12 Oct 2021
To explain the rapid development of the payments market in the last decade, just think about how you used to pay for goods and services in the 2000s. A wallet full of cash, maybe a cheque book lying around and possibly a fledgling online banking account.
Contrast that with the myriad ways to pay consumers have now – digital wallets, peer-to-peer instant payments and even cryptocurrencies. This rapid change requires providers to not only keep pace but anticipate the future needs of consumers and provide the necessary technology.
“We want to enable merchants to allow customers to use whatever payment method they wish to purchase goods or services – whether that be with a digital wallet or a QR code or via instant payment.”
Australia is a developed and sophisticated market for payments and consumers have shown themselves to be early adopters of new technologies such as contactless payment and digital wallets.
Australia is number four globally for payment terminals per capita and the local e-commerce market is likely to approach $A100 billion by 2025, according to research group GlobalData.
Many of these trends have been accelerated by the COVID-19 pandemic of course. The ever-increasing shift towards cashless payments as consumers preferred not to handle bank notes. Or the boom in e-commerce as many people flocked to shopping online during lockdowns and isolation.
At ANZ Worldline Payment Solutions we believe that growth will continue as consumers become comfortable with buying a wider range of goods online and as the systems underpinning e-commerce and payments evolve.
With more customers shopping online the main goal for merchants is to meet their customers’ expectations – to reach them and interact regardless of where, when and how they want to shop.
The retail experience is constantly evolving for both consumer and merchant. There is a more integrated mix of the online and physical channels in peoples’ shopping habits.
Customers can view something online and choose to pick it up in store. Or they may inspect something in-store before purchasing it online at a later date. They want that flexibility and merchants need to be able to meet those expectations and provide a solution.
We want to enable merchants to allow customers to use whatever payment method they wish to purchase goods or services – whether that be with a digital wallet or a QR code or via instant payment or “buy now, pay later” (BNPL).
Through the use of new technology merchants can utilise new tools such as portals to collect the transaction information and data. Once collated they can use the analytics to provide a better service and to manage additional offerings like loyalty programs.
Emerging technology may also include tap-on phone payments where small businesses won’t need a terminal. They will be able to accept payment from a customer by tapping their phone to the merchant’s phone, which uses software to act like a terminal.
Later this year a number of existing ANZ customers will be invited to trial such an application called Worldline Mobile Pay – which enables merchants to turn selected Android smartphones or tablets into a payments terminal.
Other services planned for introduction next year include a new terminal called YUMi – which includes self-checkouts, BNPL and loyalty schemes all in the one place – and Omnichannel which enables consumers to shift between online and in-store touchpoints within a single purchase.
Overseas markets often forecast trends that may soon play out in Australia. Before moving to Australia recently my most recent experience was working for Worldline in the central and eastern Europe region (which takes in countries including Poland, Czech Republic and Hungary).
In contrast to Australia, the payments landscape in Europe is more of a mixed bag. While some countries in the Nordic region are moving rapidly towards being cashless there is still relatively high use of cash in some Eastern European countries.
In Australia cash usage has fallen while contactless transactions and digital wallets have jumped. ANZ data show the volume of contactless transaction rose 10.2 per cent in 2021 compared with 2020, driven by a 15.8 per cent jump in debit card spend over the same period.
We also expect to see much higher usage of instant payments, including big growth in the peer-to-peer (P2P) transactions where you can pay directly between accounts.
Australia's fast-payments system the New Payments Platform (NPP) launched in 2018 and enables real-time payments between consumers and businesses 24 hours a day.
The service is growing in popularity and now accounts for more than one fifth of the total number of account-to-account payments, according to Reserve Bank of Australia data.
These payments are already popular with younger people and we expect the trend will become more mainstream as the technology becomes better understood. It will likely mirror the uptake of contactless payments and digital wallets.
BNPL is continuing to grow and evolve and we’ve already seen it shift from big-ticket items such as furniture or appliances to smaller purchases.
BNPL is a small, though growing share of payments in the Australian economy. BNPL providers processed about $A11.5 billion of purchases in the year to June 2021, according to RBA data.
While the sector faces increased regulatory scrutiny we expect its usage will continue to grow and being able to accept BNPL payments will be important for merchants and businesses.
We could see even more diverse payment options emerge including QR-code payments, pay by link or even crypto currencies coming into the market.
Like all new technologies some will take hold and gain greater popularity and others will fall by the wayside. For example, Worldline can accept cryptocurrencies in some European markets but the take up so far has been relatively small.
These new market dynamics underline the value of partnerships in an increasingly competitive environment among neobanks, fintechs and big technology companies. The business model is changing for many banks around the world.
While payments services are still critical, an effective way to spur the next stage of growth is to partner with a specialised payments player. Many banks and financial institutions in Europe have chosen this approach – Worldline has signed partnership agreements in three European countries last year (Greece, Italy, Sweden).
It can make sense for a bank to partner to deliver new technology without having to develop the hardware and software themselves. Conversely it can make sense for payments companies to join forces with a bank, rather than build from scratch in a new market.
It opens up many more avenues for cooperation such as improved online onboarding of merchants, specialised merchant loans and improved usage and analytics of the collected data.
Under the terms of the deal originally announced by ANZ and Worldline in December 2020, Worldline will hold 51 per cent of the new merchant acquiring venture with ANZ holding the remaining 49 per cent.
Petr Ryska is Chief Executive Officer of ANZ Worldline Payment Solutions
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
12 Oct 2021
09 Mar 2022