In Australia – eventually, perhaps – one rail to rule them all? To that end, an effort to consolidate payments rails’ efforts and – is underway across the nation’s three payment schemes.
As noted in an application to the Australian Competition and Consumer Commission (ACCC), headed “Payments Amalgamation,” a proposed “NewCo” would combine at least some of the efforts of the New Payments Platform Australia (NPPA), eftpos and BPAY.
In terms of the mechanics, according to the application put forth by the shareholders and members of those payment entities, “NewCo will be economically self-sustaining, will not be profit-maximizing and will be able to find the most efficient and least-cost way of innovating across the three payment schemes.”
The parent company, according to the proposal, would have its own board to govern the three payments groups, which would still exist as separate entities, but will share information and pool resources in the spirit of collaboration.
Forging A Roadmap
Taking those efforts under the umbrella of a parent company, according to the application, will “provide the necessary leadership to allow participants in Australia’s payments industry to coordinate their focus on an agreed roadmap of innovation.”
The move had been presaged back in December. As reported in this space, the new combined company will help cut costs, boost efficiency and be better positioned to compete. And competition is heating up: NPPA, eftpos and BPAY said that BigTech and FinTech – notably through Apple Pay, Google Pay and Samsung Pay – are expanding their payment offerings within the country.
The applicants noted that joint efforts will “overcome the network externalities and market failures that currently exist in the Australian payments industry, where the significant challenges to coordinating investments in new payments services across Australia’s banks and other financial services institutions have prevented new payment services from achieving network effects in a timely fashion.”
Fragmentation has prevented “network effects” from being realized. “The ‘splintering,’ confusion and ‘wait and see’ approach that characterizes investment decisions has meant new Australian payments services have not achieved high adoption rates, been inefficiently delayed or abandoned (resulting in asset write-downs),” stated the application.
The three schemes contended in the application that they own and operate complementary assets that do not offer services serving as substitutes for one another. For example, eftpos enables debit card payments, BPAY focuses on bill payments and faster payments (the latter across NPPA’s infrastructure), and NPPA’s core endeavor is fast account-to-account payments.
“Their closest competitors are global payments schemes, which have significant competitive advantages over the three Australian payments schemes, including as a result of their substantially greater research development capabilities and their materially greater capacity to invest,” they said in the application.
The advantages that would accrue to end users would include “hybrid and targeted innovations” and a reduction in transaction costs. One key point: There could be “increased ease” for third parties to develop more payments innovation by allowing them to access A2A and cards infrastructure through “a single commercial entry point with clearer connection points to the schemes and harmonized standards.”
Thus, a single point of contact, entry and infrastructure to provide a range of services and products, embracing everything from QR codes to real-time (network-agnostic) transactions and displacing slower, legacy processes. The collaborative blurring of network and payment lines has been presaged in part here in the U.S., where this week, Early Warning Services, LLC (EWS), a FinTech owned by seven of the nation’s largest banks, and The Clearing House (TCH) announced that Zelle transactions can now be cleared and settled through the RTP network.
In Australia, the infrastructure “readiness” is there. In an interview with PYMNTS, Katrina Stuart, head of engagement at NPPA, said of the new payments platform that “initially, the platform was designed to have a separation between the … underlying infrastructure and [the] products that would sit on top of it. It was … envisaged that third parties might build those products and work with the different banks to bring them to market. What we’ve actually found since going live is that most organizations just want to be able to use whatever capability is there.”
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