innovation Archives - Page 5 of 5

Fast payments – the difference a year makes

This time last year, I reported on the lodgement of an industry proposal to develop new real-time payments architecture for Australia. Rashly, I suggested that: - The Payments System Board would back the industry proposal (they did); - APCA would publish the proposal in full, so everyone knew what we were on about (we did); and - Industry collaboration on the new architecture would need to get going quickly if we were to have a shot at meeting the challenging timeframes set by RBA (and that happened too!)

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.

A health plan for the payment system

Recent data shows Australian non-cash activity overtaking cash transactions for the first time. These days almost every economic act other than a small consumer purchase requires an electronic transfer of value through the payment system by card, direct credit, direct debit, BPAY or some other method. This means that the payment system has become to the economy what your arteries and veins are to you – critical for economic health. One might think, then, that keeping the payment system “fit” (that is, secure, efficient and competitive) would be the subject of a well-developed “health plan”. Curiously, in many countries this has not been the case.

Evolutionary cycles in the payments system

The publication of the Reserve Bank’s Conclusions for its two year Innovation Review is shaping up as the catalyst for a new round of structural evolution in the Australian payments system. Payment participants have been set a challenge: establish a better long-term payments platform. Doubtless, effective coordination of industry participants is needed to meet the challenge. Nevertheless, it will be good old-fashioned competition that delivers the new products that ultimately benefit customers. Bluntly, new payment systems only take off when schemes and participants work out how to use them to offer stuff that customers want, and will pay for.

Innovation in a networked world

18 October, 2010
Chris Hamilton
Payment System

Here at APCA we have been thinking about network innovation a lot lately – not least because the Reserve Bank is also thinking about it, in their Strategic Review of Innovation in the Payments System. There is a lot of management theory on innovation: diffusion of innovations, disruptive and sustaining innovation, even plenty of recent thinking about clustering of expertise and innovation networks (not the same thing as innovation IN networks, by the way). But none of the theory I’ve read so far really grapples with the special problems of services that have a network effect – ie where the number and kind of other users of a service affect its attractiveness to any one user. Payments is a classic network service – merchants want to accept a card with the biggest possible issued base (or perhaps issued to lots of high net worth people); consumers want a card that is accepted in every shop near their home, and so on.