On why digitisation projects fail

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Extract from todays Australian. Article by Ticky Fullerton.

After seven years at the helm of Telstra, Andy Penn in his final interview as chief executive reflects on the trials, tribulations and dragging Australia’s biggest telco into the digital age

“Penn says it is not surprising that long established businesses like Telstra, with complex systems that seem poor against new competitors, want to digitise and match their rivals.

“But they usually fail in those digitisation programs. The reason they fail is they try and digitise the past,” says Penn

https://www.theaustralian.com.au/business/economics/telstra-chief-andy-penn-assesses-telcos-health-as-he-prepares-for-his-final-annual-result/news-story/d02ae3c60f2169b32651237ec7d55138

Apple set to take on Afterpay with its own buy now, pay later product
rom Affirm and PayPal.

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July 14, 2021 — 9.13am

By Mark Gurman and Sridhar Natarajan

Apple is working on a new service that will let consumers pay for any Apple Pay purchase in instalments over time, rivalling the “buy now, pay later” offerings popularised by services from Affirm and PayPal.

The upcoming service, known internally as Apple Pay Later, will use Goldman Sachs as the lender for the loans needed for the instalment offerings, according to people with knowledge of the matter. Goldman Sachs has been Apple’s partner for the Apple Card credit card since 2019, but the new offering isn’t tied to the Apple Card and doesn’t require the use of one, said the people, who asked not to be named discussing unannounced products.

The upcoming service, known internally as Apple Pay Later, will use Goldman Sachs as the lender for the loans needed for the installment offerings, according to people with knowledge of the matter.

The upcoming service, known internally as Apple Pay Later, will use Goldman Sachs as the lender for the loans needed for the installment offerings, according to people with knowledge of the matter.AP

The buy now, pay later system could help drive Apple Pay adoption and convince more users to use their iPhone to pay for items instead of standard credit cards. Apple receives a percentage of transactions made with Apple Pay, driving additional revenue to the company’s more than $US50 billion ($67.2 billion) per year services business.

The service is currently planned to work as follows: When a user makes a purchase via Apple Pay on their Apple device, they will have the option to pay for it either across four interest-free payments made every two weeks, or across several months with interest, one of the people said. The plan with four payments is called “Apple Pay in 4” internally, while the longer-term payment plans are dubbed “Apple Pay Monthly Instalments.”

When making purchases through an Apple Pay Later plan, users will be able to choose any credit card to make their payments over time. The service is planned to be available for purchases made at either retail or online stores. Apple already offers monthly instalments via the Apple Card for purchases of its own products, but this service would expand that technology to any Apple Pay transaction.

The interest rates that Apple plans to charge for the monthly instalments couldn’t be learned. Affirm charges as much as 30 per cent APR, while other rivals charge less. The interest-free four instalment plans would rival similar systems like ones from Afterpay Klarna Bank and Sezzle in addition to PayPal’s popular Pay in 4 service.

Affirm fell as much as 13 per cent on the news, while PayPal declined about 1.4 per cent.

Users who want to use the Apple Pay Later service will need to be approved via an application submitted through the iPhone’s Wallet app, where they will also be able to manage their payments. Users will need to submit a copy of their local ID card to apply for the program. Apple will also offer customers the ability to exit payment plans to pay off the remainder of their purchase balance.

At least some of the Apple Pay Later plans will also exclude late fees and processing fees, only costing users interest for longer-term plans. The service will also not require running a credit check on the user. Separately, the company is also testing a feature that will let users create temporary, digital Apple Pay Later credit cards for individual purchases.

Apple’s new service is still in development and its features could change or be cancelled, the people said. Spokespeople for Apple and Goldman Sachs declined to comment.

Related Article

Morgan Stanley last week predicted Afterpay Money could be used to refer customers for mortgages, and to offer cryptocurrency or share trading.

On an earnings call earlier on Tuesday, Goldman chief financial officer Stephen Scherr said he believes there are “more opportunities to be had with Apple.” Goldman’s alliance with consumer darlings like Apple is aimed at helping it find a footing in the world of consumer banking – an expansion it has sought in recent years to spread its reach beyond the world of high finance on Wall Street.

Apple’s iPhone-based payment service is accepted at 85 per cent of all US retailers, according to the company. The new service would mark one of the largest additions to the service since its launch in 2014, following other features like peer-to-peer payments. Apple last year acquired a company that developed technology to allow phones to receive payments by tapping another phone or credit card on its back, adding another potential feature to the Apple payments road map.

Bloomberg

PayPal BNPL offer. Another nail in the coffin of the BNPL players who are reliant on low interest rates and prey off the credit needy.

