Payments – Page 7 – Digital Finance Analytics (DFA) Blog

NAB launching Alipay in Australia

National Australia Bank is rolling out Chinese QR code payment method Alipay across the country, with the bank to offer it to its Australian business customers from 2019.

NAB featured an article on this earlier in the year:

Is Alipay open to Australian shoppers?

You need to have a Chinese passport to set up an account with Alipay for making purchases, so using Alipay as a payment method won’t be possible for most Australians. Our strategy is to grow acceptance of Alipay among Australian merchants so Chinese consumers have a payment method that’s familiar to them, whether they’re migrants, tourists or students. This benefits local businesses, putting them in a better position to attract Chinese consumers. It’s important to remember that Alipay is not a competitor to banks in Australia; we’re a partner.

What kind of take-up is Alipay seeing in Australia and what kinds of businesses are using it?

Alipay is the preferred payment method for Chinese people visiting Australia. We partner with close to 10,000 merchants nationwide and the take-up is growing significantly. The types of Australian businesses using Alipay tend to be retailers, including those located in Chinatowns as well as prominent tourism locations like Sydney’s The Rocks and Melbourne’s Federation Square.

Alipay lets shoppers scan QR codes with their phones to simplify mobile payments. What’s the potential for QR code payments to take off in Australia?

QR codes are increasingly a popular part of the payment process in China. For example, people scan QR codes to do everything from making donations to street musicians to controlling the temperature in hotel rooms. Alibaba’s Hema supermarkets throughout China have, for example, been developed to help bridge the gap between online and offline retail: all goods in Hema supermarkets feature QR codes. The codes aren’t just about payments, either; customers can scan the QR codes to learn more about the product. Alibaba is on a big growth drive there – this year, the number of Hema stores in Beijing will grow from five to 35.

How can Alibaba help Australian businesses looking to make headway in China?

Australia is already the third highest selling country into China on Alibaba’s Tmall Global online retail platform, with Australian brands such as Swisse and Bio Island among the most successful merchants on the platform globally. With more than 1,300 Australian brands selling on Tmall Global, many of which entered China for the first time through our platform, Alibaba remains central to their China strategy.

However, Alibaba doesn’t just offer an ecommerce platform. Our vision is to build the entire operating infrastructure to allow businesses to expand globally. In Australia, we launched our cloud computing arm Alibaba Cloud in 2016, while a growing number of merchants are offering Alipay. Longer-term, we’re planning to bring the full benefits of the Alibaba ecosystem to our partners and merchants across Australia.

And this on their announcement:

Enterprises with a NAB merchant terminal will be able to offer Chinese travellers Alipay in-store, along with access to promoting their businesses on Alipay’s marketing platform, which now holds 870 million active users.

Shane Conway, executive general manager of deposit and transaction services at NAB said that more than 1 million Chinese tourists visit Australia each year, spending more than $11 billion.

“By making China’s number one payment method available to NAB business customers, we’re enabling greater customer service and providing our business customers with access to this large tourism sector which is a win-win for everyone,” Mr Conway said.

“We’re beginning pilot testing with a small group of business merchant customers in November, before making the payment system available to all merchants through existing point-of-sale terminals in early 2019.”

George Lawson, country manager of Australia and New Zealand at Alipay said he is delighted to partner with NAB to help their business customers across the country connect to the expanding number of Chinese tourists.

“China is now Australia’s largest tourism market accounting for 81 per cent of the growth in tourism spend in Australia in the last 12 months. Enabling seamless payments with Alipay represents a significant commercial opportunity for Australian businesses,” said Mr Lawson.

He said the deal provides tens of thousands of merchants the ability to switch-on Alipay seamlessly and reduce friction at the point of sale for Chinese visitors, residents and students.

“Beyond facilitating transactions, Alipay’s marketing platform drives incremental customers and revenue as it offers the best exchange rates and reduces the anxieties associated with using a foreign currency,” Mr Lawson said.

“We expect this deal will give NAB a significant advantage among business owners wanting to capitalise on the China opportunity.”

NPP Transactions Outpaced Cheques

Tony Richards, RBA Head of Payments Policy Department spoke at the Chicago Payments Symposium, Federal Reserve Bank of Chicago and described the progress on the new payments platform – NPP. 2 million PayID registrations have been achieved so far, and the volume of payments has already outpaced cheques in the system.

Initial NPP operations

After industry testing through much of 2017, the NPP became operational for industry ‘live proving’ in November 2017. It was launched for public use on 13 February this year. This involved around 50 institutions initially, with this number now having increased to around 65 institutions.

