Australian payments: strategic trends and

observations

Scenarios RoundtableCanadian Payments System Review

Chris Hamilton, CEO

4 points in 15 minutes…

• Australian payments overview

• Payments “marketisation”

• Promoting innovation

• Industry policy implications

A quick tour of Australian paymentsAustralian non-cash payments 2009

Source: APCA/RBA

A quick tour of Australian paymentsNon-cash payments per capita

Global positioning

Basic Typology of Payments Markets

Source: McKinsey Global Payments Map

…the ‘traditional’ view

Integrated industry governance: central

bank and APCA

Integrated daily central bank account

settlement

Bilateral links, “strong” industry

standards

Utility systems, limited contestability

(cards)

Open competition: financial institutions

and a few others

© 2010 Australian Payments Clearing Association

• ‘Button’ competition• Domestic PIN debit commercialises to compete • Increasing competition in non-card consumer

payments BPay, PayPal etc• Pro-competitive regulatory reform: access,

interchange caps (to go?), surcharging• Broad industry debate on the platform

But: ‘Marketisation’ strikes!

© 2010 Australian Payments Clearing Association

Flexible, integrated batch and real-timeCommon message

library?

APCA minimum standards for open

access, security

... the vision

Universal IP connectivity:

COIN + SWIFT + ??

Multi-layered, dynamic competition

© 2010 Australian Payments Clearing Association

A network theory of innovation

The integrator’s dilemma: how can a new CVP build

critical mass?

The “big bang”: full new service eg Faster Payments

(UK), SEPA Credit (EU)

Incumbents coordinate to improve network eg EMV/chip

Innovator’s dilemma: new entrants “pick off” marginal

customers eg PayPal

“Classic” theory: incumbents serve their best customers eg

loyalty programs BUT

© 2010 Australian Payments Clearing Association

The crystal ball: Convergence

• Smartphone app– Cards and online

collide– Opportunity: wallet

rationalisation– Plethora of choice– Lifestyle integration

• Huge challenges– Lots of collaboration– Security/antifraud

•Separate instrument and platform governance• Promote multilayered competition, allow for disruption•Transparently integrate public and industry elements

• Don’t pick winners!

The policy process

Australian payments: strategic trends and

observations

Scenarios RoundtableCanadian Payments System Review

Chris Hamilton, CEO