Pam: Good evening and welcome to another Liberty IT event. I’m Pam Halle the head of marketing for Liberty IT, and this evening Craig Saphin our head of strategy and operations will host four of the most inspirational subject matter experts from the world of payments. The payments landscape is evolving at lightning speed with the emergence of near-immediate digital payments and so much more. There’s so much technological advancement. There is talk about the future and what’s next in payments. So, today we bring you an insightful conversation on the latest trend and what the future looks like for payments in Australia. As we listen to our expert panel, please feel free to type your questions on the zoom Q&A. We will take as many of those as possible at the end.
Just a reminder, we are not FST media, and we are not Sibos. Liberty does not accept any sponsorship for these events, we’re not promoting any particular products or clients of ours. Being part of the IT ecosystem in Australia we run these events in the best interest of improving our industry and helping our audience to learn something new and ultimately helping deliver valuable and straightforward technology to the end-user.
We are all very excited about the discussion ahead, and I hope you enjoy it. So, without further ado, let’s the kick off.
Craig: Good afternoon, everyone. We have a fantastic depth of Talent and experience in our guest panel today to discuss the topic of the evolution of payments. Before introducing each of our guests we are all joining this event from many locations in Australia and overseas. In Australia, we will all be in different Traditional Lands. In that context, I would like to acknowledge the Gadigal people of the Eora Nation, the traditional custodians of the land where I am based today, in Pyrmont, or Pirrama as the Gadigal call it, and pay my respects to the Elders both past, present and emerging.
The Mesopotamian shekel is the first known form of currency and emerged nearly 5,000 years ago. Later in history, the earliest known mints date to 650 B.C. in Asia Minor, where the elites of Lydia and Ionia used stamped silver and gold coins to pay armies.
In May 2018, a gimmick attempt was staged in New York City where a number of rented Lamborghinis lined up to promote the easy and fast wealth resulting from investing in Bitcoin.
To us at Liberty, Payments is summarised in a simple sentence. Send and receive money responsibly, quickly, securely, and in real-time.
On behalf of Liberty, I’m delighted to host four of Australia’s experts whose names are synonymous with Payments.
Firstly with us, this afternoon is Nikesh Lalchandani, a renowned IT professional and a Payments subject matter expert. Nikesh is an experienced banker with a background in technology and finance.
He has worked in payments and innovation for many years in fintech, banks and startups. Nikesh is a postgraduate researcher, a Chartered Banker and Senior Member of the Australian Computer Society, IEEE and a Fellow of FINSIA. He is the Head of Policy for the Emerging Payments Association, Asia. Nikesh is also a book author, and in August 2020, he published his work in a book titled “Payments & Banking in Australia – From Coins to Cryptocurrency”. The book challenges the assumption that banks will continue to control payments and the flow of money. To relax, when he is not working so hard, Nikesh loves boating and cruising up and down river streams for reflection and relaxation.
Good evening Nikesh, and welcome.
We also welcome Phillip Finnegan, who has had a stellar career holding multiple roles in major payments companies such as ACI & FIS. He is a former Managing Director at Temenos. Currently, Phillip is with Layby as the Chief Operations Officer. Phillip is considered one of the finest Payment subject matter experts gaining vast experience from implementations of Open Payment Frameworks at Australia’s top-tier Banks. Phillip is an avid road cyclist; an extracurricular activity that has taken the corporate world by storm in recent years. It’s a pleasure to host you this evening, Phillip
Phillip: Good evening, Craig. Thank you
Craig: We also welcome Barakat Elayyan, the Australian Sales Director for payments and banking at FIS. Barakat is a former executive with NCR and has worked in most continents with a specialisation in payments. After FIS’ acquisition of Worldpay for $35 billion in 2019, FIS became the largest processing and payments company globally. Annually, FIS facilitates the movement of roughly $9 trillion through the processing of approximately 75 billion transactions in service to more than 20,000 clients around the globe annually. Coincidently, Liberty people have worked on two of FIS’ most major local implementations at 2 of the big 4 Banks in Australia. Barakat loves sport and is passionate about Formula 1. Thank you for joining us this afternoon, Barakat
Barakat: thank you, Craig
Craig: We also welcome Chris Hill. Chris is the Pacific head of sales for payments and banking at ACI Worldwide. ACI Worldwide is a payment systems company headquartered in Miami, Florida. It develops software focusing on facilitating real-time electronic payments. In fact, ACI Worldwide software is used by: 19 of the 20 of top banks worldwide, and 80,000 merchants directly and through PSPs. The ACI solution processes 225+ billion consumer transactions per year. Chris was formerly Sales Director at Innova, regional sales director at Mulesoft, and a Sales Executive at HP and also Oracle. He is a seasoned Payments Industry professional. Chris is an avid surfer, a member of Surf Patrol NSW for 9 years in Cronulla, and he’s awarded a Bronze Medallion
Thank you for joining us tonight Chris
Chris: Good evening. It’s great to be part of the panel.
Craig: What a treat to be talking to four of Australia’s finest technology minds. I am Craig Saphin, Liberty’s head of strategy and operations.
Welcome to our audience this afternoon, including a few internationals.
Without further ado, let’s play a short video, and then I will ask the first question to Nikesh
[Video]: Sweden is fed up with cash. It’s a hassle to carry around, it can easily be stolen or misplaced, and frankly, no one is using it anymore. 10 years ago, just about 40% of the population was paying with cash, and now only 6%, so what’s their answer? To go completely cashless by the march of 2023. Back in 2012, the 6 largest banks in Sweden saw the trend coming and built Swish, an instantaneous mobile payment platform created for easy electronic payments. Now with all this change to digital, one of your first thoughts may be… hey how in the heck do kids use the money how did they buy ice cream or a new bicycle? How do they run down to the candy store for a lollipop? Check this out. Swedish Banks issue debit cards to children starting at age 7! It’s already been theorised that cash and coins will be put on display in museums so that children growing up will at least know what in the heck Puff Daddy is talking about when he says it’s all about the benjamins, baby.
Craig: firstly, a question to you Nikesh. There is a steady and evident reduction in the usage of cash, checks and plastic. The pandemic has just accelerated this change. What will drive the total obsolescence of these payment methods? Is it likely that real currencies will also have a similar fate in the future in favour of stablecoins and other crypto-currencies? If so, how will these be controlled and regulated?
Nikesh: thanks Craig it’s a great question and thanks for the intro by the way. I didn’t jump in, in time, and thank you Liberty for organising this fantastic event. Look, that’s a fantastic question and look I hadn’t seen that video before. When I saw that video it reminded me of something we were trying to do when I was working for a large Bank in terms of replacing the money box. Right, so … if you remember, as a kid you might have had a money box where your parents gave you coins for savings. These days, how do you do that? How do you teach kids the value of money? It’s getting really, really complex. But look, they’re getting by, they’re getting by in the electronic world. Just as we did back then. This is really interesting what’s happening. I think the way I see it, we’re moving our definition of value from one thing to another, right? So… you said in your introduction that many centuries ago we invented commodity currencies. Now we’ve been weaned off those, and now we have got fiat currencies. In the old days, we used to say I promise to pay the bearer x dollars, right? So… or so much in gold when a gold sovereign was a Pound. We’ve been weaned off that to the extent where the value of a dollar is what a dollar is … it’s what everyone thinks it is. There’s nothing behind it. That’s what a fiat currency is. Gone off that notion. And … what happening now with cryptocurrencies is interesting. It’s teaching us that… hang on a second, you know, what’s the real value behind money? Because I think when it first came out everyone said, ok what? You know, I don’t get Bitcoin. What’s the real value there, you know? This money thing I’m not… I’m not understanding it. I think we’re gradually weaning off those ideas of what we thought value was!
