Banks position for payments war as PAX enters Australia with Android card-killer terminal

Australian banks could soon lose their stranglehold on electronic retail payments after Android-driven retail payments behemoth PAX Technology said it will hit the Australian market by mid-2020.

In a move that’s likely to ship hundreds of thousands cheap new smartphone-like terminals that are essential counter-top kit in Asia within a year, the Hong-Kong listed money machine maker revealed its play for Australian market on Friday morning, replete with a fly-in visit from CEO Jack Lu.

The entry into the Australian market by PAX is a big move because it will ship terminals which, apart from running on Android, natively accept payments from giants Ali Pay and WeChat, allowing local merchants to offer a seriously cheaper alternative to riding on Mastercard or Visa’s rails.

Critically, they will also support least-cost-routing which means local merchants can say what rails debit payments ride on from a terminal, dialling eftpos back into the game for domestically issued cards.   

Asian shoppers and merchants largely eschew the US-based payments schemes because of their high costs of entry, rapacious interchange fees, painful currency conversion clips and associated high merchant charges by banks to acquire payments.

The Asian market, with considerable support from within China, has also sought to build out an alternative payments technology ecosystem that essentially leapfrogs 1980s and 1990s era electronic card payments and terminals with smartphones.

Banks in Australia have found their reliance on proprietary US vendor-based systems – think IBM, NCR etc – has made accommodating alternative payments difficult on terminal hardware that is often sweated until it dies because merchants are stung on the upgrade path.

A big difference between Ali Pay and WeChat payments is that more often than not they will use a QR code or other transactional enabler that negates the need for proprietary chip technology.

The problem for Australian merchants and their banks is that a lot of their current terminals don’t offer native QR functionality locking them out of a rapidly growing market – which is why PAX has rocked up.

“The payments landscape is evolving quickly both internationally and in Australia,” PAX chief executive Jack Lu. 

“As our revolutionary terminal hardware design integrates more smartphone-like features, we expect demand to continue to grow for PAX’s innovative suite of terminal hardware and related software solutions.”

He has a point. It’s understood Square has sold around 300,000 terminals in Australia, so there is market to be had.

Banks are also increasingly looking to offload or outsource their terminal fleets thanks to shrinking margins and competition, especially with open banking around the corner.

Institutions also face issues rolling out Android devices because they have for decades supported older proprietary technology that works for the bank, but is harder for merchants to integrate with their back-end software.

Android’s open source base fixes a lot of those problems, so terminals that can accept traditional card payments – including tap payments – as well as Ali Pay and WeChat are essentially a no-brainer for merchants with a high Asian customer base.

“This will pressure the banks to adopt Android,” PAX Technology Australia chief executive Nigel Lovell, told iTnews.

Lovell added PAX was now in discussions with banks around reselling the device but would not name names.

However it is widely expected the CBA will be the first mover to offer a lower cost alternative to its Albert offering to lure in new merchant accounts.

“We’re having lots of conversations,” Lovell said, adding that the company was very open to doing business in the value added reseller channel, which if Google’s ecosystem is included, is very big.

Lovell also confirmed PAX would come in hard on price as part of its local market entry.

“We are very competitive on price,” Lovell said. “Very competitive.”