Category: Digital Disruption

CBA and Westpac launch facial recognition on the iPhone X

Commonwealth Bank says it is the first Australian bank to offer customers secure access to their accounts using Face ID, the facial recognition technology built into Apple’s new iPhone X.

iPhone X users will be able to use Face ID to securely log-in to the CommBank App.

“Our customers use secure fingerprint logins on the CommBank App about 30 million times a month,” said Pete Steel, Commonwealth Bank Executive General Manager of Digital.

“Extending that functionality to Face ID is part of our ongoing work to provide a better banking experience to our customers through simple, easy and secure features.”

Face ID is one of the most secure ways to log into an account because it performs in-depth mapping of an individual’s face using more than 30,000 points of reference. These include the spacing between, and shape of, facial features.

“While we strive towards convenience and ease of use, we don’t implement new technology without being able to guarantee security for customers,” he says.

Westpac has subsequently also announced a similar facility.

This despite neither banks offering Apple Pay.

Crunch Time In Australian Banking – The Property Imperative Weekly – 04 Nov 2017

Its crunch time in Australian banking, as property momentum slows, households feel the pinch and mortgage risks rise. Welcome to the Property Imperative Weekly to 4th November 2017.

Watch the video or read the transcript.

We start this week’s review by looking at interest rates. The Bank of England lifted their cash rate by 25 basis points, the first hike since July 2007. The move  highlights how shrinking output gaps and tighter labour markets are pushing central banks towards interest rate normalisation. The FED kept US rates on hold at their November meeting, but signalled its intent to lift rates further, and Trump’s nomination for the FED Chair, Jay Powell to replace Yelland will probably not change this.  The US economy is certainly outpacing Australia’s at the moment. Rates are indeed on the rise and policy makers are of the view that if there is the need to lift rates, the tightening should be gradual as to not destabilize the economy. The question is though whether this will neutralise the impact, or simply prolong the pain as we adjust to more normal rates.  The boom brought about by the banks’ policy of extending credit must necessarily end sooner or later. RBA please note!

Turning to this week’s Australian economic data, Retail turnover was flat in September according to the Australian Bureau of Statistics. More evidence that many households are under financial pressure. In trend terms, there were falls in WA, NT and ACT. NSW had a 0.1% rise compared to last month. On the other hand, Dwelling approvals were stronger than expected, up 1.8 per cent in September 2017, in trend terms, the eighth rise in a row. Approvals for private sector houses rose 0.7 per cent.

The latest credit data from the RBA showed housing lending grew the most, with overall lending for housing up 0.5% in September or 6.6% for the year, which is higher than the 6.4% the previous year. Looking at the adjusted RBA percentage changes we see that over the 12 months’ investor lending is still stronger than owner occupied lending, though both showed a slowing growth trend. They said $59 billion of loans have been switched from investment to owner occupied loans over the period of July 2015 to September 2017, of which $1.4 billion occurred in September 2017. So more noise in the numbers!

Unusually, personal credit rose slightly in the month though down 1.0 % in the past year.  Lending to business rose just 0.1% to 4.3% for the year, which is down from 4.8% the previous year. Business investment (or the lack of it), is a real problem. As John Fraser, Secretary to the Treasury said the bottom line is as the mining investment boom ended, Australia has struggled with weak investment in the non-mining sectors, weighing on the labour market, productivity and ultimately economic growth.

And data from APRA showed that the banks are still doubling down on mortgages, in September. Owner occupied loan portfolios grew 0.48% to $1.03 trillion, after last month’s fall thanks to the CBA loan re-classifications. Investment lending grew just a little to $550 billion, and comprise 34.8% of all loans. Overall the loan books grew by 0.3% in the month. We saw some significant variations in portfolio flows, with CBA, Suncorp, Macquarie and Members Equity bank all reducing their investment loan balances, either from reclassification or refinanced away. The majors focussed on owner occupied lending – which explains all the attractor rates for new business. Westpac continues to drive investor loans hard. Comparing the RBA and APRA figures, it does appear the non-banks are lifting their share of business, as the banks are forced to lift their lending standards. But they are still fighting hard to gain market share, which is not surprising seeing it is the only game in town!