The next big step I feel… I think the next step is and we’ll talk about it later… central bank digital currencies. Those are going to be really interesting. We are going to change our definition of money. It’s not going to be this one-dimensional thing that we are used to everything is measured in the same value whether it’s food, education or health. I think that’s going to be a big change. I think the other significant change is that originally… human society was based on trust and the sharing of information at a scale that you could not believe is now possible thanks to the internet. We can go back to that trust through the internet through the shared ledgers, through the shared information that we have and I think that’s going to be the significant change that we’re going to see in money over the years. It’s going to be challenging we’re going to get there slowly but gradually. And gradually we are going to be weaned off the ideas that we’re used to.
Craig: thank you very much. That’s great. Thanks very much, Nikesh. Let’s talk about the next topic. Let’s talk about the emergence of digital wallets. Alipay has been in use since 2004 for digital payments. Apple Pay came on the scene in September 2014. We can safely say that Digital Wallets have revolutionised the way we pay for goods and services. After watching a short video, I’d like your opinion, Chris, on the benefits and risks you see with such payment methods.
[Video] Commonwealth Bank chief told the joint parliamentary committee that Apple has 80% of the digital wallet market share and effectively locks out other banks or competitors. Apple restricts access to the NFC chips in its mobile devices effectively locking out competition. The thought that a single provider could have 80% market share in an individual market is usually a cause for concern. So what, what’s the consequence of that? Well, it means that there can be no competing wallets on the IOS operating systems. So as I said in Google, there are at least 8 that we know of. The committee also heard about large companies self-referencing their own products online. In the digital economy area, one of the concerns that have been expressed internationally around these sorts of issues is self-preferencing by the big digital companies so if they are operating in the market and giving themselves an advantage or discriminating against people they’re competing against, that can have a very serious effect on competition.
Craig: ok so … Chris, could you please give us your opinion on the digital wallets and related payment methods thanks
Chris: Thanks Craig and thanks also to Liberty IT for the invitation to join the panel. How can I say it any other way? Digital wallets are here to stay. I’m a massive fan of my Apple wallet. I store everything I can in my Apple wallet. I’ve got concert tickets, boarding passes, all my debit/credit charge cards; I’ve got everything in it. It means everything is in one place, it makes it easier for me to find them… to manage them. It’s really easy and convenient. And sure, look, about the video, Matt from CBA is right. The BIG4 are also the biggest issuers and acquirers of card products in Australia. And so, it’s a big business for them. And Apple’s managed through their might to sort of force themselves in the path of payments if their customer is using Apple Pay. And so… they take a clip, and that means the issuers and the acquirers have less to gain. So, of course, they’re not going to be happy. It is a little ironic that one; I’m sure we’ll have a bit of a giggle when one of the Big 4 starts complaining about anti-competitive markets; I’m sure a bunch of other smaller Banks probably will have a chuckle at that as well. But what Matt is saying is actually true. You know, Apple has a huge market share when it comes to digital wallets, so the clip that they take if you’re into… you know, corporate tax issues, which are what was being alluded to that money is really being off-shored and maybe they don’t pay what we would like them to pay. And that’s sort of a different matter. I think there’s actually maybe a more serious matter that Matt might have not mentioned, and that is the ability for someone like Apple or other payment service providers to actually start delivering a service that disintermediates the banks from the client. And as we move further into the world of open banking and the consumer data proper rollout… that actually enable these payment service providers some very interesting services to their customers. And they will do that through the lights of the digital wallet products. So that’s an exciting threat primarily for the top 4. Just enclosing the security is you often be the most considerable risk that people would see and I’ve seen a couple of stats in our real-time report that ACI just issued, prime-time for real-time. One of the stats for the Australian market is that almost 40% of users in Australia have used the digital wallet or their digital wallet in the last 12 months. So this is growing, and there are obviously going to be segments of our community that are more risk-averse. But really when you think about it, I’ll give you a really quick example, and I’ll finish my answer Craig, but my 25-year-old son lost his wallet about a month ago. And it was full of maybe cash, lots of credit cards and debit cards or whatever, whatever he had in there… his licence and he thought he might have left it in the car or left it in his bedroom, and his bedroom is messy, so it was probably a week or two before he decided, I really have lost it! I need to do something about my cards. When you lose your mobile phone or your digital wallet you know straight away! And when you lose it, you can put it in lost mode. And you don’t have to go to the bank and cancel all the cards so … the security on your mobile phone is better security than the physical wallet, and it’s much more convenient, and it’s a lot harder for you to actually get scammed. I think using digital wallets if you use the good ones and there are probably a few of them, but Apple and Google are probably the key ones I think it’s safer and much more convenient. I love them. I’m a big fan!
Craig: Thanks very much Chris, that was excellent. I think that the two things that stood out to me that was the extra different product Ranges that you can sell and also the security issues so thank you that was a very interesting take. So, Phillip, the next question is for you. But before I asked the question to you, I’d like you to just watch the short video please, thanks.
[Video] in the past few days, serious questions have also been asked about the 39 billion dollar price tag paid for Afterpay by the US company Block, previously known as Square and also its chief executive, the Twitter founder Jack Dorsey and that’s because in a US corporate filling it’s been revealed that Afterpay’s loss increased in the past year from 79 million dollars, rater in the past 6 months, to 345 million dollars. So that’s in the six months to December last year.
Craig: So this is a very well-run story, and everyone seems to know about it but Philip I’d like to ask you the obvious question about Buy Now Pay Later is that even though it took Australian consumers and investors by storm it has not yet proven to be a solid business model. So, why is that and where is the BNPL market headed?
Phillip: It’s a great question Craig and no surprise that since that news broke a few weeks ago, I’ve been asked that a number of times. And… thank you again for the invitation to talk tonight. I will call out something that’s… gosh we need more gender diversity in payments. But, we’re all working on that. I know my colleagues at FIS and ACI are trying to work on that but that’s something we need to fix. To the question, I think we need context and I don’t necessarily agree with the premise of the question so just to make it a little bit more exciting. So, Buy Now Pay Later as an industry is still relatively new. It’s in an emerging, growing phase. So we’ve got a number of different players who have attacked different parts of the market and many of them perhaps chased revenue over profit in those early stages. And that is something that… Revenue is vanity. Profit is … I don’t know … sanity? So there is something at some point everybody needs to turn to that. And that’s as an industry you’ll see all of the players are starting to focus on less chasing that top line and focusing on profit. Some key things to call out though… as we go on that march it’s still early days. You just need to Google Amazon, people talking about that crazy guy Bezos starting his company a few years ago selling on the Internet that’s never going to work out and what was it in 2003 he came up with the crazy idea of putting cloud … computer power into the cloud that’s not going to work out either is it? So early days… it is something that needs to grow. From a lay-by perspective, we know it’s profitable, we’re profitable in both Australia and New Zealand in our markets. Where we’re focused is on growth. That does drag the P&L down a little. From a Buy Now Pay Later sector, independent reports… I tried to drag something up from ACI/FIS, but unfortunately, I couldn’t find one, media reports show it as the fastest growing payment method for b2c. That’s going to continue a few years ahead and I think one of the things I just like to really highlight is … if you think about this topic. I don’t pay the same way my parents did. They didn’t pay the same way their parents did. And using an example with a 22-year-old daughter and a 19-year-old son, they don’t pale thinking about banking or payments the way I did. And that’s something… we really do need to think about. It’s easy with this lacking diversity panel to think, maybe this is just a fad. But when we look at the trends. We’re seeing consumers, particularly in the 25 to the 35-year group really starting to use Buy Now Pay Later, use it repeatedly and really see this as part of their ongoing business. So… hopefully, I’ve answered that question, Craig. I like the controversy. I can imagine there will be a few questions in the chat about this as well.
