Public Policy Lead, Gabe Perrottet, proudly brought Zepto's voice to this House of Representatives Standing Committee on Economics hearing on the Inquiry into promoting economic dynamism, competition and business formation. These are his notes.
The hearing was chaired by Dr Daniel Mulino, MP Member for Fraser, whose opening statement included the following:
"Given the extraordinary pace and scale of technological change and its impact on business in Australia, we need to hear from those at the cutting edge about the opportunities and risks for competition in sectors such as banking, energy and retail, as well as across the broader economy."
Dr. Daniel Mulino
Setting the scene
We believe that Australia can be a world leader in financial technology, and in payments innovation in particular. The way that businesses and individuals pay for things is rapidly changing. The move away from cash to card payments is accelerating and the next evolution from card payments to fast, digital bank account to bank account payments is well underway.
This is a global phenomenon but is particularly true in Australia. A recent report by financial technology company FIS found cash represented just 6% of Australia’s point of sale market share in 2022. This is the lowest rate of cash usage in the Asia-Pacific region and second only to Norway (4%) among the 40 international markets covered by the report. Although credit and debit cards still dominate the point of sale market in Australia, digital wallets now account for 12% of all transactions (up from 8% in 2019).
Australians are always looking for new and better ways to pay - making Australia fertile ground for payments innovation.
Furthermore, businesses are going to increasingly need alternative ways to pay. Payments represent a significant cost of doing business in Australia. In 2019, Australian merchants paid a total of $1.3 billion in fees for debit card transactions alone. And those numbers are only going up with the move from cash to card payments.
Gabe Perrottet
What can the government do to help?
Zepto echoes the recommendation of Scott Farrell in June 2021 in his Payments Systems Review for the Government to establish a single, integrated licensing framework for payment services that scales up with businesses as they grow, provides clear consumer protection, and facilitates transparency in access to payment systems.
We see the licensing framework promoting competition in the following three ways.
- Providing clear pathways for fintechs to directly access Australia’s payments infrastructure such as the New Payments Platform, which will allow fintechs to compete directly with the traditional custodians of payments, the banks. [As it stands, you must effectively become a bank to become a Direct Participant of the NPP, due to the NPPA’s requirement for Direct Participants to be APRA regulated].
- Providing clarity regarding the rights and responsibilities of payments companies which will reduce the costs of doing business. A lot of time and money is currently spent by fintechs navigating a regulatory framework which is complex and not fit-for-purpose. A clear regulatory environment will not only help existing players but will attract more investment and new players. It will also better protect consumers.
- A payments licence which imposes regulatory requirements to protect customer funds, such as minimum capital adequacy requirements and liquidity requirements, which reflect the risks associated with different payment functions, will encourage smaller players to compete with the larger players as they are more likely to be able to meet those requirements.
Promoting competition in the payments industry is critical to allowing companies like Zepto to deliver better ways to pay for Australian businesses, ultimately saving them and their customers time and money.
Zepto is grateful to the Tech Council of Australia for the opportunity to appear as part of the Inquiry and to the Committee for the robust discussion.
You can read the entire session Hansard transcript here.
The author
