Banks Wary of Offshore Payment Providers

Google has backed down on its plan to launch its “digital wallet” in the Australian market, says Australian managing director Maile Carnegie.


Unveiled to much hype in the United States in 2011, Google Wallet sought to replace credit cards by allowing customers to pay for purchases with their smartphones.


But while some local start-ups are eyeing payments services, a market dominated by banks, Ms Carnegie on Thursday said this was not a high priority for the technology giant.


She said Australia rather was one of the world’s most innovative markets for digital financial services, leaving few obvious gaps for the company to fill.


Australians had been the most enthusiastic adopters of contactless payments in the world, she noted, whereas in the US, where Google Wallet was launched, many people still wrote cheques.


Despite Ms Carnegie’s comments Big banks view technology companies as threats to their lucrative businesses.


Australia’s largest Bank The Commonwealth Bank’s chief executive Ian Narev last year said the competitive threat from Apple or Google was as large as that posed by rival lenders.


The co-founder of technology firm Atlassian, Mike Cannon-Brookes last month described bank profitability as “insanity” and said companies including payments firm Tyro, where he is a director, were targeting the potentially lucrative market.


However, the chief executive of ANZ’s Australian operations, Phil Chronican, stressed that banks made most of their money in the highly regulated markets of lending money and taking deposits, rather than arranging payments.


“Many of the start-ups that are looking at the convenience of consumer payments are looking at a part that delivers a very small part of the profit pool of the banks,” said Mr Chronican, who was speaking alongside Ms Carnegie.


“Indeed one of the conundrums is that the banks are offering their consumers free payments today, and therefore it’s hard to know where the profit pool that can be attacked is.”


Mr Chronican added that many technology start-ups eyeing financial services were solving issues specific to the United States, rather than Australia.


“You hear about all these things happening in the US, and then you realise that 70 or 80 per cent of them just don’t transport,” he said.


It comes as the government’s financial system inquiry grapples with how to harness technology to encourage competition, without weakening regulations designed to protect consumers and promote financial stability.


Inquiry chairman David Murray told a separate conference on Thursday that financial services were a key target for leading technology entrepreneurs, and this presented an opportunity to lift competition.


“These technologies in our view will create substantial new competition in financial services and put pressure on existing players to make some significant investments in technology that, frankly, they might have made years ago if they had anticipated some of these developments,” Mr Murray said.



Comments are closed.