It is not all about new technology, something that hasn’t changed is the Australian attitude to credit. We bloody love debt & since the invention of the credit card in the early 70’s it has been steadily rising. We have the 4th highest highest personal debt levels in the world & our average credit card amount accruing interest in 2018 is $4092 with credit interest at a conservative 15% that is $613 a month straight to the bank per eligible Aussie (ouch). It’s not just the wealthy either, Australians on lower incomes have higher amounts of credit card debt than the average person. So what happens when we combine this attitude with instant payments?
Hold on. Why Do I Get Instant Payments?
Remember the new payment infrastructure enabling all of this, it’ actually thanks to the Reserve Bank & called, wait for it, the New Payments Platform (obviously named by someone in the finance dept.). It’s being built with collaboration from 13 financial organisations & restrictive payment windows by using the RBA’s new fast settlement service as an intermediary to verify payments being sent at any time of day & communicates what happened to both banks within one goddam minute. You can also attach 280 character descriptions & the ability to attach a document (like an invoice) to explain what the hell you’re paying for. So no more foodandbeersfrommar shaped puzzles to solve on Sunday morning.
Note: For some reason they all the institutions keep going on about how you can attach emojis as a transaction description — as though this is the true innovation that they pulled from the giant millennial mood board sitting in the NAB marketing office which contains all the things that our generation truly cares about.
But what the NPP has really done is start a war.
In The Blue Corner (With The Banks).
The first to jump on the NPP bandwagon is a service called Osko, brought to you from the inventors of of BPAY, that bill paying service that is probably more useful than we ever gave it credit for. Using the NPP, Osko plan to facilitate these fast payments by 1) burrowing in with each financial institution like a parasitic tick *ahem* by creating strategic partnerships with financial institutions so they don’t have create their own service & 2) being a platform for the new fast info lookup system called PayID which replaces your financial details with a 5 digit number linked too your email, phone number or ABN.
Catch that last bit? You can now pay businesses just like you’d pay your friends. Which if you own a business means that you’ll quickly run out of excuses when it comes to your invoices. No, but really it will reduce the friction around payments between all kinds of institutions.
So what’s the catch?
Well, there are 3.
1) Osko is currently free & it’s easy to imagine a small fee associated with the convenience of super fast payments. That really sounds like something a financial institution would do, but they’re focusing on growing the user base or using the banks to before they jump the gun on any monetisation. 2) Not every bank has currently signed on. So you can make fast transfers to everyone but they might receive them in regular transfer time if they’re not a major bank. 3) PayID’s are great but you can really only have a few. One linked to your phone, one to your email & one to your ABN, in theory you would only need one — but we really don’t know how people are going to use them yet, so this could an unforeseen hiccup.
Note: Banks like NAB are touting the ease, speed & access that PayID’s allow especially in day to day money transfer situations like splitting a bill between friends. But, really, all it does is is turn 2 slightly longer numbers (your Acct # & BSB) into one slightly shorter number (your PayID). It’s just not that much of an improvement. Is it better? Yes of course! Will it change your world? Nah.
In The Red Corner (Peer To Peer Payment).
Peer to peer payment apps have had mind-boggling success in the US with Venmo & as with most tech innovations the 3 year Australian lag time approaches & we’re finally catching up with out own. Welcome Beem it.
Beem it is a IOS/Android app launched as a joint effort by Commbank, NAB & Westpac who are trying to shake up the day to day movement of money through a peer-peer app rather than tackle the whole industry like Osko. In their own words:
Our free app allows Australians to pay, be paid or split the bill with their friends and family, no matter who they bank with. Beem It payments are instant, fee-free, easy and have bank-grade security and control.
So far so good. It’s just Okso, but on my phone in a tidy app form. But the second half of the app is tapping in to some of the financial trends that we’re seeing across the board. Specifically, making spending money ‘fun’.
At Beem It, we believe life is too good to be interrupted by money. That’s why we’re on a mission to create better money moments for everyone.
Sure, splitting the bill 8 ways with people you barely know is a pain, but the mission to ‘create better money moments’ is really about transforming the paying for stuff from a negative experience to a positive one. Which, as we discussed is precisely the reason why Pay Wave increases the amount that you spend on your card.
Because these apps are trying to rebrand spending money let me give my woke mission statement translation:
At Beem It, We believe that life is too good for you to realise that your are actually spending your own money when you buy stuff. We’d like it to feel like something else — preferably a game or some other kind of addicting scenario filled with juicy, positive feedback loops that keep you hooked. We’re going to call these experiences ‘money moments’ & we want you to have as many of them as possible.
Finch, a Beem It competitor app, even does away with the pretence a little more:
To make it a bit of fun, we’re combining data intelligence, behavioural psychology and gamification to present your financial world in a way you’ve never seen before.
Ie a system designed to make you spend more money — will probably make you spend more money? If these kinds of services are the trend, then the realtion ship that I have with money is going to be very different to the relatonship that others have with money
Banks Are so 2017, What Else You Got?
We’re about to welcome Australia’s first Digital Neobank (sounds cool already). It’s called Xinja & it might be a serious competitor to the big 4.
They’re still trying to make money ‘fun’ but they do seem to be giving you actual control over your money in some cool ways like segmented savings goals, ‘Soft’ spend limits & pre-paid debit cards, thought some of these features may be locked into a paid premium version of the app.
We don’t know much except they raised a bunch of cash to fund themselves & they really, really can’t say anything until they officially launch — which is whenever they get certified to ‘conduct banking business’.
To The Neo Liberals Of The Group.
We have to recognise the counter argument to all this after all, aren’t the banks just acting as banks do? Doing banking things & going about their banky business? Allow me to strong man their argument for a moment.