Craig: thanks very much, thanks very much, Phillip. That was great. Yes, I think that the profit piece is always something that people ask questions about especially for large tech companies. And indeed, my kids like you alluded to are using the Afterpay services and the others that are around yep.
Phillip: Lay-by is a better option.
Craig: Lay-by is a better option. … and I’m old enough, unfortunately, to remember the real lay-by was back in the old days when my mother would put aside a party dress and pick it up when she paid it off so … Anyhow, let’s move on and I want to have Barakat the next question is for you… 24×7 bank processing, intra-day processing and schemes like the New Payments Platform or NPP, paved the way for what we have accomplished to date…. near Real-Time payments. What does the future hold for immediate payments for consumers, businesses and corporations?
Barakat: Thank you, Craig, great question, thank you again Liberty for this invite, I really appreciate it. It’s an honour to be here. It’s an honour to be with all the great panellists… and my colleagues. We once all worked in the same places. Phillip, I actually … before I answer the question… there’s actually a great report that FIS has issued, the global payments report for this year. We talk about the massive uptake of Buy Now Pay Later and the increase globally.. there are statistics there about it.
So, immediate payments. Where shall I start? I think the first thing that comes to… in the last couple of years in Australia, the focus was on stabilising the NPP scheme. And we still, as an industry have a little bit more work to do to make sure that the refund payments scheme…. more from the scheme’s side of NPPA and all the participants. However, now the introduction of request-to-pay or PayTo would pave the way for consumers and as you mentioned for corporates, to leverage the power of immediate payments. And when we’re talking about consumers… it’s the ability to request money from your friend or colleague and get them to pay you immediately and also solves the problem of consent. Because you send a request and then you consent that you’re going to do that payment through the mandate. Also, the ability for businesses, like merchants, to be able to accept the account-to-account transfer as part of the payment method. Even to buy… not only for big purchases but also for buying your groceries. Because tomorrow if you can get a mandate … that you can … at Woolies using the QR code that Woolies is developing, you can then pay for your groceries through your bank account or if you’re talking… and for corporates, it will solve the issue of liquidity and cash flow just waiting for your money to come. Then when you get invoices, getting that money immediately is a huge benefit from a liquidity point of view, especially for small merchants and SMEs. There are a lot of benefits to real-time payments. We are still going to see the benefits of the Request-To-Pay as the industry matures. But as I said there’s a lot of work that we all have to do as an industry. Hopefully, we’ll all meet the deadline to go live in May 2023. I’m sure that this is going to be part of what we do. Hopefully, we can… we can go live with at least the Banks that work with us, earlier. But… I think about … the future of payments is in real-time time payments. I think it does not take away from the importance of cards and other types of payments; however, it will be a new payment method that will take a percentage of the card transactions that we have today.
Craig: Thanks very much, Barakat. So… yeah, the market is changing quickly, and where the payments are allocated is changing quickly. So thank you very much for that explanation. The Banks are having the pivot a lot. Can I… I’m gonna ask Nikesh and Philip to answer the following question, but before I do, I will play a short video just to introduce myself.
[Video] the idea of digital money is not new. Many of us use debit and credit cards or payment apps for transactions. But what would make a central bank digital currency different? One of the significant financial developments over the last few years has been the rising popularity of cryptocurrencies, with one, in particular, Bitcoin standing out. Following Tesla’s announcement that it bought 1.5 billion dollars worth of Bitcoin in February 2021. The volatile cryptocurrency’s price surged to new heights, giving it a theoretical market capitalisation that is even larger than the world’s two largest payments processing companies Visa and MasterCard. Unlike traditional money, Cryptocurrencies are not issued by a central bank but rather via a decentralised network of computers, typically using blockchain technology. Investors in Bitcoin believe that because there is a theoretical cap on the number of bitcoins that can ever be mined, the cryptocurrency will become increasingly valuable at a time when central Banks have been printing more money than ever before to arrest the economic fallout from the pandemic. That’s why people sometimes called Bitcoin digital gold. Many Central banks are worried that the widespread adoption of these independent cryptocurrencies could weaken their control over the financial system. It could cause financial instability especially because cryptocurrencies do not have the legal or regulatory safeguards that central bank money does. Unlike your savings in a commercial bank which rely on the bank’s promise to fulfil CBDCs are recognised by law and backed by the power of the central bank, which cannot go bankrupt. It can make payments faster, allowing for immediate settlements and no processing delays. And it can also make payments cheaper. The European central bank has plans for a digital Euro, although it may be a few years before it is available. We are going to have to address all the issues of anti-money laundering, financing of terrorism, the privacy of users and all the information, and the appropriate technology that will carry that digital currency. Will central bank digital currencies ever become as trusted and as convenient as banknotes? Quite possibly but it may take months maybe even years.
Craig: so Nikesh and Phillip, this question is for both of you so if you could just take it in turns to answer or even as a discussion between you with regards to central bank digital currency, can you give us your thoughts on the development and the future of this initiative?
Nikesh: Phil I can start… it’d be good to get your thoughts. Look… I think what’s impressive is if you look at a map of the CBDC central bank digital currency world in 2014 it was blank! And I had conversations back then, and Central Banks would laugh at you if you suggested it. Today every major country … this is amazing … every major country in the world has either experimented, piloted or researched CBDs. Everyone wants to be a part of it. There’s a paper out by the Federal Reserve that recommends and the US President, in short, is backed that CDC’s is a platform for innovation, so I think… I think we’re going to see a lot of action there. Phillip, what do you think?
Phillip: Yeah, I totally agree, Nikesh. It’s gone from something that was somewhat a fad, a payment nerd’s discussion to more real-time. Two issues I think come into that. There’s nothing really live yet so a lot to come and, you even see as you point out Nikesh, the RBA has done a couple of pilots, cross-border, a little bit of domestic work. But they are a little sceptical. And the second issue is, that it’s obviously political. So there’s some definite discussion around. Does a CBDC start to generate some political clout for any country that does own it? Perhaps, maybe a new gold rush. Nikesh, just to generate some discussion between us, do you think this is one of the most confusing areas, though? because you go … you’re thinking about this recently, I saw it as the concept of decentralised … central bank digital currency. Where is it on the hype cycle?
Nikesh: I think it’s still early on the hype cycle. It’s going to go through a lot of troughs as we experiment with different models. But the thing is, Phillip, and I think it’s a really good point that you bring up, is that there’s just so much complexity to it. It is … there are so many dimensions to it, right? So there’s a question without going too much into it, will this replace private money? Private money is issued making up 90% of money today. Will this replace private money? What does it mean for a bank? Does this mean everyone’s got a central bank account and you don’t really have a bank account with your private Bank anymore? All these sorts of things and the other one is you know can they start to do radical things with money, right? So today, monetary policies we know in Australia right, when we’re going through a bit of inflation, but the economy is not doing that well nevertheless you know they’ve only got one leaver to pull. With cbdc can they pull more levers? Can they put an expiry date on money? can they have different types of money? one for health, one for accommodation and one for wealth? all sorts of things can happen… and I think we’re gonna go through those multiple hype cycles. Number one, we implemented cbdc; number two we discover that all this isn’t quite doing what we want to do; number three you know what can we do about monetary policy in this new world?
