Big banks stalling payments platform, say fintechs.
By Yolanda Redrup & Lucas Baird Financial Review
Local fintechs have blamed a lack of commercial incentives for the big banks, fears of competition from fintech players, and delays to the introduction of key consumer features for the slow adoption of the new payments platform (NPP).
The comments from the sector came as Prime Minister Scott Morrison told the WA Chamber of Commerce on Monday that the challenge was getting the whole economy to take up the NPP, which was crucial for all of its benefits to be unlocked.
Last week the Reserve Bank called for penalties for the big banks if they failed to implement innovative new services quickly enough, labelling the slow introduction of the NPP "disappointing".
FinTech Australia general manager Rebecca Schot-Guppy told The Australian Financial Review the major banks were controlling the pace of innovation in regard to the NPP.
"As it stands, there's no real commercial incentive for them to accelerate it. This explains why the government and the Reserve Bank are now intervening to force action," she said.
"Meanwhile, the tepid consumer adoption is understandable when you consider that there’s a lot of planned functionality on the NPP that’s been delayed with the roll-out.
"For instance, the amount you can send via the platform still has a strict cap, and there’s still no direct-debit functionality or the ability to schedule payments."
Assembly Payments co-founder Victor Zheng agreed that delays to some key features had slowed consumer uptake. His company has been on the NPP since it was launched, but he said features like the request-to-pay functionality (due to be introduced at the end of the year) that lets consumers use PayIDs to request payments from others would improve the user experience and boost adoption.
The NPP system not only enables payments in real time, but should allow households, businesses and government customers to attach rich data to payments (such as longer transaction descriptions or information from a business invoice) to increase productivity. It also allows third parties to initiate a payment.
Last week the RBA said in its conclusions paper that there were still significant gaps in the functionality of how payments could be initiated and the limits on payment amounts.
It blamed the complexity of banking technology systems and an underestimation of how much investment would be needed to meet delivery time frames.
The co-founder of millennial-targeted superannuation start-up Zuper, Jessica Ellerm, said for the NPP to be successful, there needed to be a "bottom-up, top-down" approach.
"Given the clean-up that is under way at larger institutions in the wake of the [banking] royal commission, it's possible there is a dampened enthusiasm to direct resources to a project like NPP that doesn't deliver hugely material benefits to a bank's market share," she said.
"In light of this, I think there is a great opportunity now to revisit how we make access simpler and more affordable for fintechs that are hungry to deliver these new services. Right now we are missing those bottom-up drivers."
Mr Morrison positioned the NPP as paving the way for other innovations in financial services, which would make payments faster and simpler.
"The potential gains that are available to businesses, particularly small and family businesses, through the NPP and its ability to reduce payment times are immense," Mr Morrison said.
Andy Taylor, co-founder of neobank Douugh, said the only way to force banks to do anything, be it adopt the NPP or facilitate open banking, was for the government to regulate.
"The banks have the most to lose from the emerging fintech disruption and it's obvious to us all that they will do everything in their power to slow down the pace of change, as they are simply not prepared for it and their underlying business models will not allow them to react to the pending disruption quick enough," he said.
"Scott Morrison needs to focus all his efforts on what he can do to stimulate the local fintech scene, as it will be the challengers to the banks who will drive the necessary change, as they are the ones responding to the changing of customer needs."
While the uptake of the NPP has been slow, the government's much-anticipated open banking scheme, which is expected to make it easier for consumers to control their own data, compare financial products and switch services, has also been delayed until February next year, having originally been slated to be rolled out in July.
Mr Morrison flagged the intention to extend the pending consumer data right (CDR) legislation (which enables open banking) to other sectors like telecommunications providers and energy retailers.
Despite the delays, the founder of financial data firm Basiq, Damir Cuca, said open banking and more broadly the CDR laws would be phenomenal for consumers.
"One way to look at it is if you're applying for a home loan, it will be much easier. A lender will be able to assess your risk profile based on your data and be able to get a better deal for you if you're in the lower tiers," he said.
"In the past, none of that's been possible. It's shifting the balance of power to the consumer.
"There is a concern that we won't make all the deadlines along the way, but I'm confident the desired outcomes will be reached."