New Zealand's Secret Sauce
Once upon a time cash was king in New Zealand. And once upon a time we rocked mullets and perms, but things change. For more than a generation, cash has played second fiddle to EFTPOS and cards. Today plastic is our ‘currency’ of choice, with 93% of people using this method of payment and cash making up as little as 10-30% of all retail transactions. And we don’t think that there’s really anywhere else in the world where you can confidently walk into your corner dairy and buy a packet of gum with your EFTPOS card, no matter who you bank with and at no extra cost per transaction to you or the dairy owner.
The New Zealand advantage
What made electronic payments take off in New Zealand like nowhere else was simple: Collaboration. We took the attitude that rather than compete for a bigger piece of the pie, we should get together to create a bigger, tastier pie and then compete for that.
That’s what led the banks to merge two competing transaction processors into one infrastructure (that’s us, Paymark) in 1989, then subsidise the cost of operations for merchants and consumers while providing access to multiple card issuers.
This made it all mighty easy to use and pretty darn attractive to all Kiwis.
With a ubiquitous network processing most transactions and no transaction fee for EFTPOS, change happened quickly and everyone saw the benefits sooner.
As more Kiwis carried cards, more merchants offered terminals and a virtuous cycle of trust and convenience blossomed. It was a beautiful thing and it changed the face of payments here - the impact of which is clear to see today.
What does the New Zealand payment landscape look like today?
We now make 1.6 billion EFTPOS and card transactions every year with money whizzing around our economy every second of every day, moving from one bank account to another.
In all this action, there are some obvious themes that help explain why it has worked so well here.
The engine room of payments is processing. In New Zealand, Paymark process 75% of EFTPOS and card transactions and 14% of all online transactions, providing efficiency and consistency to the payments experience.
With three out of four transactions being processed by Paymark, we’re constantly connecting customers, businesses, banks, credit card companies and loyalty programmes 24/7, 365 days a year.
This puts Paymark at the centre of most retail transactions here, and in a unique position to work with everyone involved on improving our payments system – and bring those improvements to market.
New Zealand’s payments market is efficiently self-governed by an industry owned body, Payments NZ Limited (Payments NZ). They set the rules, regulations and procedures which guide how payments are processed between financial institutions, efficiently and securely.
The Reserve Bank of New Zealand (RBNZ) also oversee the payments system as part of its statutory responsibility to promote the maintenance of a sound and efficient financial system in New Zealand.
Universal adoption of EFTPOS or Debit Cards
9 out of 10 Kiwis are packing EFTPOS or Debit card because it just makes life easier. Safer than cash and universally accepted at checkouts, cards give us access to our funds all the time. Today, we can spend our time shopping, rather than standing in line at the bank or an ATM.
Merchants are paid on the spot
There are 80,000 Merchants connecting 140,000 EFTPOS terminals on the Paymark network. Kiwi Merchants can take payment at the counter, over the phone, online and on the road – and they’re guaranteed to get paid thanks to the way electronic payments work here.
EFTPOS terminals are everywhere
New Zealand has long had one of the highest number of EFTPOS terminals per capita in the world, making it super easy for Kiwis to use their card everywhere they go.
One of the most banked populations
Rather than visit a branch once a week, banks now live in our purses and wallets and leap into our hand 337 times a year at the checkout.
Exponential rise of debit and contactless
Credit card providers (or schemes in payment lingo) now account for more than a third of card transactions (more than double than what they did in 2010).
A big part of that is thanks to the introduction of debit cards in the mid-2000s and contactless payments in 2009. By tapping into an existing processing infrastructure, the schemes didn’t have to build their own backend processing like in other countries. Instead they could invest in introducing value-adds and innovations like contactless payments.
Transforming the customer experience with technology
Fintechs are new players using technology to shake things up and transform the payment experience. You can thank them for innovations like mCommerce (ApplePay, GooglePay, etc).
Fintechs are challenging the banks and other incumbents by offering alternative ways of paying and innovating at a speed that’s hard to match. At the same time, without the existing relationships and distribution they fight an uphill battle to achieve the critical mass they need to compete.
We’re well-placed to take the next leap
The New Zealand payment system is both remarkably cohesive and competitive, and as an industry and population, we’re well-primed to embrace payment innovations. We know the benefits, and we know what’s possible when we work together.
Just as collaborating helped New Zealand make a seamless transition from paper to plastic, it has put us in a great position to move from plastic to digital.
What can we take from all this as we look forwards?
The world has changed a bit recently (if you need to catch up, just ask Siri, Alexa or your Google Assistant) and payments is no exception.
It’s exciting times and changes, driven by new technology, are coming thick and fast - from person-to-person payments, to biometrics, to blockchain, and beyond.
These innovations challenge how we do things today and they will transform the way we buy and sell – but how that transformation takes place and who it benefits is still to be determined.
What is certain is that we have been successful before in leading the world in this area, and in EFTPOS we have a blueprint for what works – a ubiquitous platform and collaborative ethos.
What set us apart from the world is that we didn’t just focus on what the technology could do, but on what we could do as a collective to get the best out of that technology for everyone.
How we work together will continue to be the determining factor in how quickly the benefits of new technology will be realised.
*Source: Payments NZ, Payments Direction: 2015 Environmental scan report