As with any completely new payment system, financial institutions have mostly taken a staged approach in their rollout strategies, gradually introducing services, channels and customer segments. In some cases this was to manage risk and allow them to fine-tune their systems and processes, while in other cases it has reflected different stages of readiness. The major banks have mainly focused initially on providing payment capabilities to consumers ahead of businesses, with the rollout to consumers now at a fairly advanced stage.

At this point, there are more than 50 million Australian bank accounts accessible via the NPP, with that number growing steadily. The number of PayID registrations has just reached 2 million – Australia has a population of 25 million. And monthly volumes and values of NPP transactions have been growing strongly.

One interesting statistic is that the number of payments occurring through the NPP has already surpassed the number of cheques that are being written by Australian households, businesses and government entities

An international comparison also offers another interesting metric. While each country is its own special case, it appears that the adoption of the NPP is proceeding at least as quickly as occurred for some other fast-payment systems

As long as the rollout of NPP to households has not been completed, advertising of Osko by BPAY has been limited, but I would expect that this will be picking up, and that financial institutions will also be doing more promotion of real-time payments to their customers. So I would expect the value and volume of NPP transactions to continue to grow strongly.

Some early lessons learned

While the NPP was launched less than eight months ago, I think one can make a number of observations that may be of interest to this audience regarding its design and build, as well as its operation to date.

The presence of a well-resourced project office (from KPMG as well as from APCA and then NPPA) that was independent of the participants was important in the design, build and test phases. This ensured high quality papers for meetings, brought skills that might not have been readily available from participants, and provided independent perspectives during debates about the design and build

Having three aggregators (or service providers) involved as participants was important in ensuring the broad reach (and public legitimacy) of the NPP. The majority of the institutions that were ready to go on Day 1 were small banks, credit unions and building societies using the services of aggregators.

While the build of the Basic Infrastructure and FSS in the centre were major projects, the internal builds for NPP participants were the most challenging tasks. The systems of large banks are inevitably extremely complex, and upgrading them to allow real-time posting and 24/7 operation has taken longer than expected for some. Banks have also placed significant focus on ensuring that their fraud detection systems can support real-time payments.

Ubiquity (or near-ubiquity) is important. It is hard for a new payment system or for individual participants to go out and market aggressively to customers until a critical mass of institutions and accounts are on board. However, balancing this point and the previous one is a challenge. Decisions to launch to the public can only occur once a critical mass of participants is ready, but a program cannot be expected to move at the pace of the slowest participant.

Real-time settlement is going well. The challenges raised by out-of-hours and weekend operations can be met by appropriate central bank liquidity arrangements. Banks can easily move the balances in their Exchange Settlement accounts between the FSS and the RBA’s main RTGS system during normal business hours. These balances are then all moved into the FSS overnight and on weekends. In addition the Reserve Bank introduced a new liquidity facility for open-dated repos, which are available to holders of Exchange Settlement accounts at no penalty relative to the Bank’s policy rate.

Five or six years ago, some banks may have questioned the case for moving to real-time payments, however no one is questioning that case now. Indeed, the early signs are that banks are looking to move their Direct Entry payments over to the fast rails sooner than was earlier expected. Similarly, the decision to move to the ISO 20022 message format and richer data will be an important one for future innovation.

It was important to have the Addressing Service ready to launch on Day 1. PayIDs get around the problems of end-users having to enter lots of numbers, give certainty about the recipient, help avoid ‘fat finger’ problems and mistaken payments, and can reduce fraud.

The involvement of the central bank – from the policy side, as well as in the delivery of settlement arrangements and as a banking service provider – has been important. I suspect that some industry participants may initially have had some concerns about having the Reserve Bank involved, but that they would recognise now that our involvement helped to get some key aspects of the design, build, and business rules right.

The fact that the Basic Infrastructure will be operated as an industry utility available to all, with commercial payment services to be provided by separate overlay services, was also helpful in getting agreement among participants in the design phase.

With the initial build mostly complete, the industry has ambitious plans for additional NPP functionality. While some of this could potentially be delivered via overlay services, it is likely that there will be additional central functionality provided or arranged by NPPA – for example, possibly a central consent and mandate service that could be used to enable direct debits though the NPP. As NPPA increases its capabilities, it may also look to new means of providing functionality. On Friday it announced an API framework with three sample APIs.

Next Round In The Payments Wars 2

A joint venture backed by three of Australia’s big four banks has released its first app, with Beem It now available for iOS and Android devices according to a report in Computerworld.

