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Apple Pay in Australia

10 August, 2015
Chris Hamilton
Payment System

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.

New research highlights an increasingly “banked” world

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.

Why does it take up to a day to process my internet payment?

The use of online banking websites and mobile banking apps has increased a lot in Australia. We have one of the fastest uptakes in the world of that sort of technology. One of the side effects of this is that people are now much more aware than they used to be of how quickly a payment they are expecting is going to hit their account. And that’s led to a lot of discussion and chatter about how quickly payments take place.

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.