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Retail payment efficiency becomes a point of discussion


Digital innovation is a requirement for payment efficiency in New Zealand (INL Stock Image)

Praneeta Mahajan
Hamilton, February 29, 2024

The Commerce Commission has issued an open letter to banks regarding New Zealand’s retail payment system, setting its expectations for the industry to deliver a more competitive environment that can give Kiwis new options to pay for goods and services.
Commission Chair, John Small, said the regulator had observed a lack of innovation in payments between bank accounts, one of the cheapest payment methods available to Kiwis.

The Commerce Commission wants the banks to pick up the pace and offer solutions promptly for Kiwis.

Better ways to pay
“More efficient payments between bank accounts will reduce both merchant and consumer reliance on the likes of Visa, Mastercard, and American Express and the costs associated with these types of payment methods,” Dr Small said.
Bank transfers are not new and many consumers pay bills this way, but the Commission wants to see this system used to support better ways to pay online and in-person.
Dr Small said, “There are numerous examples of this working successfully overseas with the use of QR codes and mobile applications that facilitate new in-person payments, and that this approach is complementary to the Government’s development of a Consumer Data Right (CDR) regime.”
“Through our work to date, we have realised the value of a regulatory backstop to help create an environment where new entrants can innovate. Freeing up payments between bank accounts is key to enabling this.”
“For smaller businesses who are subject to higher fees to accept card-based payments, this is particularly appealing. It means they could enjoy lower payment costs and reduce, or even remove, the need to surcharge to recoup fees, a win-win for both them and their customers.
“We acknowledge that the industry has demonstrated some progress in the payments space, but are concerned about the length of time it is taking to see this realised for the benefit of Kiwi consumers and businesses. Banks need to pick up the pace and we think a regulatory backstop would encourage them,” Dr Small said.

The Commission will begin formal consultation in March 2024 on whether to recommend to the Minister the need to exercise powers that would enable it to ensure this innovation happens promptly.

Global use of QR codes as Payment methods (Image Supplied)

Background

In July 2023, the Commission announced it was looking at ways to remove barriers to more innovative payment options using application programming interface (API) enabled payments that would allow Kiwis to make payments securely and rapidly between bank accounts, as a lower-cost alternative to current card payment options.

It sought industry views on its characterisation of the issues and opportunities in this space which it has since reviewed.

The Commission sees itself as having a role in influencing the industry to deliver the minimum requirements that are needed to support the development of a thriving API-enabled payments ecosystem. API-enabled payments will provide new ways for consumers and businesses to make and receive payments that better suit their needs.

India leads by example

With 1.38 billion digital identity numbers and more than 10.5 billion monthly online transactions, the data from India’s public digital infrastructure is dizzying. Since 2009, the Indian government has worked on creating a unified software platform or Application Programming Interface (API), informally known as “India Stack,” to usher the country into the digital age.

The most visible aspect of India’s digital revolution is the Unified Payment Interface (UPI), which allows for instant money transfers, and whose QR codes are visible in the counters of large stores as well as the smallest roadside stalls.

A new study from Juniper Research, the foremost expert in payment markets, has found the volume of QR code payments in the leading Southeast Asian market will increase from 13 billion in 2023 to 90 billion in 2028.

High growth in Southeast Asia and other developing markets is largely down to the financial inclusivity that QR payments offer, enabling unbanked users to access digital payments. Conversely, Western markets have seen very limited adoption; highlighting the global divide in QR payment markets.

Praneeta Mahajan is an Indian Newslink reporter based in Hamilton.

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