Brad Pragnell – APCA Blog

Australia providing ideas to help bring digital payments to the poor

Brad Pragnell — Tue, 06 Oct 2015 23:23:01 +0000

Does Australia’s New Payments Platform hold some lessons for developing countries looking to design their own digital payments system? The Level One Project Guide, released earlier this year by the Bill and Melinda Gates Foundation, would suggest so.

The Bill and Melinda Gates Foundation is one of the world’s most influential NGOs. It supports numerous initiatives, primarily aimed at health and economic development in developing countries. An area of interest for the Foundation has been financial inclusion, with a particular focus on how new digital technologies, such as mobile phones, can be used to provide low cost and accessible payment services to the poor.

New research highlights an increasingly “banked” world

Brad Pragnell — Wed, 24 Jun 2015 05:55:02 +0000

Billions of people, primarily in developing countries, have historically had neither bank accounts nor access to electronic payments. When saving and making payments, they have had to rely on cash.

This is rapidly changing. According to the recently-released World Bank Global Findex, in 2014, 62 per cent of the adults worldwide had a formal account with a financial institution or mobile money service – a dramatic increase from 51 per cent in 2011.

This upswing in financial inclusion has been facilitated by a growing middle class in many developing countries and easily available technology, in particular the mobile phone. However this growth has taken a different path in different regions.

A strange brew – regulator releases its final policy statement on UK Payments

Brad Pragnell — Wed, 06 May 2015 06:32:42 +0000

The new UK Payment Systems Regulator (PSR) became operational on 1 April 2015 and as reported in the most recent edition of Payments Monitor (APCA's quarterly newsletter), released its first major policy statement, entitled “A new regulatory framework for the payment systems in the UK”.

The PSR has laid down a significant agenda. This includes the establishment of the “Payments Strategy Forum” to develop a collaborative industry strategy and effectively replace the UK Payments Council. The payment system is a network and a strong shared vision and collaborative strategy is critical for success. Collaborative bodies, such as Australia's own Australian Payments Council, recognise the need to have forums that bring industry together. However to be successful, the new Strategy Forum will need active industry participation. If industry is only there to assist in the implementation of public policy, then the new Forum will fall short of expectations.

RBA data suggests 40% of credit card values in Australia are now card-not-present

Brad Pragnell — Fri, 06 Mar 2015 04:07:58 +0000

Change is pretty well the only constant when it comes to consumer payments. In Australia, we have seen a rapid uptake in contactless card use as well as increased use of online payments. Conversely, we have seen a rapid decline in personal cheque use as well as an ever-diminishing use of cash.

Monitoring changing payment usage can be notoriously difficult. The Reserve Bank of Australia (RBA) and APCA collect and publish statistics from industry participants on cheques, cards and electronic payments as well the number of ATMs and POS devices. However, other types of usage such as cash use and the split between card-present (point-of-sale) and card-not-present (internet, telephone and mail) transactions are more difficult to track. Consumers and merchants don’t regularly record or report their own payments activity – meaning we only get a partial picture of how payments use is evolving.

Payment costs in Australia – early observations from new RBA research

Brad Pragnell — Mon, 05 Jan 2015 23:23:41 +0000

With complex processes and multiple parties, determining the costs of payments can be difficult. In recent years, the Reserve Bank of Australia (RBA) has taken up the challenge and released a research report on the cost of payments in Australia. This represents a long-awaited follow up to research last done in 2006.

The most recent RBA report dated December 2014 draws upon data collected in 2013 from financial institutions, businesses and consumers and seeks to quantify the overall cost of payments and the cost of various payment methods. This includes both “resource costs” (the costs to the whole economy) and “private costs” (the costs borne by consumers, merchants and financial institutions respectively).

Tough medicine for the UK payments system – but how sick is the patient?

Brad Pragnell — Tue, 18 Nov 2014 03:47:45 +0000

On 13 November 2014, the UK Payments System Regulator (PSR) released “A new regulatory framework for payment systems in the UK”. This document outlines, and seeks feedback on, the PSR’s thinking on its regulatory approach in the lead-up to becoming operational in April 2015.

The PSR is a new economic regulator that sits within the Financial Conduct Authority and has broad powers to designate payment systems and impose standards. While on paper, the PSR’s powers are not too dissimilar to those of Australia’s own Payments System Board, at first glance, the 13 November consultation paper suggests a much more invasive, and it could be argued ill-conceived, regulatory stance.

Big ideas in a little province

Brad Pragnell — Thu, 21 Aug 2014 00:24:02 +0000

I had the honour and pleasure of recently attending and participating in the Canadian Payment Association’s Payments Panorama 2014, held this year in beautiful Charlottetown, Prince Edward Island. Prince Edward Island is Canada’s smallest province, with a mere 0.5% of the Canadian population and a total area only twice that of the Australian Capital Territory. Yet on this postage stamp gem in the Gulf of St Lawrence, some big ideas concerning the future of Canadian payments were being discussed.

By way of background, Canada and Australia share many features and our payment landscapes have some similarities. Both have a long-standing national payments body and a competitive national domestic debit card scheme. Australians and Canadians are enthusiastically embracing new ways of paying, including mobile and contactless. The Government and regulators in both countries have intervened on the fractious issue of interchange fees, though Canada has adopted a more disclosure-based approach than the harder caps found in Australia.

The prospects for mobile contactless payments in Australia

Brad Pragnell — Wed, 16 Apr 2014 04:49:31 +0000

Many Australians believe their smartphone might one day replace their contactless cards. Research by Lonergan Research, on behalf of CBA, found that 73% of Australians believed their smartphone would replace their wallet by 2021. Australian financial institutions have, to date, met the demand for mobile payments through the use of NFC-enabled stickers and cases. The February 2014 announcement by VISA and MasterCard on “host card emulation”, where the secure element for a contactless payment can live in the cloud rather than in the phone, has reignited global interest in use of mobiles at point-of-sale, with a local trial being announced in Australia in March 2014. With consumer sentiment and facilitating technology shifting in its favour, what are the prospects for wide-scale embrace of mobile contactless payments in Australia?

Australia and the electronic payments leagues table

Brad Pragnell — Wed, 26 Jun 2013 03:11:56 +0000

Today electronic payments are the norm in Australia. In the direct entry system, there are about 7 million items per day equal to about $45 billion. Employers and governments use direct entry to pay wages and benefits, while individuals use direct entry to pay for goods and services through direct debits and internet banking.

These direct entry payments, which include direct credit and direct debit, account for 96 per cent of non-cash value (excluding high value payments) and about one-third of the number of non-cash payments.

From these figures, one would suspect that Australians are reasonably prolific users of electronic payments, which stands in contrast to some commentary that Australia is somehow “lagging behind” other countries in this respect.

ATM statistics – are we slipping back into our old ways?

Brad Pragnell — Wed, 26 Dec 2012 22:28:48 +0000

The introduction of ATM direct charging in March 2009 has been one of the more public experiments in consumer behaviour within Australian retail payments. With three and a half years of statistics now available, we are developing a clearer view of its impact.

On the supply side, direct charging has accompanied a rise in the number of ATMs. There were 25,000 ATMs in Australia in mid-2008 and now there are over 30,000.

Despite more ATMs, direct charging has also seen a contraction in the number of withdrawals, with a drop by about 30 million withdrawals between 2008-09 and 2009-10. While this decline coincides with the GFC, the average withdrawal amount rose slightly during this period - suggesting slightly fewer but slightly larger withdrawals from ATMs as a response to direct charging.