Martin North – Page 1001 – Digital Finance Analytics (DFA) Blog

Cold Hand Of The Regulator On Bank’s Investment Lending

Following the disclosures in the recent bank results that many were above the APRA target of 10% portfolio growth, and their statements they would work to fall within the guideline, we have seen a litany of changes from the banks, which marks an important change in tempo for investment home lending. Regulatory pressure is beginning to strangle investment lending growth. Better late then never.

In the past few days, ANZ has stated it would no longer offer interest rate discounts to new property investor borrowers who did not also have an owner-occupied home loan with the bank; Westpac is cutting discounts to new investment property borrowers according to the AFR; and Bankwest has imposed a loan-to-valuation ratio cap of 80 per cent on investor Mortgages. Changes that took effect on Friday will mean Macquarie customers taking out fixed-rate investor or interest-only loans will pay higher rates than owner occupied borrowers. Recently the Commonwealth Bank, scrapped its $1,000 investment home-loan rebate offer and reduced pricing discounts for investment home loans. In addition more broadly, Bank Of Queensland has changed its underwriting practices. NAB has also changed its instructions brokers, and as of May 13, NAB would only consider pricing below advertised rates for owner-occupiers or personal loans. “Investment loans will not be eligible for any pricing discretions. Advertised rates will apply to investment loans,” the note said. Suncorp plans to pare down discounts for investor property loans while boosting incentives for homeowner lending, in reaction to the regulatory crackdown on housing markets.

Last week we showed that currently discounts are at their peak, so will we see overall discounts cut, or reinvigorated discounts on selected owner-occupied lending? Banks need home loan lending growth to make their business work. We think the focus will be on a drive to accelerate refinancing of existing loans, so expect to see some amazing offers in coming weeks to try and fill the gap.

We know from our surveys there is still significant demand for housing finance out there. We also know that some of the non-ADI players are playing an increasing role in the investment lending sector, and these players are of course not regulated by APRA. Securitisation of Australian home loans was up last quarter, and most were purchased by Australian investors.

Mortgage brokers, who have been enjoying the recent growth ride may suddenly be finding their world just changed.

Whilst its a change in tempo, its not necessarily the end of the mortgage lending boom. It may however be the tipping point on house prices in Sydney and Melbourne, where investment loans have been responsible for much of the rise.

ASIC Concerns Prompt Bank of Queensland to Improve Lending Practices

Bank of Queensland Limited (Bank of Queensland) has improved its lending practices following ASIC’s concerns about the way it assessed applications for home loans.

ASIC was concerned that Bank of Queensland was using a benchmark figure, the Henderson Poverty Index (HPI), to estimate the living expenses of consumers applying for home loans, rather than asking borrowers about their actual expenses.

In ASIC’s view, the lack of enquiry about actual expenses, and reliance solely on HPI (which is used as a measure for estimating the minimum amount of money families of different sizes need to cover basic essential needs) was not consistent with responsible lending obligations imposed by the National Credit Act.

Bank of Queensland has updated its home loan application forms to obtain more information about a customer’s living expenses. The bank will carry out an assessment of the suitability of a loan using the higher of either the living expense figure supplied by the customer or an appropriate benchmark figure.

ASIC notes that the bank will continue to review the circumstances of borrowers who go into hardship or default to ensure that they have not been disadvantaged by a loan provided prior to the change in policy.

ASIC Deputy Chairman Peter Kell said, ‘This outcome is part of ASIC’s ongoing focus on the lending industry’s compliance with responsible lending laws. Lenders must carry out inquiries to determine whether a credit contract will be unsuitable for a consumer. Using benchmark figures such as the Henderson Poverty Index alone to estimate a consumer’s financial position is not sufficient to meet this requirement.’

In November 2014, ASIC updated Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209) to clarify that credit licensees cannot rely solely on benchmark living expense figures, and must also make inquiries about the borrowers’ actual living expenses.

ASIC acknowledges the co-operation of Bank of Queensland in resolving this issue.