The Commonwealth Bank of Australia, National Australia Bank and Westpac in October revealed that they would back Beem It, which the trio said would operate independently and seek to sign up additional partners as it developed cross-platform mobile payment services.

The launch of the joint venture came in the wake of the failure of the three banks, along with Bendigo and Adelaide Bank, to receive Australian Competition and Consumer Commission (ACCC) blessing to act as a cartel when negotiating with Apple over its Apple Pay platform.

More than 50 Australian financial institutions support Apple Pay. However, of the big four, only ANZ supports Apple’s digital wallet for iOS devices.

CBA, NAB, Westpac and Bendigo and Adelaide Bank lodged an application with the ACCC that would have allowed them to band together and negotiate with Apple over a number of issues relating to mobile payments.

A key goal of the banks was to force Apple to open up access to the iPhone’s Near Field Communications (NFC) antenna — which would allow the banks’ own iOS applications to support tap-and-go style payments over NFC.

Apple said in response that it would never open up NFC access.

Beem It allows instant payments between individuals signed up to the service. It can also be used to pay businesses that support Beem It and to split bills.

“We’re excited to bring instant payment technology to all Australians, ensuring that everyone can pay, request and split money via their smartphones, regardless of who they bank with,” Beem It CEO Mark Wood said in a statement.

“Beem It uses real-time banking technology to transfer funds between banks and ensure money doesn’t get in the way of great life moments.”

The service is offering $5 credit as a launch promotion. Beem It has a daily limit of $200 a day for sending money, and $10,000 for receiving money.

Earlier this year Australia’s New Payments Platform has its public launch.

The NPP facilitates real-time payments between banks, as well as additional services such as “data enriched” transactions and PayID, which allows payments to be sent using alternative identifiers instead of BSBs and account numbers.

Sleepwalking Into A Cashless Economy

In Australia, our household surveys also show significant appetite for digital payments, especially via mobile devices, and more than half of households here have not used cash for any transaction in the past month. And its rising. The drive to cashless seems unstoppable.

Yet I got caught out yesterday by the NAB systems failure, which saw their payments and internet banking services wiped out thanks to a power failure in Melbourne. My local garage has a NAB terminal and was unable to process EFTPOS payments. Luckily they had the paper based backup, which took credit cards, for later processing. Then at the local café I could not use person to person digital payments from my mobile – they were only taking cash, so I went to an ATM to find that was not working. Luckily I scraped up the spare cash I had pay for my coffee. An object lesson in frustration, and for some businesses, a loss of business, which granted NAB said they would consider compensating.

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And this in the week where Telstra’s whole internet and phone system went down (without an explanation this time – at least they did not blame a lightning strike like the previous episode). And of course CBA’s payment systems had gone down previously.

Reflecting on all this, I am pulled in two directions. I am a fan of a digital migration towards a cashless society, yet it also shows there are potential risks which need to be explored further. In fact, consumers, who prefer digital, might be sleepwalking into future disaster. Time to think harder about the risks of going cashless.

And we are not alone. In some Scandinavian countries, the rush towards a cashless society is also hitting some turbulence. Take Sweden for example. It is one of the most cash-free societies in the world. The proportion of cash payments in the retail sector fell from about 40% in 2010 to about 15% in 2016. Two-thirds of consumers say they completely manage without cash; just as many say they mostly use cards even for payments under $20. More than half the nation’s bank branches no longer take or issue cash. Many stores greet the shopper with notices that they no longer accept hard currency. As a result, the total value of cash payments in the economy has fallen to less than 2% of GDP.

“In the not-too-distant future, Sweden may become a society in which cash is no longer generally accepted,” the Swedish central bank said recently. And in February, the bank warned that Sweden could soon face a situation where all payments were controlled by private sector banks. The Riksbank governor called for new legislation to secure public control over the payments system, arguing that being able to make and receive payments is a “collective good” like defence, the courts, or public statistics.

These comments have brought other concerns about a cash-free society into the mainstream. To put it bluntly, when you have a fully digital system you have no weapon to defend yourself if someone turns it off.

And in addition, no system based on technology is invulnerable to glitches and fraud. In the past year two Swedish banks had problems with card payments and by Bank ID, the digital authorisation system that allows people to identify themselves for payment purposes using their phones. And in addition every transaction can be tracked and recorded, remember Facebook?

Now, the banks recognise that digital payments can be vulnerable, just like cash but argues that they are no more vulnerable than any other method of payment. And they say, it is being driven by the customer preference for convenient payment alternatives.

