Jahangiri: What emerging technologies are changing the face of the payments sector?


Machet: EMV chip and contactless payments are two emerging technologies that are having a significant impact. Shortly, I think we will see many more developments in the mobile space, with the introduction of payment applications that can either be attached to a mobile phone or embedded within it. This area is likely to drive a lot of innovation and change. The prospect of being able to use a mobile phone to make payments, either as a substitute for the card or through the phone itself, is certainly an exciting development.


Jahangiri: In June 2010, MasterCard launched an iPhone-enabled Person to Person (P2P) payments initiative designed to transfer money by ‘bumping’ one phone to another (i.e. the application that allows users to touch two iPhones together to transfer funds). Who would benefit the most from this kind of service?


Machet: I believe that to achieve success in any space, but especially in payments, it is important to make sure that you design a compelling proposition that benefits everyone in the value chain. In the payments space, the value chain includes the customer, the merchant, the payment scheme and the financial institution. Globally, many financial services organisations have looked at peer-to-peer payments and have introduced different products to support this. This iPhone application is a classic example of cash replacement that will appeal to many people, but particularly Gen-Ys who have consistently been open to adopting new technologies.


Jahangiri: Which payments channel has proven to be the most effective for Macquarie; and why?


Machet: Rather than being about a specific channel, I think it’s about giving customers choice and convenience. The power of today’s payment technologies is that they can be used in a number of different environments to suit the needs of the consumer (e.g. online, over the telephone and in face-to-face environments). The value proposition behind contactless payments, for example, is reduced time and greater convenience for both customers and merchants. With contactless payments, a transaction that used to take up to a minute now can happen in less than 10 seconds. This is very efficient, especially for low value items. The challenge for payments providers is that we need to be able to offer as many of these different channels as possible while still making the process simple and seamless for customers. Nobody has the time or inclination to read instruction manuals to use a payments application.


At Macquarie, we were one of the first issuers to offer contactless payment technology and we have certainly seen significant industry and customer interest since we rolled it out. While it is still early days in the Australian context, preliminary experience indicates that once a customer decides to use your product based on the contactless technology, they stay very loyal. In addition, if the customer is using it regularly, the technology helps bring the card to the “front of the wallet,” meaning they will use that card ahead of any other cards in their wallet.


Jahangiri: Macquarie was one of the first Australian banks to have issued Visa PayWave contactless cards. How do you see contactless payments evolving at the bank?


Machet: More and more merchants are now realising the benefits of accepting contactless payments (faster transactions mean queues move faster) and are switching their terminals to accept these types of payments. As the ability to accept contactless payments becomes more widespread, customers will enjoy the convenience of not having to enter a PIN or sign for a payment and, of course, the security of the card never leaving their hands.  
A key focus for us is to make the contactless value proposition resonate with customers. Increasingly merchants understand the efficiency benefits of contactless payments; our job is to help consumers understand the benefits. We plan to keep utilising contactless technology as a mechanism to add to our value proposition. It also helps to position Macquarie as an early adopter of differentiating technologies.


Jahangiri: A number of newly-emerging payment participants like Facebook, PayPal and Google are making inroads into the financial services sector. How can banks and card issuers harness the potential of these new entrants?


Machet: These players have benefited the payments industry as a whole by not only creating new ways of making payments over the Internet, but in helping to make consumers more comfortable transacting and paying for things over the internet. In turn, this has helped push the frontiers of Internet payment security protocols.


Jahangiri: What are your key priorities for the next 12 to 18 months?


Machet: The exciting thing about a new channel that is just coming into its own is that it creates market discontinuities and therefore opportunities. For example,  when everyone around you is buying their coffee using contactless payment technology and you are using cash, then you begin to think it’s time to change. This creates an opportunity for newer issuers, like Macquarie, to explain the benefits of contactless payments to those who are not using the technology yet and gives us an avenue to talk to the customer about one of our own cards. I think the current payments’ landscape is enormously exciting, the discontinuities have the potential to create great opportunities for us as an issuer, but only if we can create differentiated solutions that customer’s value. It is challenging to do this on our own, so finding the right partners will be important.  Given this, a focus for us is to find partners who want to leverage new payment technologies to offer their customers something different and who need a financial services partner to deliver the payment capabilities.


Jahangiri: What are some of the wider industry security concerns with mobile and contactless payments?


Machet: The rise of identity theft and subsequent fraudulent activity is definitely an important issue for the industry. One of the benefits of contactless and mobile technologies is that both should help to prevent fraud. A contactless card never leaves your hand when the transaction is being processed, removing the need to physically hand the card over to the merchant.  Mobile applications usually require a PIN or some outside authentication and as such are also likely to be more secure. As a result of this, we are finding that mobile and contactless payments methods are likely to lower rather than increase cases of fraud.


Jahangiri There still seems to be some resistance between telcos and card issuers to integrate combined mobile phones and payments offerings. What are your views on this? 


Machet: While a lot of work is being done to integrate the payment applications with mobile phones, mostly by the technology providers and payment schemes, there does not yet appear to be a rush to bring the two together here in Australia. I think this is mostly due to the issue of customer ownership. Today, bank customers all have plastic with the bank’s brand on it which is a constant and powerful brand reminder. The telco customers have phones which do the same.  When you bring them together, the two organisations risk having one of their brands overshadow the other. Given the risks associated with this, both the larger banks and the telcos are likely to tread warily down this path. I see this as a great opportunity for specialist organisations, like Macquarie, to find telcos to partner with – our strategy is to provide the infrastructure and payments functionality while the telco offers a value proposition that differentiates it.  If we can find the right partner and offer the right infrastructure, I think we have a great chance to radically change the way people pay for things as well as develop new ways of creating value for ourselves, the telcos and customers.


Jahangiri How do you keep abreast of emerging trends and disruptions within the cards and payments sector?


Machet: It is a challenging task. There are a large number of payments journals, websites, regulators and other sources of information that impact the space which we all need to watch carefully and I find myself spending a lot of time reading. One of the advantages we have in the Australian payments industry is that there are examples all over the world of innovation, which we can see in action and determine whether a similar application would be effective here. As a result, it is important to keep our eye on the international scene as well as stay close to what is happening here in Australia.


Jahangiri: Every leader, particularly at your level, has a legacy they wish to be remembered for. What is yours?


Machet: I guess my team and I would like to be known for bringing innovation to the cards industry in Australia and driving change which resulted in more choice for consumers.