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The Australian is reporting that CBA is in the process of rolling out contactless payments, apparently with a view to shortening the lines for pie and chips and your next footy match.

I think this is a good move, because I believe that it can have a real impact on the way people make purchases. If you can cut down the time it takes to make a payment, then you can obviously cut down the time taken waiting in line. This will obviously be really good at the big venue scenario, where you often have to wait a very long time in huge queues.

However, there is another angle where it could be very useful: public transport. There has been a long running effort to try to roll out a stored value transport card system here in NSW. This is similar to existing systems around the world, with the exception that our Government has not been able to make it work as yet. Perhaps an alternative to building a new stored value system specifically for transport would be to make use of one of these emerging contactless payments mechanisms? If done properly, this would obviate the need for a dedicated stored value card system altogether.

It will also be interesting to see how the fees and charges work. In the past, this is something that the banks would have placed a whole bunch of new fees onto from the outset, but my sense is that there is a bit more competitive tension these days between the Big4 banks on fees, so I’m guessing that there will not be too many (at least in the short term).

M@

This article from the Age represents an interesting development for payments regulation in Australia.

For some time now, there has been a regulatory dance between banks and the RBA. As with many situations of this nature, the regulator has asked for the banks to make interchange fees more transparent, and to make it easier for new entrants to enter the market, but not surprisingly, the banks (in most cases) have really only done what was absolutely necessary. I expect that will continue.

There was a move earlier on the year to make fees more transparent by allowing direct charging at the ATM. This was supposed to open things up and give the customers more information about fees, but I am not entirely sure the outcome has been what the regulator was hoping for. Following these changes, any time a customer uses an ATM from another bank, they are hit with a direct $2 charge. In some cases, the charge is even greater. There has been some consumer outcry over this.

Also, it was revealed yesterday the extent to which Australian banks make money from non-spread revenue such as fees. All up, it was about AU$12b across the banks, which is a staggeringly large number, and an 8% uptick year on year. Most of the fees were charged to business, but about $5b was charged to consumers.

These factors are probably contributing to a slightly more bellicose position from the regulator as it becomes increasingly difficult for banks to justify these types of fees and charges as “cost recovery” when they make so much money from them. I think that everyone from the regulator to the public has long since realised that fees are really a very big source of revenue for the banks, and not just cost recovery for expenses incurred providing services. It’s a prickly issue, especially politically, and I expect that it will get pricklier as the year progresses.

What makes this issue even more interesting is the fact that since the GFC, the Australian Government has provided banks with a wholesale borrowing guarantee (effectively giving them all a AAA credit rating) as well as a guarantee for retail funds on deposit, which has put them all in a very strong position. There is starting to be some public questioning of this given the fees and profit results, and people are asking if the Government should not also be able to exert some pressure of the banks given the privileged position that it has afforded them.

How this will play out is anyone’s guess, but I can definitely anticipate some more political machinations over the coming months, because just about everyone loves to bash the banks.

M@