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New systems transforming the payments sector

October 3, 2018 / Comments (0)

The Australian Financial Review and CBA round-table on smart payments : From top left, Andrew Stein, CEO Payreq; Ullrich Loeffler, managing director IDC Australia; Rocky Scopelliti, Telstra Global Strategy Leader; AFR moderator Ian Grayson; Brett Watson, KPMG partner Financial Services; Simone Constant, deputy secretary financial risk management & transformation NSW Treasury and Michael Eidel, CBA’s Executive General Manager of Cash-flow and Transaction Services. Jeremy Piper
by Ian Grayson

The increasing shift away from cash and cheques to smart electronic payment methods is causing a rethink of everything from bank retail products and service offerings to customer relationships and brands.

According to a survey by Visa-RFi, during 2015 more than 60 per cent of face-to-face card transactions were contactless. Of those respondents who had used a mobile handset to make a payment, 72 per cent indicated they believed it would become their most used method in the future.

Participants at The Australian Financial Reviewand Commonwealth Bank of Australia Smart Payments round-table discussion agreed these changes represented a dramatic shift for the financial sector that has implications for the entire business community.

Michael Eidel, Executive General Manager, Cash-flow and Transaction services at CBA, says the rise of smart payments is the latest step in an evolution that has been taking place for some time. Just as visits to a bank branches to complete transactions were replaced by electronic banking, now smart payments are being embedded into a variety of customer experiences.

“This is really interesting [but] it’s also a massive challenge for the incumbents because their traditional branding is not valid anymore,” he says. “If [a customer] uses Uber, the payment happens automatically – it’s embedded and invisible. The customer doesn’t care at all if it is enabled by CBA [or any other bank].

“If we think about who will be around in five or 10 years’ time [and] who the providers of payment experiences will be, I think we will see a very different set of providers in the end.”

‘Enthusiastic adopters’
Telstra’s global strategy leader and industry expert in financial technology services, Rocky Scopelliti, says Australians have proven to be enthusiastic adopters of mobile technology and this is being reflected in the rapid uptake of smart payment systems.

“It’s also being underpinned by the significant demographic change that’s now taking place,” he says. “One in three people in our population now are broadly aged between 18 and 24, so we’re living in a millennial-led world. So, when it comes to financial services, it’s natural that they desire to have finance embedded in their lifestyles.”
Andrew Stein, founder and chief executive of Australian fintech company Payreq, says while new technologies are changing the way people exchange money, the underlying concept of payments has not changed.

He says the traditional flow of having a purchase order, an invoice, a payment and finally a receipt still holds true, even though each of the steps may not be as obvious when the transaction involves a smart payment system.

Stein points to a typical supermarket where the purchase order is the goods in the basket that are taken to the checkout. The operator says “That’s $100” which becomes the invoice, payment is then made and a receipt is given.

“What’s really amazing is you realise that all of this is becoming digital,” says Stein. “The payment can always be done digitally, but the other three things are now being digitally integrated and that’s exciting.”

The round-table participants highlighted the increasing importance of the technological platforms that underpin digital smart payment systems. With new devices being used to initiate payments and transactions occurring via new channels, they emphasised that having a secure and efficient underlying platform becomes critical.

Participants pointed to the planned National Payments Platform (NPP) which is supposed to go live late next year. Developed by a consortium of Australian banks and technology partners, the NPP will allow near real-time electronic payments and the ability to include rich data with each transaction.

Innovation ‘accelerating’

“This is an outstanding testament to how increasingly government, central banks and other industry bodies are encouraged, and maybe forced by the expectation of consumers … to come up with a really exciting and immediate payments experience,” says CBA’s Eidel. “If you look back, for a long time, there has been a lot of innovation in the payment space but now it’s massively accelerating.”

Simone Constant, deputy secretary, chief of staff and risk at New South Wales Treasury, says smart payments capabilities and a platform such as the NPP hold great promise for businesses but will also bring future significant benefits to the public sector.

“I can see immense opportunity for what we’re doing in building our own platform,” she says. “We’re going to be working really hard to understand from our banking partners, and some of our consulting partners, what we can do to enrich provision of services.

“But it’s not just the commercial transactions we need to think about. We’ve got to think about the outcomes for citizens – what will this mean for a customer of Family and Community Services, who might also be a customer and client of the healthcare system or education system? How can simplifying these processes make it easier to administer their lives? How can we use the platform for that?”

Telstra’s Scopelliti agrees, saying that, when designing and building smart payments systems and platforms, it is important to always start from the perspective of the customer.

“What we’re seeing now with the banks, and others that are going to be successful, [is that] they’re starting at the customer and working back from that and saying ‘what am I trying to solve for the customer’,” he says.

Ullrich Loeffler, managing director at research company IDC, says the rapidly evolving smart payments space provides customers with a level of choice that has previously not existed. While this is great from the customer’s perspective, at the same time it also changes some of the ground rules for businesses and other organisations that want to interact with them.

“Previously we didn’t have a choice but to go into a branch or pay by cheque, and now customers have a choice,” he says. “So, that means we have to focus on the customer, or we lose them – we lose that connection.”

Last modified: October 19, 2018

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