Banking Review

Payments innovation stalls, starting with project MAMBO

Australia’s payments industry is looking tired and second-class. It’s something we’ve written about many times, and an issue not lost on the Reserve Bank of Australia, which has done little to hide its concern over the industry’s lack of recent innovation.

Now it appears another payments alternative is about to meet a slow death, with a spokesperson for BPAY today confirming its MAMBO project has been stalled.

“Following a 12 month assessment of project MAMBO, the major banks have recently asked BPAY to end its current round of development work on this industry initiative.“However, the banks have asked the BPAY board to revisit the project mid next year.”

The proposal would see individuals register for their own BPAY code which could be used to facilitate payments. Consumers could then port their number from bank to bank without the need to re-establish direct debits or credits, and use it to enable online payments.

MAMBO was one way for the banks to protect their market share in a payments industry rapidly being challenged by non-banks such as PayPal.

A recent study from Javelin Strategy & Research in the US has found consumers are rapidly turning away from credit cards for online purchases. Javelin is predicting nearly one-third of retail transactions will be made using alternative payment methods by 2013, many of which bypass banks and traditional card schemes.

A Cisco poll in the US has also found alternative payments are growing in popularity, with over 35 per cent of those surveyed citing “frequent” or “very frequent” use of payment options including PayPal, Bill Me Later, Amazon Checkout and Google Checkout.

Combine alternative payment methods with the trend for card schemes to work directly with transport companies to offer prepaid cards, and you can see the very real threat to bank revenue.

In Australia, scheme debit continues to be adopted at rapid rates, but credit card interest rates are under scrutiny and PayPal continues to grow its market share.

Centricom-owned alternative payment option POLi has been largely ignored by local banks, but is making inroads in the UK and has received the endorsement of New Zealand’s TSB Bank.

Chief executive officer Simon Warner says: “We actually consider ourselves bank-friendly.” So friendly, in fact, Centricom even offers a solution where banks receiving funds via POLi could clip the ticket and earn revenue from the service.

Warner says the credit crunch is forcing banks in the UK to innovate in order to survive. “In the UK they have to have five different payment options. We’re just not seeing that happen here – it’s really credit card or nothing.

“There’s quite a lot of evidence that consumers want choice when it comes to making online payments.”

The question is will the credit crunch and declining use of credit cards drive Australian banks to innovate or stall?