Corelogic’s October property price trends showed that Sydney’s deflating house prices have dragged the property market down across the entire country, the most conclusive sign yet that the boom is over. October is traditionally a bumper month for property sales but average house prices across Australia’s capital cities posted no growth at all. Sydney house prices fell by 0.5 per cent, bringing quarterly losses to 0.6 per cent. Prices in Canberra and Darwin also fell (by 0.1 per cent and 1.6 per cent respectively), while Adelaide and Perth each posted zero growth. Of the capital cities, only Melbourne, Brisbane and Hobart saw property prices increase, at 0.5 per cent, 0.2 per cent and 0.9 per cent respectively. The Australian Property boom is “Officially Over”, despite stronger auction clearance results this past week, which underscored the gap between the momentum in Sydney and Melbourne. Total listings and clearance rates were significantly higher down south.

The HIA reported a further decline in New Home Sales. The results are contained in the latest edition of the HIA New Home Sales Report. During September 2017, new detached house sales fell by 4.5 with a reduction of 16.7 per cent on the multi-unit side of the market.

Lender Mortgage Insurer, Genworth a bellwether for the broader mortgage industry, reported their Q3 performance. While the volume of new business written was down 9.8% on 3Q16, the gross written premium was only down 3.9%. Underlying NPAT was down 14.5% to $40.5 million. The total portfolio of delinquencies rose 4.4% to 7,146, and the loss rate overall was 3 basis points. The regional variations are stark, the performance in Queensland and Western Australia remains challenging and delinquencies are elevated they said. WA was 0.88%, up 19 basis points and QLD was 0.72% up 5 basis points.  According to the Australian Financial Security Authority, insolvencies are also rising in WA and QLD, which is mirroring the rise in mortgage delinquency.

We released our October 2017 Mortgage Stress and Default Analysis. Across Australia, more than 910,000 households are estimated to be now in mortgage stress up 5,000 from last month. This equates to 29.2% of households. More than 21,000 of these are in severe stress, up by 3,000. We see continued default pressure building in Western Australia, as well as among more affluent household, beyond the traditional mortgage belts across the country. We estimate that more than 52,000 households risk 30-day default in the next 12 months, up 3,000 from last month. We expect bank portfolio losses to be around 2.8 basis points ahead, though with WA losses rising to 4.9 basis points.

Risks in the system continue to rise, and while recent strengthening of lending standards will help protect new borrowers, there are many households currently holding loans which would not now be approved. As continued pressure from low wage growth and rising costs bites, those with larger mortgages are having more difficulty balancing the family budget. These stressed households are less likely to spend at the shops, which will act as a further drag anchor on future growth, one reason why retail spending is muted.

The post code with the highest count of stressed households, and up from fourth place last month is NSW post code 2170, the area around Liverpool, Warwick Farm and Chipping Norton, which is around 27 kilometers west of Sydney. There are 6,380 households in mortgage stress here. The average home price is $803,000 compared with $385,000 in 2010. There are around 27,000 families in the area, with an average age of 34. The average income is $5,950. 36% have a mortgage and the average repayment is about $2,000 each month.

Mortgage stress is still strongly associated with fast growing suburbs, where households have bought property relatively recently, often on the urban fringe. The ranges of incomes and property prices vary, but strikingly it is not necessarily those on the lowest incomes who are most stretched. The leverage effect of larger mortgages has a significant impact.

The latest Household Debt Trends from the ABS also showed first, more households are in debt today, compared with 2005-6, and second more households have debts at more than three times their income. Those on lower incomes have borrowed harder, with 50% in the bottom income range borrowing, compared with 44.6% in 2003-4.

Many banks are cutting their mortgage rates to try to attract new borrowers, desperate to write business in a slowing market, because mortgage lending remains the only growth engine in town. We saw announcements from ANZ, and Virgin Money, the Bank of Queensland-owned lender who cut rates by up to 21 basis points and also lifted the maximum LVR to 80%.  On the other hand, mirroring other lenders, Westpac is the latest to bring in a number of responsible lending changes affecting how brokers enter in requirements and objectives (R&O) questions for clients. In a note to brokers the bank said: “This will ensure that the correct R&O are captured accurately for all applications submitted and resubmitted and there is a central location that incorporates all the R&O information that has been discussed between yourself and the client with documented evidence of any loan changes,”.

More evidence of the impact of regulation on the mortgage sector came when Bengido and Adelaide Bank’s CEO provided a brief trading update as part of the FY17 AGM. There are some interesting comments on the FY18 outlook. First they have been forced to “slam on the breaks” on mortgage lending to ensure they comply with APRA’s limits on interest only loans and investor loans. As a result, their balance sheet will not grow as fast as previously expected. On the other hand, this should help them maintain their net interest margins, their previous results had shown a steady improvement and strong exit margin.  They are forecasting 2.34%.

