Fintech payments innovation and cross-border payments integration between Australia and China

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Luke Deer, independent researcher, University of Sydney Business School

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Executive Summary

Fintech payments innovation in China, driven by in-app mobile payments usage, is transforming the way in which people and businesses pay for goods and services.

The development and diffusion of payments innovation in China and Australia based on new forms of financial technology have had very different starting points. In China, low cost in-app mobile instruments have been rapidly displacing the use of cash for transaction purposes. While ‘cashlessness’ is increasingly evident in Australia, the shift to digital payments methods has largely followed bank and card-payments providerss investment in legacy infrastructure.

Australia’s retail payments system is not going to replicate the transformation we have seen in China. However, the way in which digitalisation, and mobile-centric technology innovation in particular, has enabled the emergence of major new multi-sided payments platforms in China does provide vision of a possible future for Australia’s retail payments landscape.

Regulatory supply-side changes to Australia’s retail payments system, such as the development and launch of the New Payments Platform (NPP) in February 2018, are likely to accelerate the use of mobile-centric technology at the expense of card payments in Australia and to open-up new consumer payments services in Australia.

Despite vastly differing starting points for payments innovation in China and Australia, from the point of view of payments innovation in Australia, these differences entail complementary dynamics. Because Australia is increasingly integrated with China via geography, trade and people-to-people links, we are seeing direct spillovers from the transformation of China’s retail payment system into the Australian payments landscape.

China’s most successful fintech payments platforms are also internationalising their existing payments businesses by targeting expatriates as well as investing in new payments platforms in the region, such as Paytm in India, and elsewhere. China's payments internationalisation is opening new trade and investment channels between Australia and China.

The global availability of China’s retail payments networks is the primary channel by which Chinese consumers in Australia, whether tourists, international students or residents with Chinese bank accounts, are making retail payments for goods and services in Australia. The opening of China’s payments channels and their integration with local payments systems could contribute to a tipping point in the emergence of new retail payments models in Australia.

New online payments providers, who are currently serving the mainland Chinese expat market or China-focused small and medium enterprise (SME) market in Australia, are well positioned to move from payments into offering local banking services in Australia under the new tiered bank licensing regime.

China’s global fintech payments players may also seek to acquire or invest in new payments providers in the Australian market in direct competition with local banks and card-providers.

Related links

• Luke Deer, 'Australia’s tipping point from China', ANZ bluenotes, July 31 2019.

Author

Dr Luke Deer, independent researcher and tutor in the Finance Discipline at the University of Sydney Business School.