The Reserve Bank of Australia’s Payments System Board Annual Report 2019 has revealed that they are scheduled to review card payments regulation in 2020, which could lead to regulatory changes. Rapid developments in payment technologies and innovation have meant regulation is falling behind.
Non-traditional parties like fintech companies, neo-banks and global technology firms like Apple and Google are influencing and changing the way people pay. Apple recently introduced a credit card, but for now it’s only available to US consumers. Apple boasts that it is a new kind of credit card that “can do things no other credit card can do”. While it includes the option of a physical payment method, the card is anchored to Apple Pay, a digital payments platform.
A splash in the Australian market
The payments market in Australia is quite different to in the US. A plethora of credit cards offer various rewards and incentives, while disruptive fintechs have changed consumer behaviour around payments. Apple’s credit card, at least on paper, does not seem to have any clear advantages over the competition in terms of interest rates and reward incentives.
A consultation report by the Australian Payments Council has found that in 2017, 82 per cent of Australians had used contactless card payments at least once a week. Traditional payment methods like cheques and cash continue to decline, with the RBA reporting that consumer cash payments had decreased from 47 per cent in 2013 to 37 per cent in 2016.
Digital payment activity is rising, driven by advances in fintech. Buy now pay later (BNPL), which includes companies such as Afterpay, has significantly increased in popularity especially among millennials. A report by the Australian Securities and Investments Commission (ASIC) into the BNPL industry revealed 1.9 million transactions in June 2018 alone, with the number of monthly transactions increasing by more than 30 times when compared to 2016.
There is certainly plenty of competition in the mobile payments space, with BNPL companies, PayPal and Google Pay and Apple Pay. A hypothetical Apple Card in Australia would take the existing Apple Pay, remove the reliance on other deposit taking institutions and tie it to Apple’s ecosystem. Many new credit card products would have a tough time competing in this market.
Advantage Apple?
However, if any company has the ability to get Australian consumers excited about another way to pay, it is be Apple. Not only does it have the enormous amounts of capital needed to invest in this endeavour, it possesses a unique advantage over many other companies: panache.
The tech industry stops to take notice of Apple events and showcases of new hardware and software. It has built up anticipation and excitement around its announcements over decades, with consumers now expecting a certain standard of quality. Regardless of your personal feelings towards Apple, there is no doubt it has had an enormous impact on consumer technology. The iPhone is regarded as a trendsetter in smartphone technologies and Apple wants to tie as many products and services as possible to that ecosystem.
If Apple plays to its strengths, a hypothetical Apple Card release in Australia has potential to be successful. Much like the release of the original iPhone in 2007, Apple was not the first one to introduce a product, rather it were just the first one to make it appealing to a mass consumer market, driven by, at the time, innovative software design and superior user experience. Users expect easy to understand usability that is visually appealing and has few barriers to entry, that is in line with other Apple products.
According to Telsyte, there were 9.1 million iPhone users in Australia at the end of 2018. Apple has the potential to leverage this massive install base for its credit card. The Apple Card may not be ground-breaking in terms of features, incentives and interest rates, but it can utilise the advantages of the iPhone and its ecosystem to get consumers spending on the Apple platform.