NAB reported their FY17 results and cash earnings were up 2.5% to $6,642 million, which was below expectations. NAB now has its main footprint in Australia, (and New Zealand). Of the $565 billion in loans, 84% of gross loans are in Australia, and 13% in New Zealand. 58% of the business is mortgages, and 10.9% of gross loans, or $62bn are commercial real estate loans, mainly in Australia. So you can see how reliant NAB is on the property sector. NIM improved a bit, although the long term trend is down. Wealth performance was soft, and expenses were higher than expected, but lending, both mortgages and to businesses, supported the results.  They made a provision for potential risks in the retail and the mortgage portfolio, with a BDD charge of 15 basis points but new at risk assets were down significantly this last half. The key risk, or opportunity, depending on your point of view, is the property sector. Currently portfolio losses are low at 2 basis points but WA past 90-day mortgages were up. If property prices start to fall away seriously, new mortgage flows taper down, or households get into more difficulty (especially if rates rise), NAB will find it hard to sustain its current levels of business performance. Ahead, they flagged considerable investment in driving digital, and major cost savings later into FY20 with a net reduction of 4,000 staff.

It is worth saying that back in the year 2000, NAB’s net interest margin was 2.88% compared with 1.85% today, which is lower than ANZ’s 1.99% recently reported. This should be compared with US banks who are achieving 3.21% on average according to Moody’s. It shows that considerable reform of banks in Australia are required. The biggest expense by far is the people they employ. The future of banking is digital! As the mortgage lending tide recedes, the underlying business models of Australian banks are firmly exposed. They have to find a different economic model for their business. Just pulling back to Australia and New Zealand and flogging more mortgages will not solve their problem.

And that’s the Property Imperative Weekly to the 4th November 2017. If you found this useful, as always, do leave a comment below, subscribe to receive future updates, and check back next week for our latest weekly digest

The Robots Are Coming to a Bank Near You

The NAB results yesterday included one of the clearest signals yet of the digital disruption which is hitting the finance sector (and other customer facing businesses too).

Worth also reflecting on the fact that since the turn of the century NAB’s net interest margins have fallen 100 basis points, to below 2% today. They have to find a different economic model for the business. Just pulling back to Australia and New Zealand and flogging more mortgages will not solve their problem. The biggest expense by far is the people they employ.

They will shed 6,000 banking jobs and replace them with 2,000 people holding digital skills, from analytics through to software engineers.  The future of banking is indeed digital.

This is because banking is a very “bittable” business, and just like newspapers do not need to sell physical documents to distribute news, banks do not need branches, or people on the customer service or sales lines. If they get the digital design right.

In fact, when we completed our last “Quiet Revolution Survey” which looked at customers and their banking channel preferences, we concluded:

The Quiet Revolution highlights that existing players need to be thinking about how they will deploy appropriate services through digital channels, as their customers are rapidly migrating there. We see this migration to digital more advanced amongst higher income households but momentum continues to spread. So players which are slow to catch the wave will be left with potentially less valuable customers longer term. Players need to adapt more quickly to the digital world. We are way past an omni-channel (let them choose a channel) strategy. We need to adopt a “mobile-first” strategy. Such digital migration needs to become central strategy because the winners will be those with the technical capability, customer sense and flexibility to reinvent banking in the digital age. The bank branch has limited life expectancy. Banks should be planning accordingly.

Many households and small businesses were critical of the slow pace at which banks were moving to service digital, and the lack of innovation available via mobile banking applications. And not just younger “digital migrants”.

So the task in hand for NAB and other other industry players, is to manage down the traditional branch and ATM infrastructure, while building compelling digital alternatives, whether it be payments, core banking or wealth management. And keep the business afloat during the transition. Think changing the propellers on an airplane for jet engines while in flight!

It is quite feasible to use robo-banking technologies to replace mortgage brokers, and financial advisers. It is completely possible to apply for a mortgage end-to-end on line, and deliver a quicker and more compelling customer fulfillment experience. Electronic payments can now replace cash. The mobile device will contain an electronic wallet and payment capability and rewards programmes and much more. Physical plastic credit cards are a thing of the past. Every electronic transaction produces data which is now the new life-blood of banking. Use that data to guide customers to new solutions.

The barriers to change have been the culture (especially in the middle management ranks) within banking organisations, so defaulting to a “let the customer choose” channel approach. But this was always a cop-out. Plus the complexity of the ancient “back-end systems” many of which are tens of years old, have to be tackled or replaced (as the CBA has done).

