Australian made payments stalwart eftpos has revealed its intention to make a play for the local digital identity market, a move that could set up a new utility platform for local financial institutions under pressure from the Reserve bank of Australia to rein-in fraud and increase debit functionality.
Speaking at the Retail Live conference in Melbourne on Wednesday, eftpos’ chief product officer Matt Barr suggested the new locally minted credential could be used for age verification in online transactions, including using phones with biometric functions, for purchases like liquor deliveries.
In a transaction scenario presented to the conference, an online retailer would be able to ask for age verification from an ID credential service with the consumer then able to select that service to trigger a biometric check.
The creation of a common, localised digital identity platform using existing infrastructure players is likely to be highly appealing to banks and other authorised deposit taking institutions because it would spare duplicated efforts and avoid a potential ‘rail gauge’ scenario for merchants accepting payments.
The RBA has been a strong advocate of the need for an Australian-issued digital ID credential in the financial services sector amid ballooning online fraud losses that are increasingly coming from peoples’ bank accounts.
A major problem is that credit card giants Visa and Mastercard have created what many believe is a transactional standards lock-in for online purchases based on their rails, a dominance that has now spread to debit account functionality (like Debit Mastercard and Visa Debit ) as consumers increasingly dump high interest credit cards in favour of buy-now, pay-later products.
At an online fraud level, the huge growth in ‘scheme’ debit (that’s Mastercard and Visa) is a major worry for both regulators and consumers because there is no differentiation between what bogus transactions were made on credit cards versus scheme debit cards in AusPayNet’s official fraud statistics.
Rather, card-not-present fraud is all lumped into one category, meaning the discrete levels of online credit card fraud versus online scheme debit card fraud are obscured.
But there is a huge difference for consumers, because scheme debit customers that fall victim to online frauds see the cash disappear from their accounts until the bank refunds the stolen amount, usually shifting the loss to the merchant.
Credit card customers, on the other hand, usually have 50 days to dispute a bogus transaction before their interest free period closes and bills are due.
That scenario has not been helped by the fact that eftpos has been slow to bring native online functionality for its CHQ and SAV based transactions to market, though it has recently managed to get both ANZ and Suncorp to add eftpos as an option to Apple Pay.
Barr on Wednesday revealed eftpos’ online solution, dubbed ‘eftpos Digital’ was now in trials with retailers and described it as “working well”.
An online eftpos facility is likely to be appealing for merchants contesting their payment acceptance services because it likely would enable them to route transactions down eftpos’ not-for-profit rails at a lower cost that competitors.
eftpos has been pushing hard to stand-up least-cost -routing, which is also known as merchant choice routing, to merchants despite some notable foot dragging by major banks who stand to cede considerable interchange revenue extracted from merchants.
The biggest battle ground is how debit tap transactions are routed, with most terminals set by banks to default to the Mastercard and Visa scheme rails rather than running through CHQ of SAV, even though the money is drawn from a bank account.
The size of the challenge eftpos is facing on that front was revealed by Barr, who was previously one of Mastercard’s prize hires, in the levels of LCR adoption.
“eftpos supports least cost routing as a way of helping retailers manage their costs,” Barr said.
“Currently more than 20,000 Australian merchants are routing, representing only around 5 percent of debit volume.”