By Julian Bajkowski
Payments juggernaut BPAY has moved swiftly to defend its market share in the core local and state government sectors ahead of a heavily-hyped attempt by mail monopoly Australia Post to renter the electronic payments and bill presentation markets to arrest a terminal slide in revenue from paper mail.
As the national postman continues to talk up the blue-sky possibilities of its new “Digital Mailbox”, BPAY has quietly launched a charm offensive directed squarely at government clients that showcases innovations during its 15-year-long competitive dominance of the electronic bill payments market in Australia.
The attempted re-entry of Australia Post into the payments and financial services market in Australia presents a potential headache for BPAY and retail banks alike because it would mean the emergence government-owned and backed service looking to tap into revenue streams that have taken more than a decade to develop.
Australia Post has made no secret of its ambitions to promote the Digital Mailbox as a securely hosted one-stop-shop where customers can receive, complete or pay transactional documents like bills or government forms.
But Post’s new service, which is still to go live, follows its previous failure to crack the online billing market after it launched into the space amid great hype at the height of the dotcom bubble in 2000 through its online POSTbillpay.
In mid-2007 Post quietly told customers of its online bill payments service that it was being shuttered, effectively handing BPAY what little market share it had garnered.
Although questions over Post’s online execution capability remain, BPAY is certainly not taking the re-emergence any state-owned competitor lying down.
BPAY’s general manager of business services, Keith Brown, has confirmed to Government News that the payments and presentation service expects to see the launch of ‘QR’ bar-code readers in local mobile internet banking applications by the end of June this year.
The enablement of QR reading capabilities on mobile banking apps would allow consumers to make mobile purchases directly from their bank accounts using BPAY’s transactional hub.
Mr Brown said that BPAY had released the equivalent of a global standard for such transactions.
“We are seeing a move by banks from where mobile was a cut-down version [of an online banking application] to the primary channel,” Mr Brown told Government News.
The launch of QR-enabled mobile payments by banks through BPAY is a clear sign of the increase in competition for customers’ online transactions between financial services providers including international payment card schemes that have come to dominate the online economy.
While BPAY is often seen by consumers as a stand-alone brand and service provider, it is in reality run as a low-cost wholesale service provider to Australia’s retail banks including ANZ, the Commonwealth Bank of Australia, National Australia Bank, Westpac and other smaller institutions that constitute its stakeholders as a payments scheme.
The business has progressively grown and thrived over the past 15 years after it successfully filled a gap in the payments market to enable online and electronic transactions to flow to billers and payees from bank debit accounts at a cost that is generally much lower than accepting credit card payments.
The existence of an alternative to credit cards for accepting online payments and other automated electronic payments (like phone payments) is essential for government agencies because many of those billed may not have access to or want credit cards.
At the same time, credit cards generally attract higher merchant charges because their issuers must factor in the risk of a payer potentially defaulting or not paying their bill.
In some cases the combination of fees charged to merchants, like councils or government agencies, can be as high as 2 per cent of the transaction value creating a strong incentive to move to a provider that bases charges based on a flat fee per transaction.
According to Mr Brown, BPAY accounts for around 45 per cent of the transactional volume of bill payments an Australia.
Banks and BPAY members are charged a wholesale base rate of 41 cents which they then build into their prices for other payments services and products.
While state government functions like car registrations, licenses, infringements, fines and other higher value payments have long been heartland for BPAY, the payments scheme is now squarely at the local government sector to drum up new business by enabling and automating electronic payments for bills and other fees.
BPAY estimates that it now has around 730 “Local Government related Billers” a figure that Mr Brown said represents an “increase of 55 per cent on 2 years ago when we had 470.”
“In the year to December 2012 approximately 17 million payments were made to these billers through BPAY with a value of approximately $6 billion,” Mr Brown said.
A key reason why Post and BPAY, as well as new provider “Digital Post Australia” are all pushing hard into the combination of online bill presentation linked payments is that it is far more profitable than the already mature, low margin payments processing market.
Such larger margins are achievable because online bill presentation providers are not only able deliver payments to a biller – but to largely eliminate the overhead of paying printers, mail-houses and Australia Post to send paper to a physical mailbox at a cost estimated to be between $1 and $4 per item.
The issue for councils and payments providers alike is whether consumers will be prepared to relocate their bills and associated payments from one provider to another – and if so what might prompt them to switch.
BPAY’s Keith Brown readily concedes for most, paying bills is essentially a necessary chore that people want made as easy, simple and secure as possible. He doesn’t appear convinced that there is yet genuine pent-up demand for consumers to shop around for their individual payments given it’s the biller who pays for the transaction to be processed.
“The majority of people don’t want to go to 20 sites to pay,” Mr Brown said.
With that in mind, councils can expect to hear from the small but successful provider that helped make a large part of Australia Post’s business into a symbolic origami dinosaur known as “Paperbillosaurus”, fairly soon.
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