International Comparison Archives - Page 2 of 2

Big ideas in a little province

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.

Payments World USA

In April, I took a quick trip to Disney World...well, kind of. The annual conference of NACHA, APCA's equivalent body in the USA, was held at Disney World's home: Orlando, Florida. Around 2,200 bankers turned up to hear three days of presentations on the state of US payments - and possibly catch a few rides. I hope they had some fun amongst the work, because these are stressful times for US payment providers. Having weathered the GFC with tightened budgets, US bankers are acutely conscious of new payments system developments in other countries and pressure from the US Federal Reserve to follow suit or be left behind; but they are a long way from agreeing amongst themselves what is to be done, and who will pay. My small contribution was to outline the policy logic behind Australia's New Payments Platform (NPP) proposal as a comparative example. There was much interest.

Australia, South Africa and mobile payments

When it comes to consumer payments, the future is obviously mobile. But the "how" of mobile payments turns out to be rather complicated. I recently had the opportunity to participate in the Annual Conference of the Payments Association of South Africa. Systemic comparison is one key benefit of such an experience. Here we have two resource-driven economies of roughly similar size, similarly large physical distances but markedly different population demographics. The retail payments systems are diverging, rather than converging. This highlights the obvious point that payment systems are shaped by people's habits, not by economics. Consider, for example, some simple comparisons between bank account ownership and mobile phone ownership. According to the World Bank, Australia is one of the most heavily banked populations on earth, with a 99% banking rate in 2012 - that is, 99 out of 100 Australians over the age of 15 had a bank account in 2012. South Africa, by contrast, has a 54% banking rate, and therefore a large community that is still cash-based. Now let's look at mobile phones: the "phoned" rate in Australia is a healthy 106%; in South Africa, 135%. Yes, every person in South Africa has a mobile phone subscription, and every third person has two. If you suspect the interaction of these two comparison pairs leads to different payment evolutions, you would be right.

UK payments system self-regulation under scrutiny

Last month, the UK government published a consultation paper on “Opening up UK payments”. According to the paper, “the self-regulation of financial services…has been discredited.” Say what? The world over, payments systems have been almost entirely self-regulated, so this is a big call. The evidence cited in the paper for this includes the LIBOR-rate fixing scandal and the failed attempt to eliminate UK cheque clearing. And of course, there is enduring rancor over the public bailout of UK banks during the global financial crisis.

A tale of two countries

In Sydney in early June, we launched our consultation on the future of cheques. Our proposition is simple: based on long-term trends, cheques are steadily disappearing from the Australian community. That means problems down the track for those who rely on them, as they increasingly find their payment counterparties don't want to use or accept a cheque, even if they do. This consultation is not about cheque clearing at all: it's about making sure people have what they need. In the same week, on the other side of the world, the House of Lords in London began an acrimonious debate on the same issue: the future of cheques in the UK. The UK Payments Council has had closure of the paper clearing system on the agenda for several years, but they have not been able to win community support for the need to change.

Context is everything

I recently had the rare and valuable chance to take a deep dive into someone else's payments pool. Such comparisons are always refreshing, not to mention instructive. The Canadian Government has appointed a Task Force to review the Canadian payments system, and the Task Force has embarked on a series of intensive workshops with senior people from across payments – financial institutions, schemes, corporate and government users, merchants, consumer groups and others. They kindly invited me to participate in a 3-day workshop that ranged widely over the future payments landscape as they are seeing it in Canada. This was, I have to say, an impressive effort.