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.
Apart from the weather, Canada and Australia have some striking similarities: smaller, developed western economies with large open spaces separating relatively small urbanised populations. The payments systems are, at first sight, similar too: a historical reliance on paper cheque processing, rapid growth in credit and debit cards and increasing reliance on electronic payments for low and high value non-retail contexts.
But first appearances can be deceptive. When I presented some Australian payment statistics, the Canadians were astonished at the rapidity with which cheques are disappearing from Australian society. “How did you do it?” they asked. The recent history of Canadian cheques has been somewhat controversial: an attempt to convert paper cheque processing to electronic images was unsuccessful, and cheques remain a much-used consumer instrument.
Another point of deceptive similarity is bulk payments. In Australia we have direct entry; in Canada, it’s Automated Funds Transfer (AFT). Both systems were introduced as an overnight processing alternative to cash and cheques for regular bulk payments like payroll. But in Australia, direct credit has evolved without fanfare in the last 10 years or so to serve the general payment needs of consumers and businesses through ‘pay anyone’ internet banking and BPAY. These services are usually no extra cost to the payer, and all you need is the destination account number (pay anyone) or biller and reference number (BPAY). Evolution of such services into m-commerce via banking apps seems a natural progression, although it’s early days.
In Canada, AFT credit has not yet escaped its bulk payment origins in this way, and there is no easy, low-cost and heavily-used way to send money electronically from one account to another. On the other hand, there are sexier emerging services like Interac’s Email Money Transfer (EMT) and Zoompass mobile payments, so far with low volumes.
This makes you think. Maybe cheques are disappearing in Australia because unlike Canada, our routine payments platform has evolved organically over time to support convenient and widespread electronic alternatives. Yet for the very same reason, brand new e- and m-commerce alternatives may struggle to reach critical mass. Does this make Australia more innovative or less? In discussions about payment system innovation, step change gets more attention than gradual or organic evolution, even if evolution delivers as good or better outcomes for users. This is human nature: a new system with its own brand name and logo is more tangible, more ‘announceable’ – just not necessarily of more use.