Release of the Spectrum Review Report

The Minister for Communications and the Parliamentary Secretary announced the release of the Spectrum Review Report, prepared by the Department of Communications.

In May 2014, the Minister for Communications announced a review of the spectrum policy and management framework. Established in 1992, the current framework led the world in how it dealt with the complexities of spectrum management. But today, more than 20 years later, the fast changing nature of technology has dated the framework. It needs to be modernised to reflect changes in technology, markets and consumer preferences that have occurred over the last decade and to better deal with increasing demand for spectrum from all sectors.

The purpose of the review was to examine what policy and regulatory changes are needed to meet current challenges, and ensure the framework will serve Australia well into the future.

Under the Terms of Reference, the review was to consider ways to:

simplify the framework to reduce its complexity and impact on spectrum users and administrators, and eliminate unnecessary and excessive regulatory provisions
improve the flexibility of the framework and its ability to facilitate new and emerging services including advancements that offer greater potential for efficient spectrum use, while continuing to manage interference and providing certainty for incumbents
ensure efficient allocation, ongoing use and management of spectrum, and incentivise its efficient use by all commercial, public and community spectrum users
consider institutional arrangements and ensure an appropriate level of Ministerial oversight of spectrum policy and management, by identifying appropriate roles for the Minister, the Australian Communications and Media Authority, the Department of Communications and others involved in spectrum management
promote consistency across legislation and sectors, including in relation to compliance mechanisms, technical regulation and the planning and licensing of spectrum
develop an appropriate framework to consider public interest spectrum issues
develop a whole‐of‐government approach to spectrum policy
develop a whole‐of‐economy approach to valuation of spectrum that includes consideration of the broader economic and social benefits.

The Spectrum Review Report highlights the need to simplify the current framework to remove prescriptive regulatory arrangements and to support the use of new and innovative technologies and services across the economy.

The report recommends simplifying processes for new and existing spectrum users and increasing opportunities for market-based arrangements, including spectrum sharing and trading.

The three main recommendations are:

Replace the current legislative arrangements with streamlined legislation that focusses on outcomes rather than process, for a simpler and more flexible framework.
Better integrate the management of public sector and broadcasting spectrum to improve the consistency and integrity of the framework.
Review spectrum pricing to ensure consistent and transparent arrangements to support the efficient use of spectrum and secondary markets.

The report is the outcome of a review conducted by the Department of Communications in conjunction with the Australian Communications and Media Authority, and included extensive stakeholder consultation.

The legislative reforms would:

establish a single licensing system based on the parameters of the licence, including duration and renewal rights
clarify the roles and responsibilities of the Minister and the ACMA > provide for transparent and timely spectrum allocation and reallocation processes and methods, and allow for allocation and reallocation of encumbered spectrum
provide more opportunities for spectrum users to participate in spectrum management, through delegation of functions and user driven dispute resolution
manage broadcasting spectrum in the same way as other spectrum while recognising that the holders of broadcasting licences and the national broadcasters would be provided with certainty of access to spectrum to deliver broadcasting services
streamline device supply schemes
improve compliance and enforcement by introducing proportionate and graduated enforcement mechanisms for breaches of either the law or licence conditions
ensure that the rights of existing licence holders are not diminished in the transition
to the new framework.

Implementation stages would commence following the passage of legislation. This would again include ongoing consultation with stakeholders and progress over a period of some years.

The Government is currently considering the report and will prepare a response in due course. Stakeholder feedback on the report is welcomed.

The report is available at: www.communications.gov.au/spectrumreview

How Tesco’s Loyalty Card Transformed Customer Data Tracking

From CMO. Insights from Tesco about how to harness the power of customer data. Knowing is not enough, you have to apply the insights and transform.

There were no Big Data systems in 1995. In fact the term wasn’t even be discussed until more than a decade later. But that didn’t stop the UK-based retailer Tesco going ahead and building a Big Data capability.

