IOUs go mobile: bringing peer to peer payments into the digital age
New report from Visa reveals Australians still relying on cash when paying each other, despite embracing digital payments in-store and online
Sydney - While Australia leads the world in adopting many new ways to pay, peer to peer (P2P) payments are one area that has not kept pace with the shift to mobile and digital channels, with most consumers still reliant on cash and electronic funds transfer (EFT), according to global payments technology company Visa.
A new report (“Push payments: the untapped opportunity in Australia”) released today from Visa shows that consumer demand for digital P2P solutions presents a largely untapped opportunity for Australian banks and merchants.
Research conducted for the report shows Australians are using their mobile devices for financial services, with 52 per cent (52%) reporting they check their bank balances on a smartphone or tablet. However, this fails to translate into the use of mobile P2P payment solutions. When paying friends, family or tradespeople, cash remains the most widely used method for Australians (47%), followed by electronic funds transfer (42%).
Yet consumers are frustrated with these options. The research outlines the biggest pain points for paying people are borrowing cash from others (42%), reimbursing friends or family (32%), and splitting the bill with friends at a restaurant (32%).
Opportunity for banks to bridge the gap
While there is a clear market for P2P payments in Australia, consumers cite several concerns limiting their take-up, including the cost of transferring money to people overseas, need for greater speed and convenience and hesitations about privacy or security.
Rob Walls, Head of Product for Visa in Australia, New Zealand & South Pacific, said, “People want new, digital ways to directly pay each other and it’s still too hard. The research has shown that consumers are seeking a P2P payments solution which can facilitate quick funds transfer across institutions and across countries – preferably via the mobile phone – without needing to know the receiver’s bank account information.”
“Australians are early adopters of new payments technology and are the world’s biggest users of contactless payments. But we’re lagging in P2P payments because while the technology exists, there is still too much friction and consumers want better, faster solutions.”
Gilles Ubaghs, Analyst, Ovum added, “The opportunity for financial institutions and merchants is to use digital and mobile P2P payments to attract new customers, boost loyalty and improve operational efficiency. Those who act fast and address the common frustrations associated with current solutions will successfully capture and retain demand.”
Not only about consumers paying each other
While people paying their friends and family is a more common application of P2P payments, the technology can be extended to consumers wanting to pay a business. Referred to as ‘push payments,’ this opens the door to paying sole traders, market stall operators or micro businesses electronically.
Similarly, push payments allow businesses to issue payments to consumers, like an insurance company disbursing a payment to a customer.
According to Walls, “Push payments are about more than people paying other individuals. The technology can simplify the payments process for businesses too. A merchant could disburse money directly to a consumer, like an insurance or healthcare payment or a consumer could pay a tradesperson without needing to use cash. There is enormous opportunity for push payments technology in Australia.”
Visa is investing in P2P with Visa Direct, a series of APIs (application programming interface, or software programming standards and tools) provided by Visa to be incorporated into mobile or internet payment platforms. The APIs connect the banking platform with Visa’s secure global network, enabling push payments to be processed to millions of accounts around the world.
Read more in Visa’s new report Push payments: the untapped opportunity in Australia
What are push payments?
Push payments allow people to transfer funds from their bank account, or payment card to another person’s account via their smartphone, tablet or the internet. In addition to transfers between individual consumers, push payments can be used by businesses to pay consumers and consumers to pay businesses.
What is Visa Direct?
Visa Direct is a set of software standards and APIs (application programming interface) that connect into an institution’s existing banking platforms, Visa Direct enables secure, near real-time payments across financial institutions and international borders.
Key features include:
Consumers or merchants can initiate a Visa Direct payment through a variety of channels, including a smartphone, computer, a kiosk, ATM or bank branch
• Payment examples include consumers paying each other, paying a merchant or loading their pre-paid card in near real time, or a merchant disbursing funds to a consumer in near real time
• Transfers can be made to Visa and non-Visa card accounts via a smartphone number, email address, or social identity
• An easy to use, institution-branded application or web page enables payments
• The ability to pay people in near real time across institutions and across countries
Visa Inc. (NYSE: V) is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world's most advanced processing networks — VisaNet — that is capable of handling more than 56,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products. For more information visit www.visa.com.au and @VisaNewsAU.
About the Visa/UMR Strategic research
The research was conducted by UMR Strategic Research Pty Ltd. Fieldwork was carried out between 21 November and 15 December 2014. A nationally representative sample of 1,000 consumers and 200 merchants were interviewed online, all aged 18 years and over.
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