But now, banks have to be re-engineered and migrated to digital, harnessing the power of algorithms, robotics and user experience experts. A whole new world. We may need banking services, but do we need a bank?

Then there will be consequences for society. First, banks of the future will have many fewer staff, and those who remain will need different skills. Almost none will be customer facing. Just as robots replaced workers on the assembly line, robots are now becoming bankers.

Second, the minority of customers who a Digital Luddites will need to be handled appropriately. The current branch infrastructure is just too expensive. How will banks meet their implicit service obligation? Or will they try to trade it away, as they did with the ATM network?

But third, and this is the rub. What we are discussing here is also happening across other industries, and as the digital revolution gains pace, the risk is that more people find themselves without employment.

This is the worry-some aspect of digital transformation.  Digital efficiency will mean fewer jobs. What happens to those without?

We are just 10% along the digital journey. It is unstoppable, and business models, careers and whole chunks of the banking system will be shaken to pieces. Just ask the Fintechs! But the social implications should certainly be considered too.

Australian Fintech Environment On The Up

The EY FinTech Australian Census 2017 has been released. Around 600 Fintechs are operating in Australia, the number has grown quite fast. More are generating revenue, and some are profitable. Australia is ranked 5th on their global analysis.

EY was commissioned by FinTech Australia to conduct a census of fintechs in Australia over the last two years. A broad research program was set in place in collaboration with a FinTech Australia steering committee. The research was conducted between August and September, 2017.

This report presents the key findings based on 166 quantitative online surveys, 10 in-depth interviews and 16 vox-pop style interviews.

They conclude that around 600 Fintechs are operating in Australia, having more than doubled since 2015.  A greater proportion of fintechs have been in business for more than three years. 71% of businesses are now generating revenue.  What falls under the ‘fintech’ banner is now much broader (think RegTech, cyber/digital security, Data Analytics etc.) and firms that would see themselves as ‘fintech’ are stretching far and wide into other tech industries (e.g. Agtech, etc.)

The findings show that 45% are targetting retail consumers, 43% targetting banks and other FSI’s and 35% targetting SME’s or other start-ups.

Wealth management was the largest industry segment at 30%, followed by lending at 20%, then analytics 18%.

The largest number are based in NSW (54%).

Funding remains a challenge, and private funding dominates.

In 2016, most fintechs in Australia have received some private funding (72%). Six in ten (57%) accessed some commercial funding and on average have raised $4.2m in capital; this is greater than the average amount of $2.2m raised by fintechs that exclusively accessed private funding.

One in seven fintechs stated that they are currently profitable. Of those that have not started to realise profit, their current burn rate is on average $115k a month. This is an increase in what was seen last year where the burn rate was $84k month.

Australia ranked 5th with a 37% adoption rating. While in the shadows of the quite different markets of China (69%) and India (52%), Australia is on par with other developed economies with similar financial systems (e.g. US and UK).

The growth rate in Australia is one of the fastest.

Why the RBA would want to create a digital Australian dollar

From The Conversation.

The Reserve Bank of Australia could join the likes of Estonia and Lebanon in creating a cryptocurrency based on the Australian dollar, to reap the benefits of technology like the blockchain but with more stability than other well known currencies like Bitcoin.

The RBA has already been approached by interested startups to create this new digital currency, known as the “DAD” or Digital Australian Dollar.

In contrast with other cryptocurrencies a state-backed digital currency has the advantage of being backed by the government as in fiat currency, but at the same time has the technological advantages shared by other cryptocurrencies.

A digital Australian dollar could remove the role of middlemen and create a cheaper electronic currency system, while at the same time enabling the government to fully regulate the system.

It would also allow transactions to settle faster (several minutes to an hour) than the traditional banking system (several hours to several days), especially in a situation where an international payment is involved.

The difference between a digital Australian dollar and Bitcoin

We already use the Australian dollar in a digital form, for example paying via your smartphone. But banks are essential in this system, moving money on our behalf.

When using a cryptocurrency, you interact with a system like the blockchain, an online ledger that records transactions, directly. Bitcoin, Litecoin, and Ethereum are examples of cryptocurrency that use the blockchain in this way. These currencies are created by the community that use them and are accepted and trusted within the community.

However, since the community runs the system, the price of the cryptocurrency solely depends on the market mechanism. When the demand increases, the price increases, but when the demand decreases, the price also decreases. While it might create an opportunity for speculators to gain profit from trading, it also creates risk for the cryptocurrency holders.

