APCA Blog - Page 9 of 14 - APCA Views & News

The times they are a ’changin’…

We seem to be getting a lot of media queries at the moment about electronic payments, how they work, and how quickly they happen. Maybe this is a consequence of the increasing use of mobile banking – people can see things happening on their accounts wherever and whenever. This means that the mechanics of payments are more “in your face”. In line with changing customer expectations, payments processing is speeding up, but doing this in a reliable and secure way itself takes time, given the size and importance of the system. Australia’s “direct entry” electronic payments system handles around 8 million payments a day, between about 35 payments organisations (banks and others). There are around 300,000 registered users – these are businesses that routinely use the system – and millions of account-holders. The system is the backbone of Australian business, supporting every kind of payment from big outlays, like commercial rents, through salary and wages (these days, nearly all of us get paid by direct entry) down to the little payments we make to each other on internet and mobile banking.

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

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.

Fast is no longer enough

The goal-posts are shifting in new "real-time" payments systems. It is safe to assume that if anyone, anywhere builds a new payment system, it will be real-time. That particular bar has been well and truly set by the UK's faster payments system, followed up by the Paym P2P mobile solution that started there last year. All round the world, countries that don't have a real-time alternative are working on how to get one. In the US, The Clearing House has announced its intention to develop a new real-time system, and the Canadian Payments Association is beginning its own debate on payment system modernisation. But the Brits are not resting on their laurels either - they have begun speccing out a new "world class payments system" as the next generation.

The return of collaboration

14 January, 2015
Chris Hamilton
Payment System

As I think about payments developments in 2014, what strikes me is that the payments world is now in a phase of collaborative systemic innovation, the like of which we have not seen in 20 years. I have written about the cyclical nature of network evolution before. It’s all about network effects - ie the reality that, in payments as in other network industries, the net value of a service is proportional to the number of other people using the service. Wherever there are large network effects, an evolutionary balance must be struck continuously between service innovation based on the existing network, and systemic innovation to enhance the network itself. The former uses new technology and/or new business thinking to improve services to end users without trying to change the network itself - because this is expensive and hard to do. Service innovation tends to be competitive in nature. A good example is Square, which innovates in the merchant/customer interaction by riding the rails of the existing card schemes. The latter - systemic innovation - seeks to upgrade the underlying network so that new and better services can ultimately be delivered to end users. The current global enthusiasm for real-time payments is largely in this category - building new networks to (eventually) deliver better services. Because this needs a large number of existing participants to coordinate in upgrading their technology and operations at the same time, it is typically collaborative more than competitive, and government often has an important role to play.

Payment costs in Australia – early observations from new RBA research

6 January, 2015
Brad Pragnell
Payment System

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).