products become just a nice souvenir of those experiences.
‘Card Payments Regulation: From Wallis to Murray’, Malcolm Edey, Assistant Governor (Financial System), Reserve Bank of Australia
Malcolm Edey discussed payment regulation in Australia, since the Reserve Bank’s role as a regulator of retail payments systems was established following the report of the Wallis Inquiry in 1997.
An interesting point he made was that innovation in payments worldwide were largely driven by industry players, i.e. banks and businesses, whilst innovation at a more industry “system” level was very limited. He termed this proprietary innovation vs network innovation.
‘It is important to distinguish between proprietary innovations, which are carried out at the level of particular payment businesses, and network innovation, which occurs at the level of the system as a whole. As you would expect, the industry is very good at innovation in the proprietary space. Among the many examples of this are cardless ATM withdrawals, new authentication techniques such as fingerprint, mobile banking and payment apps and now digital wallets. These are areas where the incentives to innovate are clearly effective.’
-Malcolm Edey, Cards & Payments Conference, 21st May 2015
The reason for the success of proprietary innovation is that there are obvious incentives for companies to innovate in the payment space as a form of differentiation, but not as much incentive to innovate as an industry, where competitors and regulators must work together.
However, despite this situation, the NPP is a great example of what can be achieved when working collaboratively as an industry. In Australia, industry collaboration has been promoted by the Reserve Bank Payments System Board with positive results such as the recent strategic review of innovation in the payments system, where industry players and various stakeholders were involved. The end result of the review was a number of recommendations to improve the payment system, including initiatives like NPP.