Phillip: it’s going to be an exciting cycle if we go through that. We’re all going to learn a lot of new words, aren’t we through the process? I’m sure we’ll … some of the vendor community will spend a lot of money trying to keep up with the demand, But, you do raise a really good point; it does generate a lot of control and privacy. And I think here in Australia that some questions… given our history… the public will ask a lot of questions before it’s really adopted in the mainstream. The cost and the benefits to speed up commerce, particularly internationally.
Nikesh: That’s true. I wonder if it will ever be possible for the government to turn it off. Well, they could do it now! to turn off your accounts so you know one day you’re mega-rich, the next day you have nothing.
Phillip: That’s the Bitcoin, isn’t it?
Craig: Thanks, guys. I was particularly taken with the money that has an expiry date. I suppose that sounds like airline points or something. That’s a currency that has expiry dates inside airlines. So… anyhow, that’s a very interesting discussion. Thank you Nikesh and Phillip.
So… Barakat and Chris, the next question is for both of you. Nikesh’s book takes us through payments and how we got here. More recently, Uber and their application of embedded payments, which automatically charges at the end of a ride, means that Uber has embedded payments within its technology to the point that the ride-hailing and payments experience have merged into one, rather than separate steps to be taken by the consumer.
Barakat & Chris, please could you take us through your thoughts on what the future holds for Payment technologies?
Chris: Thanks Barakat. Look… it’s interesting. You can take this question from either the consumer end or if you like … the banking or the merchant end, but look … most consumers are looking for just very simply, some convenience. They want to have their trust managed. That’s… so, their risk is managed. That’s a trust issue. And the… the cost of the transaction to them needs to be as minimal as possible. So, when you look at ACI’s customers, the sort of things that they’re looking for from us, of course, ACI to help them with, it’s really … simplicity, it’s agility, it’s cost, and it’s innovation. So it’s that… they’re the key things. And then, how we do that through the legacy technologies and the emerging of the current technologies, that’s really the goal. And I’m sure Barakat has the same challenges… and yeah…
Barakat: yeah, great point Chris, and I think for me, I think embedded payments… is hopefully taking the future to an embedded experience. So embedded payments like an Uber kind of payment, are already here today, right? and thanks to COVID, in one way or another, people are more adapting and accepting to use of QR codes, right? and one of the main reasons that we were behind in Australia with QR codes is because we were one of the first adopters to the tap-and-go. But, today with the QR codes, if you go today to a pub and you want to order two beers, you go to me and you, and you scan your QR code and you pay with your Apple Pay to pay.
And I think what we are doing with the EFTPOS investment and QR Codes, and we saw the W-Pay with Woollies announcing the QR Code payments, is not replacing the tap payment, but it’s actually providing more of an embedded experience, during that payment for the customer. Or… you can add multiple streams of payments. So, you can use a credit card, debit card or even your account number through NPP, hopefully in the future. And pay through a single scan. And that’s why I believe… the future of payments and where we’re going, it’s having that embedded experience and payment is not the main thing that you think about! Like before… you used to spend ten minutes counting cash. I think, in the future, we will be spending one or two minutes saying what do I want to pay in? one payment? What do I want to use the liberty of paying over three instalments? Afterpay? Coin? And also at the same time embed my loyalty, to improving the multi-touch experience for the consumer. Instead of tapping my three cards, by scanning a QR code, I can have that one touch that I can get my loyalty points, I can save with my credit card like my gift card and hopefully with my account. I think that’s where the future… that’s what the industry is focusing on. Developing better-embedded experiences to payments. And I think we’ll touch on data… Chris, from your point of view, where do you think we’re going to be going with taking… what’s next after… like QR Codes, after what we’re doing with real-time payments, what do you think is next for payments, and that can be anything. What do you think we’re going to do next?
Chris: Well, I think Barakat, you raised some very interesting things. I think the W-Pay case study is a great one because it’s a convenient thing. One of the interesting things about that use case is how they digitise the receipt and include the receipt as part of that experience. So it’s a digital receipt you can store it, you can actually look it up at a later stage say… One of the things that I know, as a consumer, I get really frustrated about is when they hand you an… the old type, the old paper receipt, and they say hold on to it. And we all know with a little bit of sunlight that thing deteriorates in minutes so… and you gotta keep it before warranty. So that old digital receipt as part of the experience and the loyalty, that sort of combining that together for the consumer… again stored in a digital wallet maybe. And what I think, and by the way all this is real-time, that sounds much easier than it is, that’s where things are going. And maybe that’s taking some of the transactions off the current credit card rails or maybe it’s replacing or maybe it’s new because we’re doing the Pay-To the Request-to-pay. So … but I can see where this goes next possibly is where you can now if you’re a bank when you start actually integrating all of these pieces together, especially if you think about digital receipts you can now start thinking about delivering enhanced banking services to your banking customer. And the payment service providers might be able to do this to you if they actually start getting some scale where you can actually start helping people with their spending management, their expense management or their money management. So you can start really helping people understand where they’re spending their money, how they’re spending their money, categorising… These are the sort of services… these are out there in the market at the moment, but they’re really limited by the data that you can actually get into these systems. So when you look at the Uber experience, we’ve got all of this you know it’s an invisible, frictionless payment that’s actually just the tip of the iceberg. The W-Pay experience is another one we got loyalty and the digital receipt actually encompassed and now when you start looking at these standards if you look at some of the ISO message formats, that we’re all looking at implementing, as we’re headed into the real-time, the data that comes inside those payments is something that we can actually start doing a lot more with, to deliver a much better experience, a much better Analytics which is better for customer service and service provision to the end-user consumer. So, it’s actually really interesting! And then on top of that, you’ve got the Artificial Intelligence discussion…, and I don’t think we’ve got the time to really delve into it right now, in this discussion. But with all of that extra data and the use of machine learning and artificial intelligence you got real-time payments, you’ve got convenience, frictionless then you got a whole lot of data that now is there for you to use for either to deliver services or actually to help you secure your payments even better than we do today.
Barakat: 100% I think from that first video that we showed, instead of tomorrow having an EMP chip in my hand, I am just going to tattoo a QR code
Craig: ok, thank you, thank you very much for the two of you, Barakat and Chris. I think that it’s a lot of very interesting points. One of them I took away was the data or the metadata in the transaction. It seems in this era that the data about the transaction seems to be almost as valuable as the transaction itself. So… certainly, that’s the way a lot of these digital companies are making their money now… by having access to or generating that… later. Ok, Nikesh the next question is for you but before I actually ask the question I would like to encourage the audience that’s listening to this panel … please can you if you had some questions about the panel can you put them into the chat and I will be looking at that, and if we have some time in the end, I would like to use some of those questions to the panel. So I encourage people who are listening to please enter some of their questions into the chat.
So, Nikesh, NPP’s next day is the launch of Pay To in April 2023. It’s a great initiative. However, NPP to date has been affected by resiliency issues. The RBA reported many unplanned downtimes for NPP services providers at an average of almost seven hours which is considerably higher than other payment services like card payments. What do you think about PayTo and, more specifically about resiliency in the Payment Systems?
