In the Press
12 August 2010
No Clear Way for Wave and Pay
Cornell
Andrew Cornell
AFR, Monday 9 August 2010
The future of Australia’s home-grown domestic debit system Eftpos will be the most intriguing payments story of the next few years as ex-Visa executive Bruce Mansfield strives to keep the ancient but efficient system from going the way of Bankcard. Mansfield, the new chief executive of Eftpos Payments Australia (EPAL), has identified the need to upgrade Eftpos from magnetic strip to chip cards and sees contactless payments as a critical new business stream.
Two recent reports no doubt are well thumbed on Mansfield’s desk. One, from the journal Banking& Payments Asia, makes the case for domestic payments systems like Eftpos to thrive despite the more usual view that they are costly to maintain and improve at a time when processing can be outsourced to Visa or MasterCard schemes.
“There is a growing movement towards domestic processing of payment transactions across Asia,” the journal argues. It argues that cost is actually in the domestic systems’ favour because of the high–and opaque–transaction fees charged by the schemes. Indeed, in Australia, one of the arguments that will be made by EPAL as it attempts to win merchants is that revenue losses can be offset by avoiding scheme fees. “While the card schemes do not publish fees in most of the Asia-Pacific region, costs are large and reportedly rising,” B&PA says. “Local reports estimate the fees paid to MasterCard and Visa for clearing and settlement in India at over $US100 million [$109 million] per year. Reserve Bank of India data showed just about 395 million payment transactions in 2009, compared to about 3.5 billion in Australia, so it is easy to see that fees in other markets could be more sizeable if [using] scheme networks.”
Less encouraging for Mansfield, however, will be RFi’s Australian Payments Landscape, which mined its payments behaviour data for views on contactless payments. In stark contrast with other economies where contactless cards –“wave and pay”–have taken off, Australians are deeply suspicious of them, despite understanding they are “easier, faster and more convenient”.“Security and fraud issues are the biggest deterrent with 75 per cent of cardholders stating they are put off by contactless technology because of security concerns. Cardholders are also unlikely to use contactless card technology because of concerns about accidentally ‘double scanning’, which means they would be charged twice for a purchase.” These are fundamental concerns –no doubt fuelled by Australia’s proud history of failed transport smart card projects–and a major challenge for all wave and pay systems, which will include Eftpos.
Meanwhile, had it not been for the resurrection of Kevin07(10), the most extraordinary event of last week would have been the splenetic outburst from Australian Competition and Consumer Commission chairman Graeme Samuel over the AXA Asia Pacific takeover. In animated briefings, Samuel lamented the fact that hedge funds were trying to profit from uncertainty; agents for players like potential acquirers National Australia Bank and AMP were trying to sway opinion; and his officers–and he himself–were being dredged for tips. Colour me aghast. Such behaviour? When only $13 billion and dominant share in lucrative markets are at stake and there’s slim pickings available elsewhere for the market vultures? And Samuel was once an investment banker.
Trouble is, this protracted uncertainty, which creates the opportunity for market players who thrive on such situations, cascades from the ACCC’s own actions and statements. Its initial rejection of NAB’s bid for AXA, based on the potential of an as yet undeveloped technology, was either poorly worded or seriously misunderstood in the market.
Wealth management, as the ACCC now seems to believe, is about those individuals and firms that own the clients who buy wealth management. Quite properly, the ACCC’s focus should be on who can influence those advisers and their products. That’s what ultimately affects consumers. It’s a complex dynamic, hence the protracted negotiations between the ACCC and would-be buyers. But it was the ACCC that confused matters. If the ACCC thinks letting two of Paul Keating’s original six pillars merge is bad, it should just say so. If it can’t tell one way or another, then let it through. The hedge funds will then stop calling Samuel.
acornell@afr.com.au
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