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“Whilst not a huge fan of PayPal and it’s dinosaur UX, this offer from PayPal will annihilate the pop up players and their valuation bubbles that are so dependant on low interest rates and high fees. Online payday lenders be dammed” Ewan Walsh 2021

https://www.theaustralian.com.au/business/financial-services/paypal-joins-australias-buy-now-pay-later-club-with-nofee-pitch/

This article is from the July 14 issue of The Australian Digital Edition. To subscribe, visit https://www.theaustralian.com.au/.

PayPal is throwing down the gauntlet to Afterpay and Zip in Australia, kicking off its own buy now, pay later service that avoids slugging customers with the late fees it labels a “huge bugbear” .

The much anticipated PayPal Pay in 4 launch on Wednesday came after the global payments behemoth earlier rolled out the service in the US, Britain and France.

PayPal is seeking to make a splash in this market by charging merchants the same fees it does for other payments and taking late fees completely out of the equation . It says it is the first to not levy late payment charges on buy now, pay later transactions in Australia.

This nation is the only market where late charges won’t be levied on customers that use the PayPal instalment payment option – an apparent strategy to gain customer traction in a market where Afterpay is dominant.

PayPal Australia payments general manager Andrew Toon said the local buy now pay, later option was designed in response to customer and merchant feedback , which showed late fees were a “huge bugbear” for customers.

“We’re doing this because we think it’s the right thing to do and it will deliver a better customer experience ,” he added.

Mr Toon cited research commissioned by PayPal involving more than 1000 online shopping customers which showed 55 per cent had not used buy now, pay later, with half of those noting they were “put off” by late fees.

“We are responding to that,” he said, declining to comment on whether the move was aimed at shaking up the competitive landscape .

“We support competition. It drives better outcomes for customers and innovation in the market ,” Mr Toon added.

The corporate regulator has also been concerned about the prevalence of late payments in the buy now, pay later sector. A report released last year found one in five users had missed payments, and a similar proportion have cut back on essentials like meals to make instalment payments on time.

Afterpay’s late charges sit at a maximum of $10 for purchases under $40. Above that amount they are capped at the lower of 25 per cent of the purchase amount, or $68.

Commonwealth Bank is also pushing further into buy now, pay later with a direct service called StepPay for existing customers, which will launch soon.

The bank has outlined late fees of $10 per missed payment, which are capped at $120 per year.

The PayPal buy now, pay later option doesn’t levy any sign-up fees or interest, but if customers are late on a payment their account is suspended until they rectify the situation.

“We take the view that custom- ers are missing payments by mistake and not design,” Mr Toon said, but he clarified that customers that perennially missed payments may see the service switched off altogether.

The other sore point about the buy now, pay later sector – largely from traditional lenders and consumer protection groups – is the lack of a credit assessment of customers . Afterpay, for example, does not assess a customer’s ability to repay the buy now, pay later purchases.

PayPal says it will conduct an assessment of customers they allow to access the BNPL soption, which is just one of several payment choices available online and through its digital wallet.

For PayPal’s more than nine million active Australian accounts , it will predominantly use its own data and analytics engine to assess suitability, while for new customers or to draw in additional information it will run credit checks through companies including Equifax.

“Suitability is assessed live, so that’s a real-time decision … we are only offering this to customers that we consider to be suitable and there are a number of elements that go into that decision,” Mr Toon said.

PayPal in March flagged its intention to launch the instalment pay option, at the time saying it would be available in Australia ahead of the end of financial year sales.

PayPal said regulatory issues it was confronting with local financial crimes regulator Austrac were not related to the launch of the buy now, pay later service coming weeks behind the initially flagged schedule. The company faces a real risk of enforcement action, including in court, after Austrac started a detailed investigation and assesses an independent report into hundreds of millions of potential breaches of the anti-money laundering laws.

The PayPal buy now, pay later service is available for purchases between $30 and $1500, with four interest-free payments. The lower threshold was reduced from an earlier flagged $50.

Merchants and businesses will pay the same fee to PayPal as they do for other payment services, which sits at 2.6 per cent of the transaction amount plus 30c.

PayPal’s global finance boss John Rainey, when he was asked about the pricing landscape in May, told investors that “competitors are probably going to have to move their pricing closer to where we are” .

In June, international reports had the company raising its merchant rates in the US for products like PayPal Checkout, Pay with Venmo, PayPal Credit and Pay in 4.

The Australian research commissioned by PayPal on attitudes to buy now, pay later was conducted by ACA Research.

Last month, PayPal said it was wading into the Australian credit card market – backed by Citibank

– to help facilitate in-store payments.

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