Nikesh: I could go on with this for a while. I don’t want to be too harsh. We might have some people in the audience from PayTo. Look, I think it’s a beautiful concept; NPP account-to-account payments is the future. There’s no doubt about it. I don’t think we executed it as well as we could have. I’m not blaming the regulators, and I’m not blaming NPP. I think just collectively, whatever happened… we didn’t quite get there. If you look at what India’s done with UPI if you look at what Hong Kong’s done with their fast payment service, these examples around the world where they’ve done it well. I think the problem that we’ve had… we have, was with reliability… and it was a reliability that was the issue. I think it’s the biggest problem because what happens is you’ve got the early adopters. With any new product, you’ve got these early adopters. These are the people who are going to tell their friends if this is worthwhile. Now, you imagine, day one, and I’ve been there, day one the number one use case that everyone came up with was used car sales. So day one, I’ve got the money, and you’ve got the keys … let’s do the dance. If you do it… the only way to do it in the old days was with cash or a bank cheque. If you do that with NPP, and I’ll send you the money right now… it’s a lot of money for me. It’s me…, you know. I’ve just started working; it’s my first $5,000. I want my wheels, I give you the $5,000, I send it by NPP… my bank says “sent”, thank you very much. Fantastic! You’re sitting there, and you haven’t got the money! And the reason that you haven’t got the money, and none of us know this, is my Bank held it over for one day for fraud checking. We’re waiting, we’re waiting, we’re waiting, and the money doesn’t go through. I don’t know what’s happened, I don’t know if you’re lying to me; that you haven’t got it… The money is gone! And that experience was so terrible with NPP. I think it’s going to do PayTo to a similar fate, simply because that generation of early adopters just doesn’t want to touch it and I’m one example is carsales.com. They jumped on that used car sales thing. They implemented the solution using NPP, they pulled it out of the market… I don’t think they’re gonna jump on the next one that quickly. And that’s really unfortunate! It was really important, I feel, to have the experience right and when we’re doing PayTo, you know, I ask anyone who’s involved in that, don’t launch into it until you’ve got a really sleek experience and it’s consistent, and it’s reliable.
Craig: thanks very much, Nikesh. That was, that’s excellent. I think I think the thing that’s consistent with you and the other panel members is the passion in every one of the answers. So, it’s actually a lot of energy so thank you very much.
Chris, the next question is for you. Let’s switch topics. Before we get onto that, I’d like to play a short video that puts the new topic in context. Thank you
[Video] Wirecard is a payment processor that facilitates debit and credit card transactions. In 2005, a little-known start-up called Wirecard joined the Frankfurt stock exchange. The payments processing company soon became a unicorn, eventually surpassing Deutsche Bank, Germany’s biggest bank in value. Wirecard grew to become Europe’s largest financial technology company. Worth 28 billion dollars at its peak! Then in June 2020, it filed for insolvency. Finding itself at the centre of one of the biggest financial scandals in history. Germany’s financial regulator deny that it was protecting WireCard. The company continue to emerge unscathed after each attack and it became emboldened. Huge questions… I mean, is it an Enron-type situation? because Europe got a massive egg on its face? They wanted a big Tech giant, but they ignored a lot of the facts; what about the regulators, the auditors? Wirecard’s auditor EY is also facing scrutiny for failing to check Wirecard’s bank statements for three years.
Craig: ok… so Chris, for you then, I refer to AUSTRAC’s penalties of $700million and $1.3 billion to CommBank and Westpac, respectively. Let’s think about Digital Identities, particularly in the context of Cross border payments and in the context of Financial crime. Let’s also think about the role of the regulators and the auditors. We have seen companies these days applying AI solutions for real-time payment processing and financial crime prevention. Can I hear your thoughts on this one, please?
Chris: Yeah, thanks, Craig. A bit of a touchy subject. I’m not sure how I’m the guy who got this one, but … look, both of those two banks are large customers of ours. And we work with them and talk to them about fraud and AML all the time. So, I think you will find that large… all of the banks, especially the big four, are doing a really good job to manage fraud within, you know, within the limits that they actually forecast and anti-money laundering is actually, you know critical. And if they get that wrong, as you can see, they get massive fines, and I think one of those fines is the most significant fine I think, in our history in Australia for a financial services company. So, there’s a lot at stake and these Banks especially investo a lot in intellectual property and in the platforms to actually manage the fraud and to do what they are required to do to manage anti-money laundering; actually a little bit more than anti-money laundering they do things that are related to terrorism as well… terrorism funding. It’s important. I think they try very hard and invest a lot of money and are actually quite skilled at it, too. Interestingly though, fraud and financial crime or AML are actually different things, and they are managed very differently. What I wanted to be able to, maybe… just put a bit of a slant on this… is that the challenge that the financial services and specifically the banks and the and the intermediaries of the processes have, is as we moved to real-time, how do they pick up on this without actually interrupting the payment … slowing it down? Nikesh just gave a great example of how something that the NPP should have been able to do, and there are moments when it just doesn’t. And part of the reason is the fraud management piece. So, when you think about it, immediate payments have been around for a long time; many people are very comfortable using cards. That’s why merchants love them; that’s why consumers love them. Whilst the settlement of that transaction is not immediate, certainly, the clearing of it is! So, cards, and card fraud has been around for a long time because they are very widely used… and it was in the old days… someone dropped their credit card or their bank card on the ground, and ran off and tried to use it. Card no present fraud has been probably the biggest issue in our industry for a long time and… largely I think we’ve been able to manage that within the limits that the banks and the processes are prepared to accept. But the real-time fraud now is starting to become the number one risk. And there’s a thing for that fraud, which is about authorised push payment; and that’s about someone being scammed. So… you get an invoice, it might have your utility provider. It looks exactly like the invoice that you get from the gas or your electricity provider, and you know that you’ve got a bill coming, and it looks like the right bill, so you just pay it; You go online, and you make a little payment whether that’s a real-time payment or a BPAY, but it goes into someone else’s account because it’s a fraudulent invoice. That type of fraud now is actually really difficult, and it’s particularly difficult because it’s actually nothing that the bank can do that actually prevents that. It looks like a very legitimate payment… from (from the payee) from the payer. But what we’ve seen now is in the UK, from that type of fraud the losses a bigger than the card, not present losses. So, it’s actually becoming the most significant issue that these banks actually have to look at from a fraud perspective. So, look, really, just in closing, how do you do that, and what are the banks and processes actually doing? More and more, they’re actually developing the rules and getting tighter and more intelligent rules based on machine learning and artificial intelligence that I looked at before. And these systems and ACI actually provide fraud management assistance to a lot of banks and processes; what you can do is actually be very intelligently flagging or marking certain transactions, and you can actually reach the customer or that client in near real-time and get them to validate whether or not that was actually them making that purchase or that payment. And so… that way you can catch it in inflight but again as we move to real-time, as Nikesh said before, that becomes a real challenge. But you know, we’re also getting benefits out of moving to real-time and standards-based messaging because like we said before, you get more metadata some of that metadata can actually help you identify the more likely to be fraudulent transactions and make them also give you better Analytics. So that you can improve with machine learning/
Craig: yeah, thanks, Chris. The predictive piece that the banks are using, as you suggested on the AI… I’ve been a humble consumer of a great bank I’ve been picked up, flagged a lot actually… and they call you and ask you questions proactively, and that’s a significant change to several years ago. I agree with what you’re saying. It’s fantastic, so … that’s just perspective from a consumer. Thank you very much.