Speaking at the Retail TECH X conference in Melbourne this week, former Tesco CEO, Sir Terry Leahy, discussed the company’s early foray into data-driven decision making. He credited it as a key reason why a retailer, who in the mid-1990s was ranked a distant third in its market, was able to surpass the performance of its two biggest rivals several times over two decades later.

Loyalty card revolutionises Tesco’s performance

Sir Terry joined the retailer as a marketing executive in 1979, and led the company from 1997 to 2011. He said the key for Tesco was Clubcard, a loyalty card introduced in 1995 that allowed the company to connect and respond to customers through data, rather than through more traditional methods.

“Data is absolutely priceless in transforming the relative position of a business,” Sir Terry said. “It was the first example of what is known today as Big Data.”

Before 1995, Sir Terry said computers were simply not powerful enough to hold information both on product movements and individual purchasing behaviour.

“It was absolutely transformational for the business,” he claimed. “We could treat customers as individuals. And we could learn what they were interested in, what their behaviours were, and we could tailor and target all of their marketing so that it was relevant to that individual consumer.”

Sir Terry said in the year before Tesco launched its ClubCard, Sainsbury’s was worth twice the value of Tesco. Within a year Tesco had overtaken Sainsbury’s. By the time he left the CEO role in 2011 Sir Terry said Tesco had outperformed its rivals tenfold.

“And it improved the productivity of our marketing, between 300 and 1000 per cent depending on the application,” he added. “We were able as a percentage of sales to spend less on our marketing going forward, it made it so effective.”

Understand the true nature of your business

Sir Terry’s formula from boosting the performance of Tesco started with building a true understanding of the true nature of the business.

“We all want the business to be doing well, but that may not be the truth of it,” Sir Terry said. “Today data plays an incredibly important role in bringing into the organisation from outside an accurate picture of how the business is perceived. And it is absolutely crucial that the organisation finds a way of bringing the voice of the customer into the business, because that’s the most reliable voice – that’s the one you should navigate the business by.

“It may be painful to hear, but if you are prepared to listen to what the customer is saying, and if you are prepared to change your business on the basis of that, then you’ll always be in business and stay connected to the customer.”

Performance monitoring through data

The company used data extensively to monitor changing customer preferences, leading to a series of industry innovations that served to transform its performance. Data also led Tesco to introduce the convenience format, going against industry wisdom that suggested that bigger was better.

“Customers were saying they were getting busier and busier, and needed a store that was handier and closer,” Sir Terry said. “So we miniaturised the supermarket into Tesco Express. In 1996 the first one opened, and today there are thousands all over the world, and most retailers no feel it is essential they have a convenience store format as part of the line-up.”

Tesco was also the first food retailer to sell online, and maintains the largest share of any food retailer in the world, holding close to 50 per cent in the UK.

Sir Terry said for an organisation to successfully implement a data strategy, it also required those who were working with data to take a leadership role within the organisation, as data can often lead to conclusions which run counter to conventional thinking.

“Knowing is not enough – you actually have to do something about what you know about customers,” he said. “You have to change the organisation. And it does need different decision-making structures actually to respond to data. It’s got to be actionable or it’s of no value at all, and that takes leadership.”

But despite the heavy investment in technology, Sir Terry said it would have all come to nought had the company lost its connection to its customers – something many consider has happened since he departed in 2011.

“Technology is just a tool,” Sir Terry said. “What matters in the end is the relationship between you and the consumer, and your ability to understand how their lives are changing.”

China Policy Shift Prioritises Growth Over Debt Problem – Fitch

Fitch Ratings says the Chinese government directives last week concerning local government debt signal a potentially significant policy shift to prioritise growth over managing the country’s debt problem. Uncertainty over the scale and strategy to resolve high local government debt remains a key issue for China’s sovereign credit profile, and the latest directives could reflect a continuation of an “extend and pretend” approach to the issue. The directives should be credit positive for local governments, while broadly neutral for banks.