A recent opinion poll said almost seven out of 10 Swedes wanted to keep the option to use cash, while just 25% wanted a completely cashless society.

So I think it’s time to reconsider the implications of digital payments, not least because payments can be tracked, digital networks appear vulnerable and with ATMs disappearing, it will be harder to get cash when needed.

Perhaps cash is king, after all.

The Battle Of The Mobile Wallet

Juniper Research has just released a report “NFC Vs QR Codes ~ Which Wallet Wins?”

They estimate that, by 2019, nearly 2.1 billion consumers worldwide will use a mobile wallet to make a payment or send money, up by nearly 30% on the 1.6 billion recorded at the end of 2017. The emergence of several high profile mobile payment services, including Apple Pay, Samsung Pay and Google Pay, has provided the sector with fresh impetus.

Furthermore, the accounts (or wallets) used to store consumer credentials are now have an integration of offline and online payments, enabling users to access them both for remote purchases and instore.

But there are significant regional variations in the mechanisms to make contactless mobile payments. In some countries mobile wallets win out, whereas elsewhere the NFC payment card wins. In addition Host card emulation (HCE) is on the rise, the software architecture that provides exact virtual representation of various electronic identity (access, transit and banking) cards using only software. Prior to the HCE architecture, NFC transactions were mainly carried out using secure elements, such as the chip on a card or other means.

HCE enables mobile applications running on supported operating systems to offer payment card and access card solutions independently of third parties while leveraging cryptographic processes traditionally used by hardware-based secure elements without the need for a physical secure element. This technology enables the merchants to offer payment cards solutions more easily through mobile closed-loop contactless payment solutions, offers real-time distribution of payment cards and, more tactically, allows for an easy deployment scenario that does not require changes to the software inside payment terminals.

When we compare the relative share of contactless cards and wallets in key markets outside the US (Europe, Canada and Australia), we see that, typically, cards account for well over 90% of transactions by value (rising to 98% in Spain and Canada). In the US, the positions are reversed, with mobile wallets accounting for 87% of the total.

While many markets focus on enabling instore mobile payments via NFC (which uses the same infrastructure and technology as contactless cards), a small number have embraced QR code-based instore payments. While precise mechanisms vary, typically the consumer is presented with a printed QR code, after which he/she launches the payment app and scans the code with the smartphone camera. This directs them to a payment page, where the transaction amount is entered and the transaction is made.

By far the most successful deployments of QR code-based payments have come in China, where these have already surpassed cash and cards in both instore transaction volume and values. Deployments elsewhere are sporadic, but the mechanism has been a mainstay of Scandinavian wallets for several years and is also gaining traction in India.

However, a study by researchers at the System Security Lab at the Chinese University of Hong Kong’s Department of Information found that it was possible to gain access to the phone’s camera to record an image of a QR code.

Furthermore, as QR codes can contain any kind of data (not just payment/transaction details), it is possibly to create codes containing links to malware or phishing sites.

As a result, the People’s Bank of China confirmed in December 2017 that it would be introducing plans to regulate payments by QR codes and other scannable codes. The new regulations, which come into effect in April 2018, will include a payments cap of RMB500 ($79) for basic payments, rising to RMB5,000 ($790) if additional security procedures are implemented, such as tokenisation, risk monitoring and anti-counterfeit measures.

Outside China, NFC has long been the proximity payment mechanism of choice by mobile wallet providers, although the initial model whereby the SE was based on the SIM has largely been jettisoned in favour of alternatives, where the SE is either embedded in the handset or else virtualised using HCE.

The evolution of offline payment in the US has lagged behind that in other developed markets, with EMV only mandated from October 2015. After that point, if merchants had not introduced processing systems to facilitate chip-based payments, then liability for fraud would pass from the card providers to those merchants.

Even with the onset of EMV, banks were reluctant to move to Chip & PIN, apparently concerned that their customers would be unable to remember a 4-digit PIN. Hence, US customers now use Chip & signature instead of the more secure alternative.

This means that Apple Pay and the wallets that followed in its wake, have the opportunity to establish themselves as the contactless mechanisms of choice.

The challenge facing Apple and its rivals is to ensure that the infrastructure is in place for consumers to make instore payments. According to Head of Apple Pay Jennifer Bailey, when Apple Pay first launched in September 2014, it was supported by just 3% of retailers, a figure that had risen only marginally by the end of that year. However, by the end of 2017, half of US retailers supported the mechanism, indicative of the progress that contactless has made in that market.

