Australia’s payment network consolidation efforts reflect a broader push to modernize domestic payments infrastructure and compete more effectively in an increasingly global and digital market. Bringing established systems such as BPAY, Eftpos, and the New Payments Platform under a more unified structure could reduce duplication while creating a clearer strategy for technology investment. For Australian banks, the potential consolidation also offers an opportunity to move away from costly legacy infrastructure and accelerate the development of faster, more efficient payment capabilities.
Admittedly, this is not new news, but in researching a report regarding debit payments in Asia, an article in ITNews from June caught my eye. Australia is considering collapsing some of its national payment networks into a single organization. The objective is to create one, unified and efficient organization that would direct where investments in payments are made.
Australia, and other countries want their national payments capabilities to adapt more quickly and fend off competition from Tencent and Ant Group in China plus take market share from Mastercard and Visa.
The networks under consideration for consolidation includes:
- BPAY: Financial institution based, bill pay network with online and mobile access.
- Eftpos: National point of sale solution
- NPP: New Payment Platform offers real time payments domestically.
Some key points from the article:
Both the Commonwealth Bank of Australia and the ANZ Banking Group have lodged submissions with the Reserve Bank of Australia’s review of payments regulation saying the current menagerie of payments schemes and infrastructure needs to be reviewed with a view to an industry-wide platform.
Any final decision to consolidate – which is still a couple years away – would have massive ramifications for literally tens of billions of dollars of bank-owned systems initially rolled out in the 1980s, predominantly on IBM’s zSeries (or earlier) running COBOL and dozens of bespoke and proprietary legacy applications that linger to this day.
Having taken more than a decade of regulatory biffo to come to life – a core skill of Australian banking oligopoly is its capacity to disagree on any common technological innovation unless it’s forced upon institutions – the gradual but relentless growth of the NPP ultimately creates some technological redundancies.
Both BPAY and EFTPOS, which the direct entry system underpins, are the two most obvious low-cost transaction behemoths affected by any consolidation that could potentially see their functions rolled across onto the underlying NPP architecture.
And like the NPP, EFTPOS and BPAY are essentially owned by the main banks and other institutions, hence the ultimate disinclination to keep running three sets of infrastructure.
The case for payment network consolidation extends beyond simply reducing the number of systems Australian financial institutions must support. BPAY, Eftpos, and the NPP were developed to address different payment needs at different points in the evolution of the market. As those capabilities increasingly overlap, maintaining separate infrastructure could become less economically and technologically practical.
A consolidated approach could also allow the Australian payments industry to make investment decisions more strategically. Instead of allocating resources across multiple organizations and legacy platforms, financial institutions could concentrate investment on infrastructure capable of supporting real-time payments and emerging digital use cases. This could become increasingly important as domestic payment systems face greater competition from global card networks and technology companies.
However, payment network consolidation would be a substantial undertaking. The existing systems represent decades of investment and support billions of dollars in transactions. Banks and other stakeholders would have to determine how existing functionality could migrate without disrupting merchants, businesses, or consumers. Governance would also be critical, particularly when deciding which technologies and capabilities receive future investment.
The development of the NPP could provide a technological foundation for some of this transformation because its real-time capabilities address many of the demands shaping modern payments. If Australia successfully brings its domestic payment infrastructure into a more unified framework, it could create a more efficient platform for innovation while strengthening the competitiveness of its national payments ecosystem. The process will likely take time, but the discussion itself demonstrates how rapidly traditional payment infrastructure must evolve to keep pace with changing technology and competition.
Overview by Sarah Grotta, Director, Merchant Services at Mercator Advisory Group