And the next question is for you, Phillip. Cloud and API technologies have paved the way for Open Banking and Banking as a Service. Integrated solutions, agnostic of providers, should make life easier for consumers, particularly as data is shared between entities responsibly and within regulatory compliance. We heard CommBank is offering 10-minute unconditional home loan approvals! We have come a long way with KYC or Know Your Customer and Identity Verification but also have the data to verify Income and Expenses for responsible credit decisions. So Phillip, where do you believe we are headed next?
Phillip: yeah, so this is a growing area, and… what was it? Two months ago? Apple acquired a business in the UK called Credit Kudos. A little tack into their business, but it just shows how hot this area is around open banking and data. They now got those technology elements in place, large data can be shared … uhm.. I’m not sure it’s always responsibly, Craig, just to pick on your question back. Sometimes I think it is irresponsibly shared! But we have a great deal of opportunity ahead of us just as Chris just talked about, we can contact consumers directly, we can use AI, we can use bots … I think probably to answer this a little differently, is not where it’s heading but where it should head! So, we all spend a lot of time, and I’ve got to say… my fellow panellists, we all spend a lot of time doing this; encouraging more payments, encouraging people to spend their money faster, creating systems that do it faster and faster and faster! I challenge the industry. It’s now time to be responsible for that. We have so much data about what a person is doing. We look at salary information that comes into their bank account; we look at their spending behaviours. There’s a … as you look at an old car transaction with just all those pretty mundane fields, as you go to real-time, we sometimes know more about that than the consumer. You can use biometrics to decide that is actually the consumer on the phone. ACI has a great partner with Biocatch … but we can also use biometrics to decide they are a little intoxicated and if should they be doing this transaction right now? We can use that day to assess people differently from a credit decisioning perspective. So rather than just look at points in time to offer credit to someone, which is usually a point-in-time outcome for a home loan, credit card, or a Buy Now Pay Later solution, banks and the ecosystem could potentially use all of this data to make decisions at the point of purchase. Rather than just ratcheting up how much you can get in a home loan … we noticed you could potentially pay off your home loan or more considerable credit card limits. We can use this information to be more responsible about offering other value-added services. So, yes, the technology is fantastic, the cloud’s enabled great propositions; we’re going to see more and more Banking-as-a-Service. That’s a trend that will continue as people look to White Label platforms integrated into payments, but I think just to be a little bit controversial as we get onto six at night, maybe we need to be more responsible with all that data!
Craig: Thanks very much, Phillip. Yeah, I think a lot of these new developments are part of the problem. Seems the government’s having trouble keeping up, actually, and the regulatory piece definitely lags. So, I appreciate what you’re saying, so thank you very much. Barakat, please talk to us about your thoughts on current trends of alternative payment methods, for instance, QR codes, social media payments and account-to-account payments. We touched on some of these already, but I’d like to hear more detail from you on these methods if that’s alright.
Barakat: Thank you very much, Craig. I think in Australia we’re a little bit behind when it comes to payments like what’s happening in Asia. And I can expand on that because also one of the first adopters of that and EMV payments here in Australia. However, I think with the development of the QR code and what EFTOS is doing with QR codes we have definitely introduced more tight payment methods and especially with a PayTo, hopefully, it will be more reliable than what Nikesh was saying and would definitely all working together to make sure that this is a success story for Australia. But I think… next step… what’s a new type of payment is the metaverse. I think people at FIS are looking at developing how we can take you to the metaverse and go to a virtual place to see a car virtually, and then you pay using your digital ID or your bank account. Alternative payments as Phillip said and Chris said before it’s all about trust, convenience for the consumer and the merchant and fees. So for the consumer, as long as you provide them with that trust and then you provide them with the convenience of how they want to pay … so whether QR code is to reduce the number of touch points for them, social media and Uber payment is embedding that payment into the experience that you’re having with the super App or from account-to-account payments is by enabling it to get the money immediately and bypassing the card’s way of formation so that you reduce the fees. So, as long as you achieve two out of these three … hierarchy … trust always has to be there but then convenience and fees. The more convenient the less the merchants will think about the fees. And a great example is Afterpay for that because it touched on how they can introduce more selling, for and help merchants sell more and that’s what they touch on for Buy Now Pay Later. So then, merchants give away from the fees perspective. For merchants it is also to help them with looking at reducing the fees for credit cards by using Buy Now Pay Later because the merchants are paying the fee in some of the examples. I think that we will see more and more account-to-account payments going forward in Australia. With the introduction of PayTo. We are yet to see how it is going to go with QR code in Australia, but I believe it will be … it’s going to be a great success story but still something that we need to watch and see how it goes.
Craig: thank you very much, Barakat. Yeah, it’s interesting about the fees, isn’t it? But I remember when these were totally mysterious and in the background, but now they’re much more upfront. And you can choose at the time of payment about which will attract the lowest fees. I think the amusing thing for me is when you pay tax to the government on your credit card, they charge you a fee as well, which is pretty interesting.
OK, Nikesh, I’m going to play a short video and then the next question is to you. Thank you.
[Video]: a powerful Coalition representing some of the world’s biggest democracies announced it would block some Russian Banks from Swift. So what is Swift? Swift, which stands for the Society for Worldwide Interbank Financial Telecommunication, is a global system that banks use to securely send and receive transfer requests. Swift handles billions of financial messages each year. While other systems are designed to circumvent Swift and challenge the dominance of the dollar, Swift is by far the most commonly used system worldwide. It connects more than 11,000 financial institutions in more than 200 countries and territories. Foreign banks have about 121 billion in assets owed to them by Russian-based entities. Cutting Russian Banks from Swift can make it hard to collect that money. However, the west is planning, for now, to keep some Russian Banks online for oil and gas exports critical to the European and global economies.
Craig: ok, thank you, Nikesh … The decision to switch off SWIFT transactions to a sanctioned organisation or country could have worldwide economic ramifications. Is such heavy reliance on one intermediary, such as SWIFT, albeit regulated and monitored, a good idea?
Nikesh: yeah, thanks, Craig, and I think you said we’re all passionate. I think you know how to push our buttons; that’s what it is. This is something I feel strongly about. I have written about it at length, and look at the outset, there is a political problem there, and you know a lot of people have died, and you know what’s happening in Russia is terrible. I don’t even want to start that conversation. But there’s one fundamental thing, and this was something that John Keynes established, and John Keynes is considered to be the father of modern monetary policy in economics as well. He went through the Great Depression; he went through World War One, and a lot of people didn’t listen to him. In his dying days, towards the end of World War Two, everyone was all ears because he had predicted what would happen in both cases! Many people thought that one of the major causes of World War Two was… it was the way that the Germans were treated in terms of participation and repatriations and so on … reparations, sorry, and he said this. He said you couldn’t treat a sovereign nation like a bankrupt individual. So cutting off any country, no matter what they’ve done, from the financial system, you know, is terrible. Because we’ve seen how countries have progressed. You know, when they’re able to participate. It led to a lot of frustration, and that anger created a desire to fight back, and that’s what many people think caused World War Two. Similarly, in Swift… Swift is three things. It replaced Telexes in terms of creating a mechanism to pay between banks. It’s a message standard … SWIFT messaging is a message standard, and it’s also a network. Since Swift was invented, we’ve worked out all these other networks. Primarily the Internet! As a way of exchanging information. You know, we’re not too fussed on what the standard is … we’ve got a million ways of coming up with standards, and there are so many different payment networks. It is the major one! Cutting it off is highly problematic because what it does, the signal it sends is that we can cut you out of the world economy. And what that’s going to result in, is number one is it could result in anger, and now we’re talking about nuclear war, we weren’t talking about that in world war two, we’re talking about it now… at least not at the beginning. It could result in this country’s turning their back on what has been a very successful and standardised payment network that’s prevented money laundering, that prevented, to a great extent, terrorism financing. Getting those countries out of that system, I think, is trouble. I think making them broke is .. you know… will lead to a lot of dissatisfaction in those countries, and I think personally, I think it’s a mistake to cut anyone off from the financial system… no matter what they’ve done.