Nevertheless, although a majority of the remaining US retailers are now believed to own POS terminals capable of fulfilling contactless transactions, a significant number have not yet activated the technology. Furthermore, in some stores only a minority of terminals accept the technology: Juniper estimates that just under 30% of all POS terminals in the US were capable of processing contactless transactions by the end of 2017.

Purely from a payments and convenience perspective, it will be difficult for mobile wallet providers to gain market share from contactless cards. It is therefore incumbent upon them to deliver services through which the mobile wallet will become the default payment mechanism.

We would argue that there are at least 2 means by which this could potentially be achieved:

Offering an integrated wallet which can be used on both offline and online environments;

Offering services based around loyalty.

HCE threatens the central role of the network operator in NFC’s value chain, it strengthens that of the bank and makes handset-based contactless payment a more attractive proposition.

Banks have increasingly understood this. By the end of 2014, Juniper Research estimates that just 7 banks had introduced commercial services based on HCE. By mid January 2016, that number had increased to 55; by the end of 2017, Juniper Research estimates that well over 200 banks had introduced such services. Those launching in 2017 included Belfius (Belgium), Citi (US), Credit Agricole (France), Deutsche Bank (Germany), Rabobank (Netherlands) and SBI (India).

A number of banking collectives have also sought to implement HCE. In June 2016, the Danish banking collective, the BOKIS partnership, launched an HCE wallet utising a solution provided by Nordic digital payments specialist, Nets. The BOKIS partnership includes 62 banks that form the small to mid-sized banks segment of the Association of Local Banks, Savings Banks and Cooperative Banks in Denmark, together with 5 Danish regional banks: Jyske Bank, Sydbank, Spar Nord Bank, Arbejdernes Landsbank and Nykredit Bank. Meanwhile, In October 2016, 27 Spanish banks teamed up to launch a new mobile payment platform called Bizum whicih utilises HCE.

However, despite this plethora of bank launches, adoption has been relatively modest: many services have only a few tens of thousands of users, with none yet reporting that they have achieved more than a million. The scale of the challenge facing the banks is largely tied to that facing NFC in general: in Western Europe; banks’ own contactless services are up against both contactless cards and the OEM-Pays, making it extremely difficult to gain a foothold.

Cardtronics to amend unfair ATM contracts

The ACCC says ATM provider Cardtronics has admitted that its subsidiary, DC Payments, offered contract terms with small business that may be unfair under the Australian Consumer Law.

Cardtronics has given a court-enforceable undertaking to the ACCC to change terms that may be unfair for businesses under existing contracts.

“Business contracts need to balance the rights of each party to ensure they aren’t unfair, as smaller firms may not always be in a strong negotiating position,” ACCC Deputy Chair Dr Michael Schaper said.

“We considered Cardtronics’ contract had several unfair terms, including automatic renewal for six years, unilateral increase of fees, and first right of refusal should businesses seek to change providers at the contract’s conclusion.”

Cardtronic has co-operated with the ACCC’s investigation, and undertaken not to enforce unfair terms for all existing merchants, some of whom entered contracts six years ago.

“This undertaking is a great outcome for Cardtronics’ customers, as the unfair contracts protections for small business only became effective in November 2016,” Dr Schaper said.

While Cardtronics contracts will continue to be automatically renewed, the minimum notice to cancel will be reduced from six months to three months and Cardtronics will provide written notice to customers five months before the end of the contract.

Previously, merchants had to keep track of automatic rollover dates more than five years after entering contracts.

Cardtronics must also provide written notice of any fee increase to customers and allow them to terminate the contract without penalty under a new contract term.

The undertaking is available at Cardtronics Australasia Pty Ltd

Background

This outcome is part of a wider ACCC review of small business contracts in a range of industries. As part of this review, the ACCC has been engaging with a range of businesses to encourage compliance with the new unfair contract term provisions.

For more information, see Businesses remove unfair contract terms before new law.

The Australian Consumer Law allows a court to determine that a term of a standard form contract is unfair and therefore void, meaning that the contract is treated as if the term never existed.

If the term is declared void, the remainder of the contract continues to bind the parties to the extent that it can operate without the unfair term.

From 12 November 2016 the unfair contract terms provisions of the Australian Consumer Law were extended to cover standard form contracts involving small businesses.

Sydney Angels funds QPay $570k to steal millennial students from banks

Australia’s first ever student marketplace app, QPay, has raised $570,000 from a series of high profile investors, including Sydney Angels and the Sydney Angels Sidecar Fund 2, to break into student banking through the release of a student-targeted QPay MasterCard.