In comparison to cryptocurrency, the Digital Australian Dollar might be well managed that the price volatility could be reduced significantly. The government holds the capability of increasing or decreasing the money supply in the system. This power can be used to stabilise the market supply of the new digital currency.

The blockchain technology also reduces the fee for every payment made. This is made possible by removing the role of banks or other intermediary parties charging fees for their services. However, a small transaction fee still needs to be introduced to protect the system from being flooded by adversaries with insignificant transactions.

The characteristics of cryptocurrency itself might limit its usage to daily transactions. As the pioneer of cryptocurrency, Bitcoin was created to become a payment system, but the users gain incentive by simply saving their cryptocurrency and not using them to purchase goods or services.

They believe the future price of the cryptocurrency is higher than the current price and thus does not make a good medium of exchange nor a store of value. There is no guarantee that the cryptocurrency will hold any value in the future. Since there is nothing to back up the value, users will lose their wealth when the community no longer acknowledges the value of cryptocurrency.

Cryptocurrency might also jeopardise the local government’s effort of implementing regulations to minimise illegal activities. Perpetrators create cryptocurrency transactions easily without being detected by the government’s financial monitoring system.

The privacy features of cryptocurrency also make it hard for law enforcement agencies to determine the actors behind illegal activities. Although most governments in the world have enforced the coin exchange services to identify their users, the operation of the cryptocurrency is beyond their reach.

There are other state-backed digital currencies

The idea of creating a national cryptocurrency is not new. Estonia has explored ways to create Estcoin, following an initiative on the blockchain-based residency registration called e-Residency. Lebanon’s central bank has also started to examine the possibility of creating one.

Despite the efforts of those central banks, several questions must first be addressed before launching the real product to the public. The user’s financial data could be exposed since the blockchain will make all transactions created in the system transparent.

Consumer protection is also a concern since all transactions made in the blockchain are permanent without the possibility of being reversed. Without firm solutions to those problems, the Digital Australian Dollar will not satisfy all requirements to be the next groundbreaking innovation for the country’s financial system.

Author: Dimaz Wijaya, PhD Student, Monash University

The Next Round In The Payments Wars

The Commonwealth Bank, Westpac, and National Australia Bank are working together to build the next generation of mobile payments and wallets in Australia.  These banks are not offering the Apple Pay solution, unlike ANZ. They sought unsuccessfully  to negotiate collectively with Apple in order to gain access to the iPhone’s near-field communications (NFC) chip which would allow their own apps to make contactless payments.

The first initiative of the new joint venture will be the development of a payment app that will enable instant payments for all Australians, including small businesses, regardless of who they bank with.

Beem will be a simple and convenient free app enabling anyone to make an instant payment using their smartphone, and request payment from someone who owes them money or to split a bill. The hope is that it will become an industry-wide payment solution, and is open to interest from other banks, industry, and retail players.

Beem will work on both iOS and Android smartphones, and will be compatible across devices and different banks – users won’t need to be customers of CBA or Westpac or NAB.

Commonwealth Bank Group Executive of Retail Banking Services, Matt Comyn, said Beem will give Australians a simpler way to pay and request payments, a pain point for both consumers and small businesses.

“Two thirds of small businesses say they are owed money for completed work, with around $7,300 owed to small traders. Beem will give small businesses a cost effective and easy way to collect payments instantly and on the go for their goods and services, without having to take the larger leap into using merchant credit facilities, or issuing invoices to be paid later,” Mr Comyn said.

Beem will benefit from bank level security and encrypted user account information. Every transaction will be authenticated and subject to real-time fraud monitoring.

Westpac Chief Executive, Consumer Bank, George Frazis, said Beem expands payment choices for customers, and is the latest offering in Australia’s long history of innovative payment solutions, including EFTPOS, Pin@POS, chip, tap and pay, and wearable payment devices.

“We are committed to giving our customers more choice by supporting a range of convenient ways for them to pay and transfer their money. Customers will soon be able to ‘Beem’ free payments instantly using any smartphone, regardless of who they bank with and without the need to add account details.

Innovations such as Beem and wearables are leading the way in payment solutions because they’re convenient, easy to use, and fit in with people’s lifestyles – we firmly believe in going to where our customers are and providing them with greater choice,” Mr Frazis said.

NAB Chief Operating Officer, Antony Cahill, said the bank is continually looking for opportunities to make banking easier, simpler, and more convenient for its customers, both consumers and businesses.