Craig: Thanks very much, Nikesh. I’m sorry, I got a few things going on here technology… alright thank you very much for that. I think about what you were talking about, we have a real-life situation playing out in Sri Lanka at the moment, don’t we? So. I think that’s a fascinating play as changing politics and a country trying to stay out of bankruptcy, so that’s directly related to what you’re talking about.
So can I call on you Barakat please about the next question? So, banks and financial institutions are collecting an incredible volume of data. We’ve already spoken and touched on this briefly today. Many Insights can be drawn from such a massive array of data, particularly payments data. Behavioural patterns can be analysed, and predictive analysis can safeguard and better advise the bank, the government but ultimately, businesses and the consumer. Barakat, what are some examples of payment data collection and clever analysis that can be used to benefit the consumer?
Barakat: yeah, definitely a small example of data is when you Google something the next day in the morning, you start receiving email targeting marketing about it. And … imagine you take that to the next level regarding payments. No one can know your behaviour better than your payment provider. If you can collect this information about consumers, you can provide better, targeted marketing. And some people look at it and say it’s a bad thing. I believe it’s a great thing! I love to receive ten emails about something I’m interested in, as in 100 emails about random stuff that I don’t care about. So, empowering the merchants and the financial institutions/acquirers, empowering the merchant with this data to give targeted marketing, a deeper relationship with their preferred shopper and App. That’s actually a great example of how we can leverage data. And also, on something that Chris mentioned before, for fraud, the more data we have of our customers and the more we know about their spending habits and behaviours, the better we can protect them, and the better we can protect the merchants through that. One of the other things is loyalty, right? with more data you get about the shopping, the shopper, you can better offer them loyalty programs. And for small businesses, and this is an example from a significant acquirer, we can help small businesses by identifying the buying habits of their customers in specific locations. We can actually help them stock for certain items in specific locations. So, when you go to … say your WA Woolworths Metro, and you always buy that specific bar of chocolate, I know that you and 50 other people like that .. so I always make sure to stock nearby you. So many ways… I’m very passionate about the use of data for payments, and I think with the introduction of alternative payment methods. Because today, with the card payments, when you are making a deposit, there is a limited amount of information that we are receiving per transaction, but with an alternative payment method, with a QR code, with a card not present adoption even more… you are receiving more information with that payment transaction that helps merchants, banks analyse the customer and build a better profile about this consumer. So, they can provide them with a better service. And also on the other end for corporates and data with the ISO222 and request-to-pay, that considerable amount of data that you can send with that request-to-pay, a like a contract or a receipt or a bill so that you can bill that amount. That’s amazing that can fix a lot of problems for corporates in the future.
Craig: Thanks, Barakat. I know you used to work for NCR, yeah? I remember a story that used to be circulated by Teradata actually … about a young lady who the marketers who were targeting her knew that she was pregnant before her parents.
Barakat: I was actually a data developer at Teradata before NCR, so that was the first invention of data lakes and data warehousing and how can you work on data.
Craig: thank you very much for your answer. That’s great, and I suppose the main point of the question is how it can benefit the consumer, so as long as the data is being used to benefit the consumer and not just the service providers, so that’s very good thank you. So Phillip and Chris, the next one is for you. Beyond technology and specific products, every bank or financial institution that embarks on a Payments solution modernisation should have the right team composition to successfully complete its journey. What do you think is the role of the correct implementation partners to accomplish that?
Chris: Look… ACI has a lot of experience at being a partner to help our customers implement you know .. payments modernisation. It’s a bit of a journey! And.. whilst we’d always like to get better… we’re looking for ways to improve and engage differently, but I would have put it down into three simple elements of what I think describes the right partner. It would have to be there. So, the first one would be, that you need to have a partner that has extensive payments experience. Because if you’re talking about payments modernisation, you’re moving from something that’s probably… let’s call it Legacy. You’ve probably had it implemented and working for 20-30, maybe 40 years; could even be longer. But it’s about that heritage. And it’s very complex. To be able to move from something that old and to manage the risk and to manage the cost and to get it right so that you have a good experience and you’ve got the reliability and availability and everything that you’re looking for to continue moving forward. So, you need to partner with someone who’s got the experience in what was and has the skills and the experience and what will be. So, the current and the future technology. So that’s the first part. The second probably most important part is that you want a partner that can be flexible and strategic. And really, what that means is that you have a long-term view because payments are a long-term view. You can’t pop in, and out of being a payments partner; that’s just not how it works. This is a significant investment to be a partner. Because it’s a significant investment to be a customer. So you need to choose a partner that has that long-term view; is prepared to be flexible but has a very strategic view in terms of what it is that they’re providing and so how they would provide it. And then, the last part may be more relevant but where you’re getting from would be around the engagement model. You really … to make these payments modernisation projects successful, you need to engage with business sponsors, not just technology sponsors, and I think what we’re learning to do better and better is we need to be prepared as a mature partner to challenge our customers so that we don’t allow them to go down a path where they fall into a trap, and then we go … well, we thought you knew that or we thought you wanted to go down that path, but we could see the pothole. I think customers want to partner with you to help them with insights to understand what implications or consequences are of some of their decisions. And lastly, from a model perspective… you know, you need to be agile, you need to be able to be quick, and you need to be as cheap as you can. There’s always a good balance between onshore and offshore resources. So… experience that you’ve got from around the globe and experience that you have here locally. I think all of those things are
important. I could probably talk for a bit longer but Phil, sorry, you’ve got a lot of experience too. What do you think probably describes the right sort of partner?
Phillip: I agree with all those things, Chris. If I could synthesise it into a couple of different words. Clearly needs to be a payments expert but I think… really important is somebody with the vision to operate. We’ve talked about a lot of complexity tonight. We’ve danced across many topics currently facing us … that are ahead of us. We need a partner who has a true vision. But it’s not about the technology sometimes. And I’ll say that with a smile to my colleagues from FIS and ACI. It’s really about getting a change of culture and approach in the financial institution. If you are doing a lift and replace, simply replacing legacy technology with newer interesting technology in the cloud, is not going to change things for the incumbent providers. It’s the ability to have the mindset, as Chris said, to think agile, to think about adapting to the changes that are ahead. But through a large organisation that requires a lot of changing downstream processes. So, I think what’s important is a partner that understands. It’s technology, it’s absolutely about technology, it’s absolutely about payments, but the culture of the transformation of business needs to complete as part of that program. Very easy to wack in a brand new piece of tech up front and then see months and months of problems when a bank or institution needs to deal with fraud, returns, hooks into their various systems and oops… we forgot to do AML with that new fandangle system. So really, getting that right transformation, and cross-organization view is essential. And I’m sure that somebody Craig, like Liberty IT are expert in.
Craig: that’s very kind of you, Phillip. Thank you, thank you for your answer, that’s great, and for both of you, that was… they’ve been great answers right throughout.
We’re coming towards the end of the panel, but before we go … that’s the end of the formal questions actually, the audience has been asking a lot of questions while you guys have been giving fantastic answers. So, I just want to go to a few of those because not only because these are some really good questions being asked by the audience, but also because that’s respectful to do.