A joint directive from the Chinese finance ministry, central bank and financial regulator on 15 May, instructed the banks to continue extending loans to local government financing vehicles (LGFV)s for existing projects that had commenced prior to end-2014, and to renegotiate debt where necessary to ensure project completion. This is an explicit form of regulatory forbearance, and serves to delay plans to wind down the role of LGFVs. More broadly, it also suggests that propping up growth in the short term has temporarily taken priority over efforts to resolve solvency problems at the local government level.

Fitch estimates local government debt to have reached 32% of GDP at end-2014, up from 18% at end-2008. The CNY14.9trn increase accounts for 18% of the rise in total debt.

The authorities’ efforts to rein in indebtedness have led to a squeeze on monetary conditions and credit that has dampened growth. GDP expanded 1.3% qoq in 1Q15, and April activity data indicated the slowdown has persisted into the second quarter with weak demand across the board. Fixed-asset investment growth slowed to 12% yoy for the first four months of 2015, a 14-year low. Property investment growth fell to 6% from 8.5% in March as China’s 2009-2014 real estate boom continues to unwind.. This poses downside risk to Fitch’s projection of 6.8% growth for 2015.

Earlier, on 13 May, the central government also announced a USD160bn debt swap plan by which local governments would be allowed to convert LGFV debt for municipal bonds and where the bond yields would be capped.

For local governments, the swap will ease the interest burden at a time when a slowing economy and a significant reduction in land sales are weighing on revenue growth. Local government debt often carries interest rates in excess of 7%, whereas the local bonds that will be converted from debt under this programme will be restricted to yields not in excess of 30% above central government bonds with similar tenors.

Fitch views the development of a local bond market as credit positive in itself for local governments. They will benefit from an extended maturity profile on the bonds compared with LGFV instruments. This will significantly reduce liquidity risks, and ensure a better asset/liability match. It also widens local governments’ funding channels and builds a more transparent fiscal reporting system.

More broadly, Fitch expects the resolution of China’s debt problem will ultimately involve sovereign resources, and that debt will migrate on to the sovereign balance sheet. The agency views the debt-swap plan as part of this process, even though the new local government debt is not expected to carry an explicit sovereign guarantee – as the debt is likely to be perceived as having a strong implicit guarantee. Nonetheless, the expectation of substantial contingent liabilities is factored into China’s ‘A+’/Stable sovereign IDR, affirmed in April 2015.

For Chinese banks, the shift from debt to bonds will affect profitability, especially as the rates on the swapped bonds are being capped. Banks will receive lower yields on the same exposure at a time when net interest margins are coming under pressure owing to the macroeconomic slowdown. Furthermore, the government directive to continue extending loans to LGFVs on certain projects will have a negative effect on banks’ liquidity and leverage. More broadly, the directive highlights that banks remain subject to direct influence from the authorities, which could have an impact on management governance and standards.

However, it also reinforces the role that state banks play in economic stability, and therefore the high likelihood that they will benefit from state support. Furthermore, the impact on liquidity will be offset somewhat by the fact that banks will be able to use municipal and provincial bonds as collateral to access key lending facilities. This will enable them to boost lending to higher-margin business. Notably, too, the conversions should have some positive impact on banks’ reported capital ratios as municipal bonds have lower risk weights than local government loans.

ASEAN Financial Integration – SME Funding Needs

Interesting speech from Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the ASEAN Risk Conference. The 10 countries which together are defined as ASEAN, make up a large and fast developing economic area with 600m people, and it could be the fourth largest trading bloc by 2050. But the credit gap for SMEs in East Asia is estimated to be more than USD250 billion, due to under-developed financial systems. Cross regional financial services players could have a critical role to play in future growth and development.

The vision for an economically and financially integrated ASEAN represents the aspiration of many policy makers, old and new. A recent take on this can be found in a document titled “The Road to ASEAN Financial Integration”, a study on the financial landscape and formulating milestones on ASEAN monetary and financial integration. This document endorsed by the ASEAN Central Bank Governors and approved by the Finance Ministers presents a clear, ambitious and committed statement by the region to collectively embark on this journey. In this respect, ASEAN has made meaningful progress in the identification, articulation and implementation of principles to advance financial and economic integration among its members.

