New Payments Platform (NPP) and The End of Cash

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  altomic on 24/09/2017 - 17:00

  I was in Beijing 2 weeks ago and was surprised at how many people were using electronic payment - mostly alipay and apple pay. At convenience stores, supermarkets, shops, restaurants, etc. Sort of how the split in Australia between cash and cards was the split between cash or cards and electronic/phone scan banking.

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  Diji1 on 24/09/2017 - 17:19

  +6

  Keep using cash for as long as possible.

  Here's something fun: using electronic payments causes you to spend more than you would if you paid with cash. The convenience of electronic payments causes you to lose money. That's before we get to linking transactions to your identity and which cause you to lose more money as you are manipulated using your identity data for marketing.

  • 

    mskeggs on 24/09/2017 - 19:51

    +1

    Not sure why you are getting negged. This is uncontroversial.

    • 

      peterpeterpumpkin on 24/09/2017 - 20:03

      And this is why anonymous negative voting is often unhelpful as I've said before. I understand the logic behind it but it frequently stifles intelligent discussion.

  • 

    [Deactivated] on 25/09/2017 - 00:39

    -3

    How….

    If I buy a shirt for $100… i pay $100 no matter if I used cash or card. Furthermore, I am inconvenienced by the need to continually withdraw cash.

    This is like the poker machines arguement.

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  simgue on 24/09/2017 - 17:22

  +6

  I've been involved with a couple of mid-tier banks and credit unions around the country all frantically trying to get their NPP solutions up and running in time for the (delayed again) launch. It is a fundamental shift to the way we transact money around the financial system here in Aus.

  There is a land grab happening with each of the financial institutions to get you to register your accounts with their NPP offering. There is going to be a one to one relationship to attach a specific id (ABN, ACN, email, or mobile number) to a single bank account. So most people will only use one or two specific accounts with the NPP, their mobile number, or main email address. Each of these can only map to a single bank account. This makes is particularly important for smaller banks / fintechs to try and get you to assign your most used email/number to their accounts. From the looks of it Osko will most likely be a defensive move to protect the larger banks initially, and as you rightly say they will release their own in app functions both at launch and further down the line to expand on this.

  There are a number of small start ups focusing on this space. Not only does it make the whole payments space far more attractive for them but it also allows for a lot more data to be attached to transactions. This opens up a goldmine of opportunity to use some good data analysis to offer better financial insights into people's spending/saving habits (this data is gold to businesses). The nirvana of an intelligent financial assistant is what a lot of them will be chasing. A lot of the larger US based fintechs are paying close attention to the adoption here as they are doing a lot of this in the states (and EU) already and the NPP will make it far easier for them to replicate their success on Australian shores.

  I'm not overly sure how the accounting for interest will take place but I would suggest it will be done pro rata over a monthly period meaning by swapping it in/out just before and after midnight will not net you any serious gains.

  • 

    peterpeterpumpkin on 24/09/2017 - 18:07

    Thanks for the inside info. I had a feeling there was a lot of nervous action behind the scenes but it seems the stakeholders are keeping their cards close to their chests.

    I never even considered that 1 ID = 1 account but it makes sense.

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  mskeggs on 24/09/2017 - 20:04

  Considering the banks are introducing this platform using technology that could have delivered it decades ago, I'm not particularly threatened that their plans will be successful.
  Cash has substantial advantages for many users, and while it would benefit the banks and government to see less of it, I think it will be with us a long time yet.

  • 

    peterpeterpumpkin on 24/09/2017 - 22:36

    I think the threat isn't that people will accept it as much as the government can make it burdensome not to comply.

    Many European countries have already set legal limits on how much you can pay in cash. Italy, Spain and France set this figure to 1000 euros. Greece to just 500 euros.

    There are also programs that incentivise the use of digital payments by making cash payments more expensive. This is an often-discussed tactic in India to target the black economy, the same country that invalidated its higher denomination bank notes for similar reasons. We haven't seen a new denomination since the $100 bank note was introduced in 1984 due to inflation.

    Bandwagon jumpers think cryptocurrencies solve all these problems without considering the impacts of governmental criminalisation. Most governments already have programs to combat money laundering, and this has recently been extended to cryptocurrencies. And then of course you have China, which just days ago banned centralized order-book exchanges, and for all we know may ban all peer-to-peer crypto-transactions in the future. A billion dollars in a Swiss bank account is useless when you're locked away in solitary confinement.

    Combined with plans for "paperless immigration", the worthlessness of a number to your name, physical or not, really starts to hit home. Just ask one of Australia's many refugees who left with everything and came with nothing. Now imagine the totalitarian regimes of years gone by having access to information that governments have today.

  • 

    John Kimble on 25/09/2017 - 08:54

    We still use faxes and cheques!

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  Herodotus on 24/09/2017 - 20:55

  +1

  As a former publican i could only dream of a cashless bar. Skimming by staff was endemic to the industry.

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  outlander on 24/09/2017 - 23:39

  I think initially it will be terrible. New systems generally take the existing system and port it over to the new framework. Problem is the existing system was designed around the limitations of the existing framework, and people, especially acting as companies, are loathe to sacrifice something once they have control over it. Classic example - Melbournes ticking system Myki. Instead of harnessing the new ability to bill people by how much they travel, you get a clone of the old 2hr/daily rate, and after the initial promotional period has passed, the discounts stop and the price rises. I don't see this being any different. However they calculate interest, or whatever else, will be in the favor of the system designers.

  Thanks for bringing it to my attention. I'd never even heard of it before now

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  [Deactivated] on 25/09/2017 - 19:08

  put your tinfoil hat back on

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  divipay on 06/02/2018 - 10:14

  Hi, DiviPay rep here. As per your comment ill address our thoughts on the NPP in relation to our business.

  DiviPay has recently shifted more focus into protecting users online privacy and security by allowing them to make a new virtual Mastercard for every purchase. That being said we also have our group payments mobile application that allows users to load funds onto a virtual Mastercard and make a group purchase directly to the merchant. At this point in time we do not see the NPP as a competitive threat but rather an enabling piece of technology for the DiviPay platform. The NPP will allow DiviPay to fund customer’s virtual cards in real time at a drastically reduced cost to current funding methods, ultimately benefiting the business. The NPP has been designed as a payments utility with the intention of fintechs, such as DiviPay to build customer experiences on top of the utility layer.

  In terms of our view of the Alias product we do not see a significant impact to our value proposition from the NPP as customers will continue to be forced into a post repayment bill splitting scenario. Whilst the Alias system will make the request and payment of funds easier, consumers will continue to be forced into a post bill splitting scenario where a single person must cover the cost, request the repayment and ultimately follow up for that payment. Social psychology and behavioural economics suggests the ease of requesting and sending payment does not increase the owing party’s propensity to repay. DiviPay eliminates the post bill split scenario by allowing groups to make payments together in real time directly to the merchant.

  Ultimately real time settlement for Australia is a huge leap forward and we welcome the technology. There is no doubt Banks will work to innovate ontop of this utility themselves however they are slow to innovate and in my opinion will be able to generate more value out of it by 'renting' the rails to fintechs and payment providers at a fee. NPP will also become a real game changer when merchants can accept NPP payments. However I don't think banks will be promoting this anytime soon as it will cut into their card interchange fee revenues.