2013 was a major year for advances in the payments sector, as established financial institutions sought to innovate to keep ahead of new market entrants, new technologies, and new currencies.
Aside from one of this year's biggest payments stories, Bitcoin, much of the year was marked by banks shoring up their traditional payments businesses through major IT projects on the one hand, and trying to hold on to their merchant customer bases with closer collaboration and partnering on new payments devices and systems on the other hand.
Feeding off merchants' need to get trading online and keep up with customers' use of digital wallets and the explosion in mobile payments apps, new players such as eWay also emerged to challenge the existing order.
According to PayPal Australia spokesperson Adrian Christie, changes in the payments space in 2014 will be driven by three major trends: The continued consumerisation of smartphone technology; increased adoption of the digital wallet; and innovation at the point of sale.
"Over the last five years, Australia has grown to have one of the highest smartphone penetrations in the world, with almost three in four Australians owning a smartphone," he said. "As technology providers continue to introduce new phones and provide greater access to smartphone technology at a lower price point, we will soon see every Australian migrate to a smartphone device."
This smartphone penetration, along with better-quality connectivity, is likely to see more Australians use mobile payments apps and/or digital wallets in 2014, Christie said.
"In 2014, we predict even more Australians will pre-order their morning coffee, pay for bar tabs, and pay for takeaway via their mobile phone," he said.
Christie predicted that technology innovation at the point of sale will drive a significant shift in how people shop and pay in-store and on their mobile.
"Consumer behaviour will have the most significant influence on innovation in payments in 2014," he said. "Since 2010, mobile payments have grown by more than 5,000 percent and as consumer demand for cashless payments grows in 2014, more retailers will begin to transform their technology at the cash register to meet new consumer expectations.
"Technology managers will need to consider what trends truly matter for their organisation, and how to best incorporate these into their business. At PayPal, we've been talking about the mobile revolution for many years; however, it wasn't until 2013 that we saw the industry embrace the form factor. Managing data in real time to add value to consumers is the next frontier."
Agreeing, National Australia Bank's executive general manager for customer processing and payments, Stephen C White, said the increased use of contactless payments and mobile applications would indeed be the major trends of 2014.
"Australia is now one of the biggest users of contactless globally," he told ZDNet. "We expect that trend to continue in 2014... Mobile has also emerged as a very important channel, and this momentum will continue into 2014. We expect to see new mobile point-of-sale applications emerge in 2014."
Payments industry collaboration
According to White, the year ahead is also expected to see the start of a period of transformation in the payments sector thanks to EFTPOS Australia's launch of its new centralised payments hub, which is expected to improve its core network and bring new domestic products to market more quickly.
Greater industry collaboration is also expected to occur, thanks to the New Payments Platform proposed by the Australian Payments Clearing Association, White said. The program seeks to create a faster and more flexible payments infrastructure for the country.
The proposal by the Reserve Bank of Australia (RBA) late this year of the establishment of an Australian Payments Council could also see continued innovation in payments in the year ahead, White said.
"Retailers, businesses, and their customers will see an ever-widening array of ways pay for services and competition for payments will increase with a wider array of offerings," he said.
"Technology managers in 2014 will have the added challenge of managing new channels and balancing competing demands for investment during a period of sustained foundational changes to the payments ecosystem."
Westpac Institutional Bank head of payments, global transactional service, Phillip Joyce, also pointed to the RBA's NPP, stating that the initiative's drive for industry-wide real-time payments would influence the way that current payments trends, such as the push for greater automation, fraud detection, and customer access to data, will play out.
"The NPP will deliver great improvements for retail and SME businesses in the longer term," he said. "It's fast, it's versatile, and it's data rich. We are essentially building long-term infrastructure that will allow for future innovations in payment technology.
"It connects all ADIs [authorised deposit-taking institutions] together in a standard way to support fast end-to-end turnaround, 24/7, to meet the needs of the digital age. This is a huge positive for Australia's banking system. It will bring about significant efficiencies and improve risk management.
"The versatility comes from the new concept of 'overlay services', a capability that will set Australia ahead of its international peers in the payments space. It allows banks and payment providers to develop competing overlay services that will solve specialised customer needs.
"Finally, the rich amount of information we can attach to every payment with global ISO20022 messaging standards is great, as it allows maximum flexibility in automated data processing. This has the potential to solve some real pain points for customers today, especially around reconciliation."