QPay aims to use the QPay MasterCard to capture the largest cluster of millennial consumers at the point when they’re most likely to begin making serious financial decisions – when enrolled in tertiary education.

“University is the time when life decisions start to become quite future-focussed, especially regarding our finances,” said Andrew Clapham, Co-Founder of QPay.

“We might be weighing up the amount of student debt we can responsibly accrue, and what return we might expect to receive career-wise. We could be trying to save for a deposit on a property, and wondering the best place to deposit our cash. Or, we might simply be getting a handle on our first experience with budgeting outside of Mum and Dad’s house.

“Whatever the case, university is a crucial turning point for financial decision-making. And the thousands of student transactions occurring on our app each month have allowed us to develop a financial product that perfectly suits the financial behaviour of this group.

“Given that universities arguably comprise the largest cluster of millennials anywhere in Australia, we see this as our first step towards becoming the next challenger bank for millennials,” said Andrew Clapham.

QPay is already used by more than 150,000 students across all major Australian and UK universities, including the University of Sydney, Melbourne, and Queensland, and the University of Oxford and Cambridge. The QPay MasterCard will build on the financial behaviour of these students by uniquely tailoring the rewards it offers every time the card is used for a purchase.

“If you’re a frequent coffee drinker, expect a free coffee from your local coffee shop, or if you regularly shop from a certain store, your next purchase may come with a 50% discount,” continued Andrew Clapham.

“Students are always looking for affordability and convenience – the best deal for the least amount of effort – which is why QPay is being so strongly embraced across all of these universities,” concluded Andrew Clapham.

QPay is backed by a Corporate Authorised Representative with an AFSL license, and the waiting list for the MasterCard has already grown to 4,305 students, far exceeding the initial goal of 2,000 cards.

This proof of concept was a key attraction for QPay’s prestigious investors, which include the head of Royal Bank of Scotland’s Australian arm, Andrew Chick, world-renowned leadership consultant, Charles Carnegie, and prominent angel investor, Rayn Ong.

“QPay’s viral acquisition strategies have created a high level of adoption and engagement even at this early stage,” said Rayn Ong, lead investor and non-executive director of QPay. “It makes sense to take it one step further by bundling relevant deals into the MasterCard offering.”.

QPay received $400,000 from Sydney Angels in 2016 in its first funding round, and has since performed over $11 million transactions for university students – a number which is projected to double by the end of 2018.

The original idea came when the co-founders were students, and realised there was no single access point for student needs such as second-hand textbooks, timetabling, accommodation, student organisations, and campus events.

NAB Adds Samsung Pay

NAB customers can now use Samsung Pay to conveniently make contactless payments.

Samsung Pay is a secure and easy-to-use mobile payment service that allows users to add credit and debit cards from participating financial institutions, and loyalty cards from participating merchants.

NAB Executive General Manager of Consumer Lending, Angus Gilfillan, said Samsung Pay complements the bank’s mobile payments service, NAB Pay, which customers can already use on compatible Samsung and other Android devices.

“We are continuing to invest in giving our customers the best digital payments experience,” Mr Gilfillan said.

“We know Australians increasingly want to pay for their purchases quickly and conveniently. The growth in ‘tap and pay’, and take up of NAB Pay since we launched it two years ago, has been remarkable.

“By adding Samsung Pay, we’re giving our customers more choice in digital wallets.”

NAB customers can also use Samsung, Fitbit, and Garmin smartwatches to make contactless payments, and NAB will also be adding Google Pay to its suite of mobile payment services very soon.

“We see the highest number of NAB Pay transactions being made at supermarkets, restaurants, and at takeaway venues – which is exactly when you want to be able to make quick and easy payments,” Mr Gilfillan said.

Samsung Electronics Australia’s Head of Products and Services, Mark Hodgson, says Samsung is thrilled to be able to provide the Samsung Pay experience to even more Australians.

“Our partnership with NAB builds on our commitment to providing a simple and secure digital wallet experience to every Australian using a Samsung smartphone or wearable. We believe our collaboration with partners like NAB will help further enhance our mobile experience, and we look forward to evolving the portfolio further over the upcoming year.”

NAB also announced last year that it is working with the Commonwealth Bank of Australia and Westpac to build Beem It, a free app enabling anyone to make an instant payment using their smartphone, and to request payment from someone who owes them money or to split a bill.

“We are continually looking at all options to provide our customers with access to safe and secure ways to make digital payments.”

