Small payments are not just for music fans and online shoppers

As Australia’s first bank, formed in 1817, Westpac’s strength in international payments has developed alongside the expansion of trade and export markets globally. Australia is also a country with a large migrant population and Australians have been sending money overseas for many years.

E-commerce and online market places like iTunes, Alipay and eBay have seen the emergence of non-traditional payment channels with rapid customer adoption.

For example, if an independent rock band in Iceland puts their song up on an internet platform and a fan in the US downloads it, what is the best way for the band to be paid?

Transactions of this nature are being made several hundred thousand times, if not millions of times, each day.

Whilst the traditional correspondent banking model remains the most popular way to send large payments across borders, the rise of e-commerce and personal remittance flows is driving some innovative alternatives in the low-value payments arena.

Faced with ongoing disruption in payments, Westpac has been a leader in developing faster and cheaper ways for our customers to make small overseas payments, which are also secure and internationally compliant.

Westpac sees itself as a 200-year-old start-up that is “disrupting itself”. We are delivering new solutions to customers, and facilitating the smooth flow of funds around the world.

International e-commerce platforms A major international e-commerce business needed a solution for international payments into Australia which was cost effective and which complied with Anti Money Laundering (AML) and sanctions screening. Westpac is partnering with that company’s global bank to deliver a solution, using SWIFT File Act, which packages up these small payments and then distributes them through Australia’s low-value clearing system.

The cost per transaction is down to several cents from several dollars.

The bigger picture Small payments are not just for music fans and online shoppers though. This is also about financial inclusion, and low-value payments are an important part of how the global financial sector is helping to solve the long-term goal of reducing poverty, as defined in the Millennium Development Goals which Australia adopted in 2000, along with 188 other countries.

Cross-Border Payments Innovation Westpac has launched LitePay International (LitePay), a low-cost payment service from Australia to the Philippines for payments of less than AU$3000.

Partnering with a bank in the Philippines, LitePay uses an Application Programming Interface (API) to offer a cheaper and more transparent service for small payments between the two countries.

Enabling direct payment between two identified parties with no aggregation of multiple payments, LitePay complies with AML and KYC certifications. It gives individual Westpac customers a transparent way to send money overseas, with lower fees, and it’s integrated directly into our online banking portal.

Using an API also achieves faster delivery of value than traditional telegraphic transfers, with Australian Dollar denominated payments reaching Philippine bank beneficiary accounts, including conversion to pesos, in under a minute, in some cases, from the time Westpac customers originate the transfer. LitePay is a solution which can be replicated, and Westpac is currently looking at rolling it out in other markets.

Extending the Service to meet the specific needs of Partner Banks India is another significant market for low-value payments, and the World Bank has estimated that around US$2 billion in small payments flow into the country each year from Australia.

Westpac, through its wholly owned in-house software company, Qvalent, delivers a solution to six of the largest banks in India, which enables simple, secure and low cost money transfer.

The solution is designed for overseas banks that have a proprietary online service for individuals with bank accounts in Australia, to send money back to their home country.

Available for inward migrant flows too Qvalent was also instrumental in creating Westpac’s inbound payment solution, initially launched in the UK and soon to be extended being explored to be extended to Hong Kong, Singapore and India.

In partnership with a UK bank, British people migrating to Australia are able to open an Australian dollar bank account in the UK, and move funds into their new account as if it is a domestic UK transfer. Further, similar customers within the European Union can also use this facility and transfer Euros to their Westpac Australian dollar accounts.

Blockchain As the use case for Blockchain (or distributed ledger) continues to present a challenge to traditional banking, Westpac has been at the forefront of testing its potential to deliver faster, safer and cheaper payments with other international banks on the Ripple platform.

Westpac is a member of R3 CEV, a consortium of 42 global banks investigating how to employ blockchain in financial services.

In all of these initiatives, Westpac has understood that banks need to drive innovation and that the future demands new solutions for a whole range of customers.

Traditional models, such as correspondent banking and SWIFT Network still serve a purpose, but the world is diversifying and needs a range of diverse new financial solutions to help it grow.

Important Information Westpac Banking Corporation ABN 33 007 457 141 (Westpac) AFSL 233714.

The information contained in this article is current as at 23 September 2016. It has been prepared without taking account of your objectives, financial situation or needs. Because of this you should before acting on this information, consider its appropriateness, having regard to your objectives, financial situation, or needs. Except where contrary to the law, Westpac intends by this notice to exclude liability for the information contained in this article. The information is subject to change without notice. Any information about products and services in this article is subject to local capabilities and regulatory requirements.