“Think about all the times you’ve gone out for dinner and split the bill – this app will make it easy for Australians to pay their family and friends instantly. Or, when you go to the local market and need to pay the butcher – this means instant payment through your phone. This is the industry working together to deliver an innovative payments solution, no matter who you bank with,” Mr Cahill said.

Commonwealth Bank is currently conducting user testing of a Beem prototype, with the app to be available for download on iOS and Android smartphones later this year.

Beem will initially have a sending limit of $200 a day ($6,000 per month), with a monthly receiving limit of $10,000 as an initial risk control measure.

Beem will be available to all bank customers and small businesses that hold a global scheme debit card issued by an Australian Authorised Deposit-taking Institution (ADI).

The joint venture will be independently run, with a mandate to actively seek new participants to join the initial three participants. Future product initiatives beyond the payments facility are being planned, including digital wallet features and capabilities.

Westpac Reveals ‘PayWear’ Wearable Payment Technology

Given the stalemate with Apple Pay, it is interesting to see the recent announcement that Westpac customers will soon be able to tap-and-pay hands-free with the announcement of a new wearable payment option, ‘PayWear’.  “Westpac PayWear uses the same contactless payment technology as your Debit Mastercard®. You simply tap the accessory wherever contactless payments are accepted and the transaction will be debited from your everyday bank account”.

Westpac 'PayWear'

PayWear Essentials, available early December, includes a silicone band and a ‘keeper’, which can be easily attached to an existing watch or fitness band, containing a microchip (PayWear Card) linked to the customer’s everyday transaction account.

Customers can tap and pay in the same way they regularly do with their debit card, without having to reach for their wallet or smartphone, through the new range of waterproof and battery-free wearable accessories.

Westpac Group Chief Executive, Consumer Bank, George Frazis said customers across the country embrace greater convenience and expect to be able to simply tap-and-pay.

“Australia has the highest contactless penetration in the world, and cards continue to replace cash as consumers demand convenience. We’re always looking for new ways to help make our customers’ lives easier, and with our new PayWear products, customers will be able to pay on-the-go, in one hands-free step.

“With PayWear, there is no need to search through a bag, login to an app or worry about battery life. It will be on the go with our customers and ready for use when they are.

“When speaking with customers, personal style and choice were important. In fact, 70% agreed that they would only wear a wearable device if it suited their own personal style and lifestyle. This is why we will collaborate with iconic Australian designers to create a variety of wearable accessory designs to suit different tastes, preferences and styles,” Mr Frazis said.

The first Australian designer to be announced, who will design a range of unique products for Westpac PayWear, is award-winning surfboard shaper and entrepreneur, Hayden Cox of Haydenshapes. A range of leading Australian designers will be hand-picked to speak to a wide mix of everyday Australians – from surfers and fitness fanatics, to busy parents, professionals and festival-goers.

Hayden Cox says the opportunity to collaborate with Westpac has been a natural fit when it comes to designing products that are innovative, functional and stylish.

“Functional design is something I’ve always been passionate about – particularly technology and products that improve experiences for people. It was this passion which led me to creating and filing a patent on my parabolic carbon fibre surfboard construction, FutureFlex, and wanting to uniquely design my product to improve the surfing experience.

“Working with Westpac to create an exclusive range of wearable accessories which evolve the way people make contactless payments is exciting to me. This product signals an inevitable and innovative progression of our everyday routines. While some customers may opt for the simpler Essentials range, there is also a part of the market that will want something with a little more flavour. This is where the products I’m designing will sit.”

All Westpac customers with an everyday banking account eligible for a Debit Mastercard® will be able to order a PayWear Card online via Westpac Live, which can be inserted into the PayWear accessory of their choice. The PayWear Essentials range of wristband and keeper will be available from December. The Designer range is due to be available to customers in early 2018.

Westpac customers will be able to use PayWear to make purchases on all contactless-enabled terminals.

“Unlike many other wearable payment options, our customers don’t require an expensive device to access this technology. Customers will be able to get a PayWear Essentials accessory free of charge for a limited time, making it accessible to all our everyday banking customers,” Mr Frazis said.

The announcement of PayWear builds on the Westpac Group’s strong history of digital innovation, as the first to introduce internet banking to Australia, and the first in the world to deliver fingerprint sensor technology (Touch ID) to mobile banking logon in 2014.

On The Digital Innovation Front Line

I had the chance to catch up with Martin McCann, the CEO and Co-Founder of Trade Ledger, the newly launched platform-as-a-service for business lenders and claimed as the world’s first open digital banking platform exclusively for business lending. The platform, they say, will help banks assess business lending risk in real time and will so address the US$1.7 trillion global under-supply in trade finance lending, so providing high-growth companies with much-needed working capital.