“From our own mobile banking app and NAB Pay, to a range of other payment platforms and services, we’re investing in solutions to help our customers use and manage their money. We’re very pleased to be launching Samsung Pay to our customers now,” Mr Gilfillan said.

NAB’s Mobile Banking App includes a range of world-leading features to help customers have more control over their cards. Features include the ability to switch on or off online transactions, overseas card usage, and ATM withdrawals, and to block, unblock, and replace a card that may have been lost.

The app also includes real-time alerts and merchant information, providing customers more information about their transactions straight away, and a range of options to help them know more about and manage their repayments and accounts.

U.S. Mobile Payments Survey Shows Banks Still Trying To Catch Paypal

JPMorgan Chase & Co. has work to do if it wants Chase Pay to have the same kind of customer adoption as PayPal Holdings Inc.’s digital wallet, based on the results of a recent survey commissioned by S&P Global Market Intelligence.

About 39% of the individuals that used a mobile payment app to pay for an in-store retail purchase in the 30 days prior to taking the survey had used PayPal, versus 13% for Chase Pay.

This was one of several findings of the survey, which began with 904 respondents. Of those, 405 had not used a mobile payment app in the past 30 days, which gave us insight into why respondents would not want to use such services. The 499 that did use mobile payment services, meanwhile, yielded clues on what people do with their apps, such as the aforementioned in-store retail purchases.

Despite offering alternative services, Chase Pay recently partnered with PayPal, letting clients link their cards to their PayPal accounts through Chase Pay to access the PayPal wallet. This is not uncommon, as PayPal partners with other large banks and credit card issuers, such as Bank of America Corp. and Citigroup Inc., to link customer cards to their app. And as our survey data illustrated, respondents often used more than one wallet service.

PayPal also dominated in the survey question regarding person-to-person payments. Nearly 70% of those that had transferred money to an individual used PayPal, and the third most-used app was Venmo, which PayPal also owns.

Based on our survey, bank apps were slightly more popular than Venmo for person-to-person payments, with about 25% of respondents saying they had used a mobile bank app and about 23% saying they had used Venmo.

The RBA on NPP

From a speech by Michele Bullock RBA Assistant Governor (Financial System) – Address to Seamless Payments 2018.

As you know, the NPP launched to the public in mid February. It is the culmination of more than 5 years’ work from inception to launch. It involved unprecedented cooperation between financial institutions to build the capability to send and receive individual payment messages between themselves in real time, with settlement also occurring transaction-by-transaction through the Reserve Bank’s Fast Settlement Service. But it also required banks to upgrade their internal systems to allow posting to customer accounts within a few seconds. The resources involved in delivering the system as a whole were substantial.

Australia is obviously not the first country to build a fast payments system. FIS in its 2017 report on fast retail payment systems noted that there were some retail payment systems with real-time features as early as the 1970s and 1980s.^[1] The report listed 25 countries with live real-time systems in 2017. It listed a further 10 systems under development, at that time including Australia. FIS also provided a useful taxonomy to compare and contrast the various systems – its Faster Payment Innovation Index (FPII). The index rates faster payment systems on the basis of the features they provide. At a basic level, in order to be classified as a fast payment service the system must provide interbank, account-to-account payments in less than one minute end-to-end and be irrevocable. But, the more value-added services and openness to innovation, the higher the rating.

The Australian NPP was not rated in this report since it was not live at the time. But it certainly will offer many of the features that rate highly in the FPII. For example, the taxonomy lists ISO standard and 24/7 availability as being highly desirable features enhancing customer value – the NPP offers both these. It lists fast settlement, the ability to include remittance information with payment and the ability to assign an alias to a bank account as being some of the optional features that maximise customer value. The NPP also delivers these features. There are other capabilities that the NPP does not currently provide – like ‘pull payment’ capability – but the infrastructure will allow other services to be offered in the future.

One of the things that is unique about our NPP is the architecture. There are three facets to this. The first is that the infrastructure for exchanging messages is based on a distributed architecture rather than a centralised hub. Participating institutions implement payment gateways that exchange messages with other payment gateways. There is no centralised infrastructure that processes and switches messages. One key advantage of this architecture is that there is no central point of failure. It also means that many of the functions that might typically be performed in a hub, such as fraud monitoring and exceptions processing, are done by the individual participants. This might be desirable for institutions that want to maintain control over these processes.

