New Zealand does not currently have an IP system in place, as confirmed by the Reserve Bank of New Zealand.
However, the local governance organization Payments NZ launched the “Speeding Up” workstream in 2018 and has been evaluating how best to implement a solution. Forecasts predict a launch a few years away, but regardless of timings, the country will prove an interesting market for IP given its moderate levels of paper-based payment volumes and its heavy reliance on cards.
ConsumersBanksMerchantsBillersNumber of debit, credit and charge cards per adult
Index to global average
Fully banked
% of adults who have a mobile wallet and have used it in the past year
Currently the payments landscape of New Zealand is dominated by two payment types with combined volumes of over 80%: cash and cards. Though this might seem to leave little room for alternatives, it may actually accelerate the adoption of IP, provided the country’s scheme offers an advantageous user experience with broad acceptance throughout the ecosystem. Alternative payment methods like mobile wallets have seen limited uptake; only 15.3% of adults used a mobile wallet in 2019. But with an IP launch date predicted to be agreed upon this year, New Zealand presents an interesting example of a market focused on evolving to a data-rich digital ecosystem, rather than solely implementing a real-time rail.
As such, it’s no surprise that the approach employed by Payments NZ is highly focused on the powerful combination of IP plus open banking. For IP transactions to become popular in New Zealand, consumers need a compelling reason to utilize this payment method. This can be done by providing a broad ecosystem of participants accepting IP, and through a convenient, optimized user experience with a variety of initiation methods, and multiple payment types. Rewards or discounts for IP transactions could also drive adoption. All of this needs to be considered in the development of the national IP and API frameworks.
New Zealand clearly has an appetite for real-time, but like any country, that appetite is tempered by the quality of the existing payments infrastructure, such as its near-real-time solution, Settlement Before Interchange (SBI). The domestic ACH system is in transition to a 365-day operational model, although this program will still not deliver "always on" because of limited hours of availability daily. While this will provide the foundations for IP, the user experience uplift in terms of speed of transaction will be less than for those markets where clearing cycles took as long as three days. Where the country stands to send user experience into hyperdrive is with value-added services.
New Zealand may currently exhibit low mobile wallet adoption, but the usage of contactless payments shows a population willing to change behaviors in the pursuit of seamless purchases. As exhibited in other similar markets (such as the U.K.), contactless adoption can be the starting point for widespread mobile wallet adoption, with the right use case. Thanks to New Zealand’s joint IP and open payments approach, the likelihood of that catalytic use case reaching the market is high. APIs and open banking are steadily rolling out and providing the user experience channel for IP.
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