ASEAN is home to more than 600 million people and if considered as a single entity, would represent the sixth largest economy in the world with a combined GDP of USD2.5 trillion. According to the OECD, the region is projected to sustain an average annual growth of 5.6% over the next four years and is expected to be the fourth largest trading bloc by 2050. Concurrently, the standards of living among the general populace will continue to improve. Household purchasing power has risen significantly over the last decade, transforming the region into a thriving hub of consumer demand. The size of ASEAN’s consuming class is expected to double from 81 million to 163 million by 2030. By 2020, Asia is estimated to account for more than half of the total global middle class population, with ASEAN representing more than USD2 trillion of additional consumption within the region.

Also, as the sources of economic growth become increasingly domestic-based, this enables many economies to diversify their sources of growth. An important development is the significant increase in intra-regional trade. These developments augur well for the region and would expand domestic demand and further fuel greater intra-regional trade among ASEAN member countries.

The promise of higher living standards and employment is also drawing large numbers of people from the countryside to cities. Today, just over a third of ASEAN’s population are living in urban areas. This is expected to rise to 45% by 2030.

Integrating national financial systems within the region is key to unlocking ASEAN’s enormous economic growth potential. As a critical component of the AEC, financial integration will significantly enhance the efficiency and effectiveness of intermediation and allocation of resources. This is crucial as the region pursues greater economic prosperity that is both inclusive and sustainable. By allowing the region’s financial resources to move more freely across borders, financial integration will open up new opportunities for businesses and trade, enhancing further financial linkages within the region.

A more integrated regional financial system would also allow a larger share of the region’s surplus savings to be deployed within the region towards productive ends, such as in physical infrastructure projects. According to the Asian Development Bank, ASEAN will require approximately USD1 trillion 1 over the next 10 years in infrastructure investments across the region. This includes for the provision of sufficient housing, efficient public transportation and access to clean water and electricity. While the numbers seem staggering, the ability to recycle the huge savings within ASEAN will substantially enhance the region’s prospects to fund and sustain such investments.

With one of the highest savings rate in the world, at approximately 30% of GDP which currently amounts to USD750 billion, a well-integrated regional financial system would provide a more comprehensive eco-system for an efficient and competitive intermediation and investment.

An important component of ASEAN growth is the critical role of SMEs in all economies. The AEC recognise this and calls for SMEs to play a greater role in contributing to the overall economic growth and development of ASEAN as a region. Access to financing, however, remains a key challenge for many businesses. Despite various national level efforts, more needs to be done for SMEs to obtain access to financing, including the funding required to grow their business beyond national borders. The credit gap for SMEs in East Asia is estimated to be more than USD250 billion. The difficulties in access to financing are compounded by underdeveloped financial systems, the need to manage multiple banking relationships across different markets, and a lack of coordinated financial advisory support to help businesses navigate the regulatory and business environment in different jurisdictions. A larger presence of regional financial institutions can significantly reduce these challenges. Banks with wide regional networks would possess the intimate knowledge of each economy and understands the unique requirements of SMEs. Such banks are well placed to serve and harness SMEs’ capability to participate more meaningfully in the region’s production networks.

For ASEAN financial institutions, the prospect of regional financial integration will also serve to raise industry standards across the region. This includes enhancing the breadth and quality of financial products and services as a result of more efficient markets and the transfer of knowledge and technology. Financial institutions will also need to meet higher standards in how they manage risk and govern their operations. To some extent, this will be driven by regulatory efforts to elevate prudential and business conduct standards. But aside from regulation, greater economies of scale and scope will also make it more feasible for financial institutions to invest in talent and more advanced technology and systems, to support business development and risk management.

Chair Yellen Says US Rates Will Rise, Slowly

In a speech by Fed Chair Janet L. Yellen at the Providence Chamber of Commerce, Providence, Rhode Island, she outlined the state of play of the US economy. Whilst there are mixed signals, she affirmed that rates will begin to rise later this year.

