I’ve always been a big fan of PayPal, signing up within days of them starting to accept New Zealand users back in 2001. PayPal allows users to instantly settle transactions internationally: it’s used primarily on eBay (so much so that eBay bought it a few years ago and shuttered its own similar service).
I’ve had some other more interesting work-related interactions with them pre-their IPO. The opportunity their service represented was a little avant-garde for the organisation I was with at the time and we had to let it slide. What a wild ride that would have been though!
PayPal’s service was never fully localised for New Zealand: no NZ dollar transactions, and the fees for repatriating money are horrendous. Thus, it’s no good for New Zealander to New Zealander transactions (I’ve concluded just one TradeMe transaction with PayPal, again back in 2001!) and in any case FastCheque / One Off Payments / insert your Bank’s term here came to dominate the space once all Banks started providing the ability to do this by the end of 2002.
This is probably why PayPal type systems have never really been properly introduced here.
All this is changing. There are now two major services being promoted on TradeMe, and at least one other smaller one, vying for the prize of being the dominant P2P payment player. The “network effect” generally means that over time, one system will become dominant (e.g., TradeMe is the biggest auction site in NZ, and will stay biggest, not because it’s necessarily the best, but because everyone uses it and its usefulness is in proportion to its number of users).
First up is PayMate, Australia’s answer to PayPal. In August TradeMe added PayMate’s new local service as a “preferred payment provider”.
Before eBay bought PayPal, PayMate was eBay’s preferred payment service on eBay.com.au. I even signed up for it, just in case I wanted to buy and sell stuff over there. So I was quite pleased about the NZ version… until I found that in order to use it I would have to delete my Australian PayMate account. And then the NZ registration process required that I give PayMate a Direct Debit authority on my account. I assume this was so that they could fund transactions without having to hold my money in advance (and thus become like a bank). Whatever, I didn’t like it and I abandoned my registration.
So I was happy to see Pago arrive on the scene yesterday, and even happier to learn that a bank was behind it. This lends a certain amount of financial credibility to it straight away. Better still, the service appears to be instantaneous, and mobile. I can pay for a TradeMe auction by text message, providing (I assume) that my Pago “wallet” has enough funds in it. The wallet is funded by Fast Cheque / One-off Payment etc overnight, so unfortunately that part’s not instant.
But the fees for Pago are very reasonable – just $0.30 per transaction – whereas PayMate have forgotten they’re competing with Internet Banking transactions and charge a hefty 3% + $0.50 per transaction (probably as a result of using the credit card as the means of payment – while this has some advantages I’m not sure that it outweighs the pricing inherent in using the bank account system like Pago).
So… as you’ve probably guessed, I’m picking Pago to succeed in this space, assuming anything succeeds at all. While it’s by no means assured that Pago will capture people’s imaginations to the extent that they’ll stop using Internet Banking payments for routine P2P transactions, Pago are off to a flying start by including simple, mobile transactions and a nice fee structure.
And up at ASB headquarters, they’ll be rubbing their hands together at the thought of eating yet more of the transactional banking lunch that the other big banks were taking for granted.
When you think about it, they’re not only taking from the other banks, but pioneering a new revenue stream in an area that banks didn’t make money on before: cash transactions. Moving first on it in this way means they are more likely to garner all of it.
Good for them.