Martin McCann, the CEO and Co-Founder of Trade Ledger

Martin McCann has a long history is tech, including time with SAP in their Business Networks Division, and applied this experience to seeking out the best fit opportunities as companies digitise their supply chains. He thinks businesses, especially those in the mid-market who are growing fast, are completely underserviced by banks and other financial institutions, and so built Trade Ledger to close the “last mile” gap between these firms and their lenders; something which is now possible thanks to the migration of business data into the cloud.

McCann says he does not see Trade Ledger as a Fintech, as it does not lend to firms directly, but rather is a technology company which via its platform, facilitates the connection between lenders and businesses. And he has ambitious growth plans, not just in Australia but beyond over the next 3 years.

Targeting mid-market firms, with a turnover of around $20-100m, the platform ingests data from their invoicing and accounting systems via an open api, (and can also pull information from enterprise systems like SAP), as well as trading documentation, financial information, bank statements and credit bureau data.   Trade Ledger also has its own trade invoicing solution, which can also be used. They apply custom analysis to these datasets on the platform.

Trade Ledger Platform

Then they work with Lenders who want to use the platform, getting the lending, risk and product teams in the bank to define their trade finance underwriting processes, giving the opportunity to transform these processes, before customising the Trade Ledger platform to meet their specific credit assessment requirements.

Once set up a lender can make trade finance lending decisions more quickly, and accurately, and McCann says the business case to these banks is very compelling. Currently they have a couple of Australian non-bank specialist lenders on the platform, and expect a global top-20 bank to come on board soon.

And here is the rub, their experience to date has been that banks in Australia may recognise that Fintechs should not be regarded as competitors, but rather partners (something which has changed relatively recently); but the process of working inside their slow and complex decision making machinery means lenders are missing the boat. In fact, McCann points to the UK, where lenders are up for the challenge, and cites examples of organisations who say within 4 weeks of engaging with a new concept, they guarantee a decision, so as not to waste time. Hence the global focus.

McCann and his team are clearly on a mission, and already have plans to bolt in additional added value functionality into the platform, based on artificial intelligence and machine learning which can leverage the rich data in the system.

Whilst he sees potential for Blockchain down the line, they are focussing on accurately predicating the probability of default and fraud within a firm and transaction set, complete with confidence scores. This should be operational in 1Q 2018. This will enhance the lenders underwriting ability and provide greater benefits across the value chain.

Another innovation which he calls Conversational Commerce, is aimed at the owner of the business, by providing analysis of their working capital and offering these insights by a bot, thus enabling the owner to benefit from the knowledge and experience contained in the platform. This solution will appear sometime next year.

So this is one to watch. They have spotted a real niche, are harnessing the best of digital transformation to help firms source the trade credit they need to grow, and assist lenders to improve their underwriting processes and operational efficiency. Through their open platform, they are, we think, on the Digital Innovation Front Line.

Mastercard and Partners Show Augmented Reality Shopping

From Brand Channel.

As shoppers look for more secure payment transactions and engaging in-store and online/mobile experiences, Mastercard is using augmented reality to deliver on that as well as enhance the overall retail experience.

Mastercard chose Money20/20 in Las Vegas this week to demonstrate how its Masterpass solution seamlessly enhances an AR-based retail shopping experience that uses iris authentication for a simpler, security-focused solution.

In Mastercard’s vision, shoppers can view digital representations of products before purchase, learn more about them and see additional options not available in the physical location along with access to instant recommendations.

To complete a purchase, users can pay using Masterpass and iris authentication, technology developed by Qualcomm, selecting a card from their Masterpass-enabled wallet and press the Masterpass button on the screen. Items can be taken home or shipped depending on availability.

“At Mastercard, we are seeing major shifts in how commerce is conducted, as people lead increasingly connected, digital lifestyles,” stated Sherri Haymond, EVP, Digital Partnerships, Mastercard.

“As the physical and digital worlds blend together, we are focused on developing solutions that provide merchants with the ability to accept payments across all technology platforms possible—in-store, in-app, online, and in AR and VR—to help drive how people will experience shopping and payments in the future.”

In Las Vegas, the partners also used the Saks Fifth Avenue brand, marks and likeness to showcase the physical retail environment.