Implications for Monetary Policy
Given this economic outlook and the attendant uncertainty, how is monetary policy likely to evolve over the next few years? Because of the substantial lags in the effects of monetary policy on the economy, we must make policy in a forward-looking manner. Delaying action to tighten monetary policy until employment and inflation are already back to our objectives would risk overheating the economy.

For this reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy. To support taking this step, however, I will need to see continued improvement in labor market conditions, and I will need to be reasonably confident that inflation will move back to 2 percent over the medium term.

After we begin raising the federal funds rate, I anticipate that the pace of normalization is likely to be gradual. The various headwinds that are still restraining the economy, as I said, will likely take some time to fully abate, and the pace of that improvement is highly uncertain. If conditions develop as my colleagues and I expect, then the FOMC’s objectives of maximum employment and price stability would best be achieved by proceeding cautiously, which I expect would mean that it will be several years before the federal funds rate would be back to its normal, longer-run level.

Having said that, I should stress that the actual course of policy will be determined by incoming data and what that reveals about the economy. We have no intention of embarking on a preset course of increases in the federal funds rate after the initial increase. Rather, we will adjust monetary policy in response to developments in economic activity and inflation as they occur. If conditions improve more rapidly than expected, it may be appropriate to raise interest rates more quickly; conversely, the pace of normalization may be slower if conditions turn out to be less favorable.

Securitisation Of Mortgages On The Rise

The ABS released their latest statistics on the asset and liabilities of Australian securitiers to March 2015. We saw a rise in mortgage back securitisation, and a rise in issuance to Australian investors. At 31 March 2015, total assets of Australian securitisers were $140.0b, up $3.5b (2.6%) on 31 December 2014. During the March quarter 2015, the rise in total assets was due to an increase in residential mortgage assets (up $3.1b, 2.8%) and other loans (up $0.9b, 5.9%). This was partially offset by decreases in cash and deposits (down $0.4b, 9.8%). Residential and non-residential mortgage assets, which accounted for 83.1% of total assets, were $116.4b at 31 March 2015, an increase of $3.1b (2.7%) during the quarter. At 31 March 2015, total liabilities of Australian securitisers were $140.0b, up $3.5b (2.6%) on 31 December 2014. The rise in total liabilities was due to the increase in long term asset backed securities issued in Australia (up $4.1b, 3.9%) and loans and placements (up $0.7b, 3.5%). This was partially offset by a decrease in short term asset backed securities issued in Australia (down $0.6b, 18.8%) and asset backed securities issued overseas (down $0.3b, 3.2%). At 31 March 2015, asset backed securities issued overseas as a proportion of total liabilities decreased to 6.6%, down 0.4% on the December quarter 2014 proportion of 7.0%. Asset backed securities issued in Australia as a proportion of total liabilities increased to 78.2%, up 0.5% on the December quarter 2014 proportion of 77.7%.

This data relates to all Special Purpose Vehicles (SPVs) which securitise any type of asset (including mortgages, credit card receivables, lease receivables, short and long term debt securities) and which are not regulated or registered with APRA and therefore are not required to report to APRA under the Financial Statistics (Collection of Data) Act. Coverage is limited to those SPVs which are independently rated by a recognised rating agency. Internal securitisation is excluded from this survey. Internal securitisation, also referred to as self-securitisation, is a process in which an originator sells a pool of assets to a related special purpose vehicle (SPV), and the SPV in turn issues debt securities, which are held entirely by the originator. These securities are eligible for use as collateral in repurchase agreements (repos) with the Reserve Bank of Australia (RBA).

Note that revisions have been made to the original series as a result of the receipt of revised survey data. These revisions have impacted the assets and liabilities reported back to and including the September 2013 quarter.

Shoppers Switch to Smart Phones to Pay for Groceries, Takeaway – CUA

Customers using their Android phone for ‘tap and pay’ purchases are most likely to be buying their groceries or a takeaway meal, spending an average of $27 per transaction, according to new data to be released by CUA at a national conference in Melbourne. By way of background, CUA originally was formed as a credit union in Queensland in the 1940s with just 180 members. Since then, through the amalgamation of more than 160 credit unions, they have become Australia’s “largest customer-owned financial institution”, with more than 400,000 customers, over 900 employees and $9 billion in assets under management.

