RBA criticises payments innovation

Summary:Australia's central bank has criticised the nation's four largest commercial banks for shirking on investments in payment systems technology, resulting in a lack of innovation and neglect of systems like EFTPOS.

update Australia's central bank has criticised the nation's four largest commercial banks for shirking on investments in payment systems technology, resulting in a lack of innovation and neglect of systems like EFTPOS.

A correction was made to this article. Please go to the end of the article for details.

The lack of investment had resulted in a situation where Australia was lagging behind other countries, the Reserve Bank of Australia told the BankTech conference in Sydney yesterday, after the nation had initially led the world in the 1980s with the EFTPOS network.

"Payment industries — and this comes down to innovation — has the problem of the slowest mover: you can only move as fast as the slowest person wants to move. And this is a real problem in Australia," said Michelle Bullock, RBA head of payments policy.

"If you can't get all four banks on board, then the project won't go ahead."

Instead of investing in networks that could generate benefits to the consumer, banks had focused on marketing cards, said Bullock.

"So much of our focus in Australia has been innovation on cards. When I speak to people, they say, 'We're innovating'. When I say what are you doing, they say, 'We have a platinum card instead of a standard card, or we have a photo on our card'. That's not the innovation I'm talking about... There is a whole aspect of innovation which is about cooperation, not competition," she said.

[Without standards] ... a chip on a card is just a fashion statement

Chris Hamilton

Chris Hamilton, CEO of the Australian Payments Clearing Association, said chip and pin credit cards were another example where greater cooperation is required.

"Until you had standards that worked across the industry, a chip on a card is just a fashion statement. It doesn't actually do anything until there is a terminal ... that can read that chip," said Hamilton.

While the National Australia Bank's contact-less mobile phone payment system, a trial jointly being run with Nokia and Telstra, was one example of innovation in payment systems, the stand-off between banks has left Australian consumers with payment choices dominated by PayPal, credit card schemes Visa and Mastercard, and a neglected EFTPOS network, according to Bullock.

"Why haven't alternatives sprung up? I think there is a demand for it out there," said Bullock.

Major banks instead have increasingly relied on the payment networks offered by Visa and Mastercard, for example, by issuing debit cards that use their networks.

In response to Bullock's comments that banks had failed to invest, Commonwealth Bank's general manager of credit card and retail banking services, Stephen Karpin, deferred blame to the bank's own customers.

"The reason why scheme (Visa, Mastercard) debit is appearing to be appealing to the market is because customers are asking for it. It has more functionality on it than what we have been able to provide on EFTPOS," said Karpin.

The National Australia Bank's senior manager of product innovation, cards, Amanda Ralph, blamed Australia's scale for the lacklustre state of innovation in payment systems.

"I agree there is always a need for a degree of regulation, but I think in the innovation space in Australia, a key driving factor — or an impediment — is that we just don't have the economies of scale that countries in Europe or Asia are able to drive in their innovation projects," she said.

RBA's Bullock said the bank would not regulate investments in payment networks; however, ACPA's Hamilton pointed out that a previous inquiry had recommended the RBA use standards to facilitate greater cooperation between competitors.

This article mistakenly stated that Sam Nickless commented on this matter for the National Australia Bank. In actual fact the speaker was the bank's senior manager of product innovation, cards, Amanda Ralph.

Topics: Banking


Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, s... Full Bio

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