Banking Review

Payments the new competition battleground in banking

Today’s announcement by Woolworths that it is to move into mobile telco services with Optus paves the way for the retailer to offer debit and/or loyalty card products via mobile devices.

It’s no secret that Woolworths has ambition to issue more cards, and since it wound down its EzyBanking relationship with the Commonwealth Bank, it has embarked on a relationship with HSBC to issue financial products, including the Everyday Money credit card.

It would not be an enormous leap for Woolworths SIM cards to come with in-built EMV capability, opening up the option for a prepaid product that could be used at Woolworths and/or other retailers, in much the same way that its existing loyalty and gift cards work.

As James Gardner, head of innovation with Lloyds TSB told Online Banking Review in June, a mobile phone is “a vastly better credit card than a credit card actually is.”

Phones come equipped with improved means of authentication, can give consumers information back via a screen, and have the ability to accept input codes.

Like retailers, banks could also partner with telcos to issue credit cards via a SIM. Contactless payments trials between NAB, Telstra and Visa have shown it can be done, but we’re yet to see a widespread deployment that works across devices and telcos.

Ultimately it may come down to whether it’s retailers or banks that can play the nicest with telcos.

Or perhaps a third party payments group like PayPal might trump both.

Last week Dominique Buysschaert, CEO of new European card payments start-up PayFair was in Australia talking to some local heavyhitters from the industry about the possibility of taking on Visa and MasterCard. (We’ll have more in this in the next issue of Online Banking Review).

Buysschaert is something of a visionary when it comes to mapping out a very different looking payments industry – one that isn’t dominated by the major card schemes and banks. If PayFair can gain the kind of traction it is seeking, it may be able to leapfrog the plastic card and go straight to mobile and/or online for debit payments.

What do you think? Are banks prepared for a new payments landscape? Will retailers or telcos win out in the payments product stakes? And will all of this require banks to rethink our entire payments system?