In July last year, customer-owned financial institution CUA became the first banking provider in the Asia-Pacific to roll out a free mobile app using HCE technology, which allowed customers to ‘tap and pay’ with any compatible Android phone. The mobile app – CUA redi2PAY – was developed by CUA’s payments provider Cuscal and works on any NFC-enabled Android phone running on KitKat 4.4 or later.

CUA Head of Customer Insights Chris Malcolm and Cuscal Head of EFT, Acquiring and Digital Colin Sultana will share insights into how customers are using their ‘mobile wallets’ as part of a case study on the redi2PAY implementation at the Australian Cards and Payments Summit taking place at the Melbourne Convention & Exhibition Centre today.

Mr Malcolm said groceries were the top retail category for redi2PAY transactions, followed by fast food, petrol stations, restaurants/ dining and alcohol purchases.

“Interestingly, the top five retail categories for redi2PAY mobile payments are the exact same retail categories where CUA customers make the highest number of Visa PayWave purchases using their debit card,” he said.

“It appears that CUA’s early adopters of mobile payments technology are literally swapping their debit card for their mobile phone, using it for the same kind of purchases as they would have made with a traditional plastic card.”

Customers using redi2PAY are also using it more frequently – the number of customers using redi2PAY more than 35 times per month was around three times higher in March than it was six months earlier in October. The number of customers using mobile payments semi-regularly (5 to 14 times per month) is up 63 per cent for the same period.

The data also shows:

Customers spend an average of $27 per transaction when using CUA redi2PAY – the same as the average amount for Visa PayWave purchases.
The number of redi2PAY transactions spikes towards the end of the week (Thursday to Saturday). Saturday has the highest number of redi2PAY transactions, while Sunday has the least. Visa PayWave transactions also peak on Saturday, while Monday has the lowest number of payments.
Most mobile payments occur between 12pm and 8pm, with a spike from 1-2pm. The trend is similar for Visa PayWave payments.
The number of redi2PAY transactions each month has increased by more than 16 per cent since September 2014.
December 2014 recorded the highest value of redi2PAY transactions for a single month, coinciding with the lead up to Christmas.

CUA and Cuscal have already been recognised in Australia and Asia as pioneers in mobile payments. A leading financial research company in Asia, IDC, recently named CUA redi2PAY as one of the top 25 mobile innovations in financial services for 2014-15.

“There is huge potential for this technology to fundamentally change how people pay for purchases,” Mr Malcolm said.

“People tend to take their smart phones everywhere they go and now, the need to also carry cash and cards in your wallets is becoming a thing of the past.”

He said approximately eight times more CUA customers now have a compatible Android phone which could be used for redi2PAY, compared to a relatively small group of customers who had the required technology when redi2PAY was launched 10 months ago.

“We’re seeing increased take-up of this HCE technology across the banking sector, as others follow our lead. The use of ‘mobile wallets’ will only continue to grow as customers become more familiar with the technology and its security features, and upgrade their Android devices to the latest models.”

TOP 10 RETAIL CATEGORIES – redi2PAY vs Visa PayWave

(1 September 2014 to 31 March 2015)

CUA redi2PAY		CUA Visa PayWave
Category of retailer	Transactions	Category of retailer	Transactions
1. Grocery stores	26%	1. Grocery stores	27%
2. Fast food outlets	17%	2. Fast food outlets	17%
3. Service stations	14%	3. Service stations	11%
4. Restaurants	10%	4. Restaurants	11%
5. Liquor outlets	4%	5. Liquor outlets	4%
6. Convenience food stores	4%	6. Convenience food stores	3%
7. Discount stores	3%	7. Discount stores	3%
8. Pharmacies	3%	8. Pharmacies	3%
9. Variety stores	3%	9. Hardware stores	3%
10. Hardware stores	2%	10. Bars/ pubs	2%