Jonathan Dale: BNZ Head of Payment Development on the surcharge ban, Payap

BNZ is taking advantage of the Government’s ban on in-store card surcharges to promote its new banking platform. 

Payap, an open banking platform, allows customers to pay directly from their bank account.  

It provides a lower-cost alternative with transaction fees of just 0.39% or 0.59%, and is compatible with all major NZ banks. 

BNZ Head of Payment Development Jonathan Dale told Kerre Woodham with yesterday’s surcharge announcement, it’s good to highlight some alternatives in the market that will leave businesses in a good position for both them and their customers. 

Payap, he says, creates an even playing field, and the small transaction fee creates an opportunity for small and large businesses alike to keep on growing. 

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Episode Transcript

Speaker 1 (00:06):
You're listening to the carry Wood and Morning's podcast from
Newstalk SEDB.

Speaker 2 (00:12):
As we're discussing the government plans to scrap instore payment
can't surcharges by May twenty twenty six. Being Z used
yesterday's news to promote its new open banking platform pay App.
With pay app, customers can pay you directly from their
bank account. They use a dynamic QR code generated on

(00:33):
the existing f POS terminal. BNZ Head of Payment Development
Jonathan Dale joins me. Now, very very good morning to you.

Speaker 3 (00:41):
Good morning, Cary.

Speaker 2 (00:42):
Were you just sitting there with this technology waiting for
the government to make an announcement like this so you
could leverage off it.

Speaker 3 (00:50):
No, we have been looking at how we could reduce
the cost payments for businesses for some time, and with
the emergence of open banking coming into the market, how
we could use that new technology to facilitate that. So
it's been something we've been looking at for some period
of time and this was.

Speaker 2 (01:06):
Just timely with the announcement.

Speaker 3 (01:09):
Yeah, we announced last year that we were looking at payout.
We'd worked with a home growing New Zealand fintech center
pay with this technology and indicated to businesses. So this
would be a way to reduce a whole lot of
different payment costs. And with the announcement yesterday, it was
good to really highlight what some alternatives are in the
market to make sure that all those businesses don't feel

(01:31):
like all of a sudden they have to build that cost,
that there are alternatives that can put them in a
good position for them and their customers.

Speaker 2 (01:37):
Well, it's a vastly different playing field for the big
retail chains, for the big supermarkets, they can negotiate to
get a better rate on fees, can't they, And with
their banks whoever they happen to be banking with. The
smaller dairies and business owners don't have that same wriggle
room when it comes to negotiation.

Speaker 3 (01:59):
Well, that's the beauty of something like payapp is that
it creates a real even playing field where you don't
need to economies of scale to get efficiencies on cost
and that that flat rate that we've got for that
is open to if you're a small business right through
to large enterprise. And I think the real key thing
for New Zealand businesses is also with a payment. When

(02:21):
you're making a payment as a consumer, you want it
not just to be around what's the cost of purchasing something,
but how do you create it as an opportunity for
those small businesses to generate or spend in their store
or people coming back to the store again and again
and enhance that experience, and that some of the additional
services that pay up give away from our traditional payment methods.

Speaker 2 (02:44):
So you've got a processing five zero point thirty nine percent,
which is considerably less than the surcharges right now.

Speaker 3 (02:53):
Yes, yeah, and that creates that opportunity for small businesses
and large businesses to keep on keep on growing.

Speaker 2 (03:01):
Like it makes so much sense to be able to
use a code or an app or what have you,
and what the technology that you've developed makes so much
sense to be able to go from my account to
the retailer's account straight away with nobody clicking the ticket
three or four times along the way.

Speaker 3 (03:18):
That's right. It does reduce the sort of intermediaries in
the process, which we can then pass on that cost
savings to all the businesses. But also it's using existing infrastructure.
So if you're a business, then you've bought terminals when
a sale systems the last thing you want to do

(03:39):
is have to invest in more technology to look at that.
So by leveraging what people are used to, you know,
their muscle memory, be it in a business or a consumer,
we see that as a really good win.

Speaker 2 (03:50):
Is this a way of getting around the duopoly that
Visa and MasterCard pretty much have worldwide because they've got
the existing networks of carrying all the information over the
existing networks. To try and set up a rival network
would be near impossible. It would just be prohibitively expensive.
But is this a way of bypassing the duopolese networks?

Speaker 3 (04:15):
When New Zealand's been a bit of a leader in
payment methods like FPOs in the eighties launching that and
this is an extension of that where you can pay
directly out of your bank account. Yeah, there's always going
to be benefits for a worldwide payment method like Visa
or a MasterCard, so that you're able to go overseas
and have similar experiences and access those global markets. But

(04:37):
this pay it really does offer a great domestic alternative
for New Zealand businesses.

Speaker 2 (04:43):
And you had a trial of it didn't use so
were there any little things that needed to be ironed
out when you did the trial of the app.

Speaker 3 (04:52):
There's always all prevlins that come out when you need trials.
The big thing is getting people used to any type
of change, and that's consumers walking into a store. So
while they're using existing terminals, you are having to scam
with your camera a QR code now while you don't
actually need an app or anything, you just need to
have a camera on a phone. That really is just

(05:15):
retraining people, educating people on a different way of doing things.

Speaker 2 (05:20):
We're quite good at being early adopters when it comes
to technology. I just become on something you said at
the very beginning though, Jonathan, you said, you know, we
want to be able to help with the cost of
doing business for small retailers. Why not absorb the cost
then if you really wanted to help small retailers.

Speaker 3 (05:40):
So when you look at the cost of pay app,
it's really priced at a cost recovery or bare minimum
of the new infrastructure that's coming through open banking and
what we've tried to do there as well working with
a great Keithintech center. Pay is expand the experience, which
I have touched on for so if you were going

(06:02):
in to buy your coffee and you had a stamp
card that said on your fifth coffee, you get the
six to one free digitizing that within the payment purchase.
So it removes some of that other costs that the
businesses have got around loyalty schemes, gift cards or receiving
other forms of payment from other loyalty schemes. So when

(06:23):
you combine that all together, you've actually significantly reduced overall
cost of serving a customer for business. So that's really
where our focus has been. How do you make the
payment experience much more valuable, not just about paying three
percent or two percent surcharge for the takeaway in the weekend.
How do you make it an incentive to go back

(06:43):
to that takeaway next weekend?

Speaker 2 (06:46):
And just finally, when it comes to take up of
the paypp app, how responsive has the market been.

Speaker 3 (06:56):
We've had really good responses from the market right across
the board, from small businesses through the enterprise, but several
thousand merchants loaded and an active with pay it Now
and continuing to roll that out over the coming months.

Speaker 2 (07:12):
All right, I thank you very much for your time.
Jonathan Dale b and zhead of Payment Development. I think
we're going to see a bit more of this you know,
B and z's done a good job of capitalizing on
the government's announcement yesterday and launching the open banking platform,
But with the technology that exists, there will be room
for many more opportunities like this. I think it's a
great idea.

Speaker 1 (07:33):
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