Canadian bank ATP Financial sent an international money transfer to German bank ReiseBank using blockchain for the first time in history.
The transaction took all of 20 seconds to complete, but it opened up a whole new world of possibilities.
It was a direct challenge to the payments infrastructure of every incumbent, and it signaled an era of extreme disruption to the industry. Until that point, payments had languished in somewhat of an innovation vacuum. So, this moment should have heralded world-wide change for the entire industry, except…
Behind the eight ball
For some reason, Australia was slower to innovate in payments than some of our neighbours abroad.
Conceived and architected in the '70s and '80s by the big banks and credit card companies, the Australian payments system was essentially crafted with these providers at its core. Unfortunately, the vast increase in technology solutions brought about by blockchain hasn’t yet been able to shift the mindset towards a customer-centric model and away from the provider-centric model – the shift in mindset that tends to drive most financial innovation.
It is this lack of a change in mindset that has led to the ineffectiveness of many attempts at modernising our payments system. These attempts have so far mostly been incomplete and unsatisfactory because, in large part, they’ve typically taken a parochial, ad hoc or self-interested approach.
As a result, the system remains largely segmented, inefficient and inconvenient: it is un-integrated, un-agnostic, un-user friendly, un-customer centric.
This is to the detriment of providers, payers and payees alike.
Interestingly, even the Amazons and the Facebooks of the world – new entrants into the payments arena with their enormous footprints and treasure-trove of user data – are also taking a somewhat situational approach that still forces customers to chop and change depending on the transaction.
A different approach
The key problem, it seems, is that customers don’t look at payments in the same way that providers do. This opens up opportunities for any fintech able to consider the consumer’s needs when endeavouring to deliver a solution. Because, to consumers, it is achingly simple.
They’re not interested in differentiating between online payments (Scheme Cards, PayPal), in-store point of sale payments (Scheme Cards, EFTPOS, ApplePay, AndroidPay), bill payments (BPAY, Australia Post), or even emerging deferred payment options (ZipPay, AfterPay).
They don’t want to input their financial information multiple times per day, or juggle between multiple apps, to cater for this large range. And they definitely don’t want to switch payments providers and types simply because their biller requires it.
Providers need to put themselves in the customer’s shoes
In an increasingly cashless digital economy, customers don’t want to think about it. They just want to make the transaction. This means frictionless payments and virtual terminals that are faster, cheaper, easier-to-use and that require much less effort or output.
They also overwhelmingly want to complete transactions using the one device that almost everyone reading this right now probably has within reach: their smartphone.
Australians look at their smartphones more than 440 million times collectively per day. We have 133 mobile subscriptions per 100 citizens, and about 17 million smartphones. This ranks us among the top nations in the world on a per-capita basis, according to the World Bank.
Now combine that with the stats on payments.
Payments generate nearly 25 per cent of all revenue in the Australian financial system (PwC). Global payments made on mobile devices and wearable tech are also predicted to be worth $95 billion annually in 2018, up from $35 billion in 2015 (Juniper Research).
So, we have a rapidly growing industry that requires centralised solutions, and a device that almost everyone has in their back pocket. And though mobile wallets have definitely improved payments in some areas (e.g. POS, e-commerce), they are yet to solve the agnosticism problem across all payments in a consumer’s life.
At the moment, the Australian payment sector is still quite fragmented. But in a perfect world, payment solutions are agnostic across every vertical: across locations, mediums, payment types, devices, financial institutions, retailers and billers. This may be idyllic and whether it will ever be possible in Australia remains to be seen.
However, one thing is certain: mobile-based, customer-centric solutions will deliver true change in payment-behaviour and, in turn, will deliver better outcomes for all stakeholders across the payments landscape.
Damien Vasta is the co-founder and chief executive of Sniip.