So, the first one I’d like to ask is a little bit of something that’s real-time for us and a real issue that we are facing in Australia. There’s been a lot of you know in the one season we’ve just had in summer with a vast flood around the country and we’ve had massive bushfires in the west, and these are real issues that threaten the internet and its ability to stay connected which is essential. So when you are talking about digital payment methods, and you’re talking about people being isolated from the internet and electricity even for weeks at a time, what do you have in mind as far as the cashless environment is, and how should people be able to survive in that situation? I am just asking the question generally; anyone in the panel, anyone or someone in the panel …
Barakat: can I take that? I think when technology fails, and especially unfortunately with what happened with the floods, there’s always a place for cash. Cash is not disappearing! Cash is still there. As much as all of us here want to replace cash with technology because that’s the business we’re in, I think there’s a place for cash all the time. But, I would like to mention that with everything that’s been happening for the last ten years in Australia, we’ve wanted the EFTPOS hub with 100% availability. We’re actually going to announce 10 billion transactions with zero downtime that we’ve wanted to get to with EFTPOS at FIS. So, the systems that we have in place, not just FIS but across the board, are very reliable. The whole industry, whether it’s FIS, ACI or any others, we spend a lot of time on actually developing the systems to make them to the level that they are very reliable. But when the Internet is not there and you don’t have a connection, and you don’t have anything standing, then the answer is cash, unfortunately.
Craig: does anyone else want to have a stab at that?
Chris: I totally agree with Barakat. I mean, you can’t … in a situation where you’ve got floods or fires, and you’ve got infrastructure down … I mean, people can’t keep their mobile phones charged. Or they’ve lost their mobile phone, so you just can’t get around not having cash. And actually, interestingly, the Commonwealth Government is one of the most significant users now of the real-time payments platform so that they can deliver emergency payments through the Reserve Bank. And I think it’s Services Australia to recipients very, very quickly. Now, if it’s sitting in the bank and they can’t get to it, that’s not great, but then the banks were actually working with each other and between each other to support communities, and were actually getting cash into the communities. So, there are way around it. I mean, these are exceptional circumstances, so I don’t think we can plan the future of our whole payment around when there are fires and floods, but I think the question is valid because they do happen, and when they do happen, we need to have a way of being able to coordinate so people can still carry on and leave them to do the things that they need to do and actually recover from the trauma that …whatever the flood and the fire have actually caused.
Nikesh: I agree with all of you. I think you know right now that’s the situation. I do feel, though, and we’re seeing this happen, right? We’ve seen the internet move from being a novelty to being a nice to have to being a critical service. I can see a future in 20 or 30 years not far from now, where it becomes an essential service. So, the first thing that happens when there’s a fire or flood… if there’s a fire, they call in the fire brigade, they put the fire out, the next thing that happens is you know… telco’s out there with the mobile tower, right? Cause it’s going to be so critical in the future and when we talk about the CBDC’s, pretty much … it’s very difficult to have them work, you know… without that conductivity. And I think, unfortunately, like it or not, we’re heading towards that sort of world. That’s how I feel.
Craig: very, very interesting situation, isn’t it? How do we think we’re advancing, and then something comes along to sober us up, doesn’t it? So, the next question is about cbdc so will the use of cases of cbdc such as programmability, and offline anonymity, create a demand for CBDC to not only compete with cash but also the existing payments infrastructure and payments behemoths like Visa and MasterCard?
Phillip: I might start. Nikesh could pick up the rest. So the answer is yes, but not now! So all of the Visa, and MasterCard are looking at that. It just doesn’t have the scale, the interconnectivity required at this point in time, plus it’s somewhat theoretical. We didn’t talk about this earlier, Nikesh. But the base technologies are not transparent. Most people lead to the assumption it’s all on blockchain … actually, many of the pilots are not. Most of them are not. The technology’s got a long way to go, but clearly, it’s getting the attention of Visa and MasterCard. One day but I don’t … I think I could be brave enough to say, not in the short-term. Nikesh, you might want to be a bit more controversial than me.
Nikesh: yeah, look, I 100% agree. It’s going to take a while… but rest assured, outside of the US, everyone’s got their eyes set on the American schemes. They feel that there’s too much concentration. A lot of the policies they’re implementing in Australia and elsewhere, even if it’s not explicit… you know, are directed to opening that up. Look, you know, Mark Hesse put some really good points in the Q&A. Cards, I agree with you, Phillip. They’re so far ahead is going to take ages to catch up. And the other thing is that Mastercard and Visa and AMEX, to some extent, have been innovating like crazy in payments. They’re all over this, so… you know before you know … we get a CBDC, they’ve probably painted the idea. So, I wouldn’t be surprised if they’re part of that future world but in a different way than they are now. But absolutely, look, I think… you know the target for CBDCs are the payment systems, these sorts of things. But it will take time.
Barakat: I would like to add one thing, though. Definitely something on FIS’ radar; we’re actually accepting and selling cryptocurrency and digital currencies in our new core banking system. Another example of something that we’re investing a lot in. Because we do believe that this is coming… this is happening. I don’t think, and that’s my opinion, and something still in testing. It is something that countries are seriously thinking about. It will happen. How much … instead, how fast will it happen? That’s the question, but definitely, digital currencies for countries are coming in the future. Something that we have an investment too.
Craig: thank you, I think we might be almost at the end. Let’s try one quick one then. There’s one here about biometric payments… so in Brazil, they’re pioneering biometric payments for MasterCard. What do you think is the future of signing or approving who you are as far as your payment is concerned for digital wallets? Does anyone want to comment on that?
Phillip: we’re already doing it. So, my iPhone … biometric authorisation… it’s my card. Sure you do the same Chris with yours. My Apple watch it’s already happening; it’s just integrating a new factor. There will be more and more of this. I worry about getting some of that tech right, but it’s already happening. There will be more of this in the future.
Craig: thank you very much, Philip. That’s all that we have time for today.
I hope you have enjoyed the conversation and that you take away some interesting and valuable information on Payments trends and the future of Payments solutions. It was great hosting our excellent speakers today; Nikesh, Phillip, Barakat and Chris; thank you for imparting your wisdom.
So, thank you all very much for attending, and it’s back to you, Pam. Thank you.
Pam: Wow. Well, that was fantastic. I hope everyone listening tonight enjoyed the conversation. I know that I will walk away with a lot of new information and a better understanding of Payments, and I hope you all will as well. If you have any additional questions or want more information on the subject we discussed today, please contact me directly. I’m always around. We are planning our next event, and hope it will be face-to-face next time. So, watch this space; we will be in touch with more information shortly. Don’t hesitate to make contact with anyone in our team here at Liberty IT to talk about your business payments implementation or technology problems; we can help, and we would be happy to assist you. Liberty is always looking for great talent to join our ever-growing team, so don’t be shy. Feel free to make contact with any one of us at the organisation. We’d be happy to talk to you about career opportunities. We would like to thank everyone for joining us today from our audience and for the excellent questions you posed to our speakers. Thank you to our Liberty team, who help stage the events. Of course, to Craig for moderating the discussion and John Dimitropoulos, our CEO, who has conceived and sponsored every event that Liberty IT has hosted to date. And the biggest thank you, a HUGE thank you to our speakers Nikesh, Phillip, Barakat and Chris. Thank you very much for your insights. We look forward to inviting you all to our next event. It is going to be around “Core Banking Systems”, and it will take place in August our team are currently working on an all-star panellist cast. Thank you again, Have a wonderful evening. See you next time