Neeraj Bhatia, Director, Product Management, Qualcomm Technologies, Inc. said in the release, “Qualcomm Technologies’ iris authentication and extended reality technologies for Snapdragon 835 are designed to support a future generation of contextually aware commerce experiences using secure, augmented reality. We are delighted to work with Mastercard and Saks Fifth Avenue to showcase new AR experiences on ODG’s sleek smart glassed based on our Snapdragon 835 Mobile Platform.”

The partners designed a Money20/20 experience to inspire brands and merchants to dream up new ways of enhancing the in-store shopping experience. Part of it is about drive sales by delivering additional content and information during shopping, leveraging:

  • Masterpass, the digital payment service from Mastercard, and Identity Check Mobile, which enables users making purchases to authenticate with physical traits including fingerprint, facial and voice recognition software;
  • ODG’s expertise to lead the development of the AR shopping experience, as well as its award-winning extra-wide-field-of-view R-9 smartglasses with enhanced iris tracking cameras; and
  • Snapdragon 835 Mobile Platform running the Snapdragon XR SDK and iris authentication technology with liveliness detection for a superior authentication experience.

Mastercard is betting on AR to “reshape the retail environment, making it more immersive and efficient.”

Ralph Osterhout, Founder and CEO at ODG said in the release, “This solution showcases the transformative nature of augmented reality in the retail space and highlights the power and performance of ODG smartglasses and the unparalleled potential for headworn AR to change the way we see and experience the world.”

Michael Miebach, Mastercard, Chief Product Officer explained the company’s ambitions for impacting “the lives of the underbanked and underserved.”

ATO warns ride-sharing drivers about GST obligation

From Smart Company.

The Australian Taxation Office has put the hard word on ride-sharing drivers and the wider gig economy, reminding drivers working for platforms like Uber about the importance of meeting their GST obligations next tax time.

The tax office determined in 2015 that ride-sharing and ride-sourcing drivers should be classified in the same way as taxi drivers for GST purposes, meaning they must register for an Australian Business Number and for the GST even if they are under the $75,000 threshold.

Uber appealed the decision in the Federal Court earlier this year but lost, and since then the ATO has been periodically reminding drivers of their tax obligations.

However, the tax office says the message isn’t getting through, with ATO assistant commissioner Tom Wheeler saying in a statement that the tax office has notified over 120,000 ride-sharing drivers over the past 18 months regarding their tax obligations.

“We know that most drivers do the right thing, and we are now focusing attention on the minority of drivers that are not currently meeting their obligations,” Wheeler said in a statement this morning.

“Our message to taxpayers is that if you have a ride-sourcing enterprise you must get an Australian Business Number and register for GST as soon as you start driving. You also need to include the income on your tax return at tax time.”

Wheeler notes the ATO is sourcing information “directly” from banks and facilitators, and warns “we know who you are, and we know if you aren’t correctly meeting your obligations”.

“This isn’t a black economy issue,” says Lisa Greig, SME and start-up tax specialist at Perigee Advisers.

“The money’s going through Uber and into a bank account, [and] it will be found.”

Companies should remind workers of GST obligations

Wheeler says if ride-sharing drivers who have not registered for GST continue to ignore the ATO’s prompts, the tax office will register the drivers itself and then backdate the registration to their first ride-sharing payment.

“[The drivers] will be required to lodge and pay all outstanding tax obligations. Penalties and interest may also be applied,” he says.

Greig tells SmartCompany she believes many of these outstanding cases would be drivers who maybe did a few trips for a ridesharing app over a couple of weeks, made around $60 dollars, and then haven’t driven again.

“Those people still have to be registered for GST,” she says.

Businesses who employ a significant number of these ride-sharing type contractors – such as Uber – should have a “duty of care” to inform workers of their GST obligations, believes Greig.

SmartCompany understands Uber drivers are directed to the ATO’s ride-sharing information page and notified of their obligation as part of the signup process, but Uber is unable to sign them up when a driver registers on the platform, because Uber not a registered tax agent.

Other companies working with similar types of contractors should take a similar course in informing them about GST obligations, because companies should make it “as simple as possible” for workers.

However, one reason the ATO is having to chase people now might come down to the slackness of the drivers, Greig says, suggesting that signing up for an ABN and GST would likely take less time than signing up to drive with Uber.

“People who forget to register for GST are like those people who forget an old bank account has $2 of interest in it when it comes to tax time.”

Looking to the future of tax reporting, Greig says it won’t be surprising if Uber driving income is automatically detected by the tax office in future.

“But with where this is all going, in the future all your ride-sharing data will just get populated in MyTax come tax time and you won’t have to worry.”