Here at APCA, one of our jobs is to ensure that the community is well informed about payments systems and their future evolution. We were therefore very interested in recent industry media commentary on the evolution of new payment technologies and, in particular, the progress of Apple Pay in Australia.
Australian payment institutions have been criticised by some in the local media for not getting together to make Apple Pay happen. I am not privy to any commercial discussions (of course), but that is a little surprising. There just might be legitimate pro-competitive reasons for that not happening – they are competitors and given Apple’s market weight, they will doubtless have a significant effect on competitive dynamics. This bears careful thought.
Apple Pay is doubtless a nifty system. That said, the downside of Apple’s commitment to a seamless, elegant customer experience is that it can be difficult in practice for anyone else to put competing payments technologies on an iPhone.
Despite the hype surrounding Apple Pay (much if it from the US media), Australian banking organisations are already at the leading edge of consumer payment technologies globally through EMV adoption, widespread contactless use, host card emulation, other mobile implementations of payments services and new home-grown point of sale payment technologies. The competition is fierce and the customer experience is already streets ahead of the US and the UK. For our systemic health, Apple Pay should be one of many options, not the only icon on the screen.
I think the real problem is that many commentators in the media don’t distinguish between underlying network infrastructure – which has to be worked on collaboratively to improve it – and innovative new products and services. These should be subject to healthy competition, and succeed or fail based on customer preference.
The industry is currently engaged on the most comprehensive collaborative rebuild of the underlying payments infrastructure – the poles and wires – that we have seen for many years. For example:
- EMV (chip) conversion of Australian cards is well advanced;
- Our contactless rollout and usage is the most developed in the world;
- Conversion of the direct entry system from next day settlement to five additional same-day settlements, speeding up Australian routine payments – keeping it amongst the most efficient ACH systems in the world; and
- The development of the New Payments Platform (NPP) by 2017 – a genuinely world-leading basic infrastructure designed to support the next generation of payment services.
In contrast to Apple Pay and other proprietary payment technologies, every one of these developments will lift the entire market, and allow new competition and better services right across it. They may not be glamorous or heavily branded, but good plumbing never is. It just does the job, and makes for a better long-term economy.
Other industry collaborations are focussing on the long-term evolution of the overall payments system. The Australian Payments Council is mid-way through developing a 10-year plan for Australian payments. It wants to harvest the best ideas both to improve the underlying infrastructure and to encourage market-driven new products and services. The consultation period has formally closed, but ears are still open.
Our industry conscience, the Reserve Bank of Australia, sits at a number of key tables – such as the Payments Council and NPP Australia Limited – to make sure we stay focussed on the right stuff.
It’s definitely a personal prediction, but I think we will see an explosion of new competitively developed payment services and products riding on the rails being built now. Indeed, what makes the NPP ground-breaking is that it is the first payments infrastructure in the world designed from the ground up to facilitate new competing overlay services on top of fast, data-rich rails.
I am confident we will see Apple Pay here before long, but hopefully as one of many competing offerings in a rapidly evolving market.
