But there are developments afoot that should be taken seriously, and certainly better understood – namely, the structural changes within the payments industry.
A perfect storm of changes – from new industry initiatives and regulatory change to the growing influence of certain demographics alongside a surge in tech innovation – will not only unlock a fresh wave of interest and investment into payments-related fintech, but will also bring immediate benefits to the wider SME and start-up sector.
In doing so, and by supporting a critical yet traditionally under-served section of the economy, these changes are set to strengthen the Australian economy as a whole.
This greater potential will only be realised, however, if the underlying changes and their implications are widely and fundamentally understood.
The first and most noteworthy of these is the upcoming implementation of the New Payments Platform (NPP), a major industry initiative that will overhaul Australia’s payments infrastructure.
Designed to inject speed, versatility and data-enrichment into everyday payments, conducted around the clock, the NPP is best known for its promise of real-time payments, wherein payments that previously took one to three business days to settle will be conducted in seconds.
While other countries have made significant steps in this direction – consider the UK’s Faster Payments and Singapore’s FAST platform – Australia’s NPP is set to be the world’s most advanced real-time payments capability, going further in both efficiency and effectiveness.
Like many complex initiatives, the launch date, currently set for late 2017, has been repeatedly pushed back.
But once in place, the NPP will enable small firms and retailers to be paid much more quickly, catalysing the all-important cash conversion cycle.
And for fintech, the ability to layer valuable data onto a payment transaction will give a huge boost to productisation, which aligns with the industry-wide shift towards a cloud-based payments ecosystem.
In addition, the NPP comes against a backdrop of ongoing regulatory change. Certainly, the industry is still adjusting to the Reserve Bank of Australia’s decision to remove the requirement of a banking license for those wishing to acquire card transactions, one of the biggest regulatory changes seen in payments in recent years.
The upshot of this is that the big four banking monopoly, which previously controlled in excess of $2 billion worth of acquiring fees, has been dismantled, enabling other participants to grab a piece of the payments pie.
This opening up of the industry – allowing an influx of NBFIs, fintechs and other non-traditional payment providers – is in turn fuelling a far greater rate of innovation.
While banks have long held the reins as payment providers, the truth is that they are financial services firms, not technology providers, and simply speaking are not (yet) capable of keeping up with the needs and expectations of today’s digital-savvy generations.
Furthermore, as fintech firms enter the payments sector, they – unlike banks – are free from the legacy infrastructure and other incumbent restrictions that so often hinder innovation and the necessary ‘fail fast, learn fast’ mentality.
From biometrics and bitcoin to blockchain and the cloud, payments are evolving rapidly and each advancement opens new commercial opportunity.
Finally, we need to recognise and understand the changes taking place more broadly across Australia, and chief among these is the growing influence and weightier wallets of Chinese visitors.
This significant demographic shift – today, 10 Chinese visitors arrive in Australia every five seconds, equating to 8.3 million visitors in 2016 – alongside the rapid growth in Chinese purchasing power, is already having a big impact on Australian payments.
Retailers, health and education providers and the tourism sector in particular will be requiring ‘Chinese-friendly’ tools, such as WeChat, AliPay and Weibo, and this in turn means the most successful fintechs will be those already developing related payment solutions and partnerships.
Ultimately, all these changes spell opportunity, the opportunity for fintechs to enter and establish themselves in a highly-lucrative marketplace, the opportunity for forward-thinking fintech investors to reap the rewards of this structural change and the opportunity for SMEs – the backbone of our economy – to benefit from enhanced cash flow and far greater payment innovation.
Without a doubt, this perfect storm will lead to blue skies ahead.
Bradley Gerdis is the chief executive officer of SmartPay.
