Change as usual in the global payments landscape

Cheque duty goes in 2014/15 Budget

We’ve seen yet another indication of New Zealand’s comfort with electronic payments, with the Government’s removal of the 5 cents duty from cheques.

“We see this as a sensible move, as the processes and efforts to collect the ever-decreasing cheque duty are likely to outweigh any taxation income benefits that the Government receives,” said Payments NZ Chief Executive Steve Wiggins.

“The Government’s move reflects New Zealanders’ declining use of cheques.  We can clearly see this trend in our monthly data gathered on the total volume and value of cheques which is pulled directly from the systems used to process all of New Zealand’s cheques.”

The system works by scanning all cheques into an image by one service provider.  By getting these combined totals we know exactly how many cheques are processed every month in New Zealand.

In addition, Payments NZ owns and governs the clearing and settlement system that is used to process payments between banks and receives the combined volume and value data from this system, including data on cheques. 

Cheque use in New Zealand is naturally declining at a very fast rate as shown by Payments NZ research done in 2012. 

In April 2014, 3.78 million cheques were processed, which is a decrease of 23% since April 2013 (4.92 million). This mirrors a world-wide trend, although New Zealand’s natural rate of decline appears comparatively faster.

In 2013, 55 million cheques were processed in New Zealand. Cheques are now the least used form of payment in this country.  By comparison, in 2004 192 million cheques were processed.

“As New Zealanders migrate to more efficient, convenient and safe electronic payments, the use of cheques is likely to continue its downward trend,” said Mr. Wiggins. “New Zealand was quick to adopt electronic payment mechanisms and we make billions of transactions a year through electronic means.”

Mr. Wiggins said Payments NZ would continue to appropriately manage the natural decline of cheques. 

“We are also very aware that some groups of New Zealanders still rely on cheques as a way to make a payment and we will be ensuring these segments will be appropriately catered for.”

The disappearance of cheque duty is just one signal of a fundamental shift in the worldwide payments landscape.

But there’s more going on, besides.

Mobile Payments and what’s next

New rules and standards produced by Payments NZ will govern incoming solutions for mobile payments, which have just come into effect in May. These new rules and standards are designed to support banks and other providers to bring new electronic payment options to market for their customers.

“We’re now expecting banks and telecommunications companies to come to market with fresh electronic, Near-Field Communications (NFC) payment options for our nation of early adopters,” said Mr. Wiggins.

NFC payments are already happening at the point of sale.  We’ll expect to see a big spike in those as people start getting their phones out to pay for a tank of petrol or a coffee.

Payments NZ recently examined how smaller transactions by electronic means are unique to Kiwis – in very few other countries will people use a domestic EFTPOS system to make such small purchases. In some other markets, such as the US or UK, cash and cheques are still more widely used as a way to pay.

This attitude among New Zealanders has been an important contributor to Payments NZ’s thinking as we’ve worked with our industry partners to break new ground. New Zealanders’ consumer behavior indicates that they want these systems, so we have to make sure they’re properly governed.

The safety and security of those systems is paramount when New Zealand has the highest per capita use of electronic payments of just about anywhere (Australia, the US and the UK all trail behind). The new rules and standards that Payments NZ has developed for mobile payments are therefore world-leading.

Similar questions must be asked about cryptocurrencies. These online peer-to-peer methods can seem like sci-fi stuff compared to cheques and cash, and they’re also a step removed again from point-of-sale electronic payments. Nonetheless, Payments NZ has been exploring what these new payment methods, such a BitCoin and Litecoin might mean for payments not just here, but worldwide. Following a series of Payment Hubs on the topic, in which we engaged in some myth-busting and healthy debate with a panel of experts, we’ve discovered that there’s a huge appetite to know more.

“This is a dynamic context. Importantly, it’s the context in which we bring you the 2014 Payments NZ conference; Get to the Point,” said Mr. Wiggins

“We’ve said already that we’re in the midst of a New Zealand payments revolution. Five cents disappearing from the cost of doing business with a cheque might seem like a small thing, but we know that it’s one more sign of change in an ever more complex payments landscape.”

“We hope you’ll join us at the conference, along with some of the sharpest minds in the industry, to ask some hard questions, to talk about what’s next for payments – and what might come after.”

As a neutral, non-competitive organisation overseeing payment systems; Payments NZ helps ensure the best interests of all stakeholders are considered in the evolution of system improvements.  Payments NZ’s dedication to collaboration, partnerships and ensuring a level playing field in a fast moving industry is critical to achieving a cohesive and sophisticated payment system.  A system that takes into consideration the best interests of all industry organisations, works to the highest standards and is amongst the best in the world.