The second facet of the architecture that is quite innovative is the separation of the clearing and settlement infrastructure from commercial overlays. The infrastructure has been set up as a utility, and pricing will be on a cost recovery basis. This infrastructure can then be utilised by any number of commercial ‘overlays’ to deliver services that use the NPP’s real-time clearing and settlement capabilities. The first of these is Osko – initially offering person-to-person payments but within a year or so offering payment with document and request to pay. It is also expected that other innovative services will look to leverage the real-time payment capability of the NPP.

The third relatively unusual facet is the real-time transaction-by-transaction settlement of retail payments 24 hours a day, 7 days a week. Australia has had a real-time gross settlement system for high-value payments for weekday settlements for the past 20 years. And this is indeed best practice around the world for high-value payments. But not many countries currently provide real-time settlement of retail payments, and even fewer offer it 24/7. Many fast retail payments services, for example, settle payments in batches through the day or only during business hours. The advantage of utilising real-time settlement in our fast payment service is that it extinguishes settlement risk and removes the need for other controls over settlement risk, such as caps on exposures. The fact that these controls are not required removes some limitations that might otherwise need to be considered by overlay service providers as they design their products.

So now we have this world-class infrastructure, what for the future?

The first point to note is that it is still early days. Given the complexity of the build and the long-term nature of this important piece of infrastructure, the launch was never intended to be a ‘big bang’. While there had been extensive testing ahead of launch, including an extended period of live proving, moving into production always uncovers some issues. A cautious approach to ramping up volumes was therefore an appropriate way to manage the operational risks.

Second, the experience of fast payment systems around the world suggests that volumes will increase quite slowly at first. It took the UK Fast Payment Service around 3½ years to get to 10 transactions per person per annum and Swish, the Swedish system, just under 3 years to get to this level. There are probably a couple of reasons for the initially relatively slow growth in volumes. It will take some time for people to become familiar with the new system – people are typically quite set in their payment habits. Furthermore, like all networks, there are positive externalities the more participants there are. That is, as more financial institutions offer fast payments and the reach of the system grows, it provides greater value to both individuals and businesses. If none of my family and friends can receive payments through the NPP I am less likely to sign up for an alias and use it. But the more people I can pay using the system (and the more people I can receive money from) the higher value I get from the system.

Graph 2: Use of Fast Payments Systems — Graph 2

Third, as noted earlier, the system has been set up to encourage the development of commercial ‘overlays’ using the real-time payment capability to deliver value-added services to consumers and businesses. Aside from the additional Osko services in prospect, possible overlays might include services for superannuation, e-invoicing and motor vehicle sales. I am sure there are many innovative minds turning to the possibilities.

This brings me to an issue that has caused some concern among potential new players in this space – access to the NPP. They observe that the system has been built by the financial institutions and is governed by a board made up of those institutions, including the four major banks. They worry that these institutions will either make participation very difficult or costly or, alternatively, will have the inside running on developing and launching commercial overlay services.

I think there are a few reasons to be optimistic that access will not be an issue. To begin with, as I noted earlier, the NPP is a utility. It is aiming to cover costs, not make a profit. Further, given that many of its costs are fixed, it is in the interests of NPP Australia (NPPA) to get as many payments through the system as possible to lower the per-transaction cost.

The structure of the board and the constitution also provide some protection. The board is comprised of eight participant financial institutions (the four major banks plus four elected representatives of smaller institutions), two independent non-executive directors (of which one is chair) plus a director representing the Reserve Bank. Each director has one vote and the constitution notes that an objective of NPPA is to promote the public interest, including through fair access.

But it is also worth noting that the NPP at its core is an infrastructure that facilitates clearing of payment messages between financial institutions and settlement of those obligations across accounts at the Reserve Bank. In this sense, it is similar to other clearing and settlement systems – cheques, direct entry or payment cards, for example. It is not necessary, or even necessarily efficient, for all financial institutions to participate directly in clearing and settlement. In the NPP, for example, there are three aggregators that provide indirect access to institutions that do not want to incur the cost of participating directly. Indeed, there are already around 50 smaller banks, credit unions and building societies that are able to offer fast payments to their customers using the aggregators.

Similarly, it is not necessary for non-financial institutions that want to use the real-time capability of the NPP to participate directly in clearing and settlement. Just as they use the rails of other payment systems through a financial institution to offer their services to customers, they will be able to use the NPP. NPPA is already engaging with start-ups on how they might utilise the infrastructure. More generally, if a business doesn’t like the price for fast payments it is getting from its bank, there are many other institutions that can offer an alternative.

In the end, though, if it looks as though lack of access is stifling competition, the Reserve Bank has the power to designate and set an access regime. As I said, I am fairly optimistic that we will not have to. But it is always an option.