Payments industry aspirant Azupay has secured a financial services licence from ASIC as it continues to refine its business model ahead of the major banks connecting to the New Payments Platform’s PayTo service.
Azupay is currently in talks with large retail merchants about subscribing to its service, which provides invoicing, transaction reporting and receivables management for retailers wanting to use PayTo.
Azupay also manages the payment experience of merchants by sending payment instructions and requests (as their agent) to the NPP.
PayTo is a nascent mandated payments system that allows merchants to obtain a standing authority to pull payments from their customers’ accounts for an agreed period or on a recurring basis.
While Azupay has no role in holding funds on behalf of merchant clients as part of its service, the company was required to apply for an ASIC licence because it is engaged in the payments system as a facilitator of future-dated payments.
The company’s AFSL took effect on 12 July, according to ASIC records.
Azupay’s business case mostly hangs on the four major banks eventually offering PayTo to their merchant customer bases – a prospect that is not likely to materialise until at least early next year.
The company, which is backed by a string of high-profile investors including Perth billionaire Andrew “Twiggy” Forrest, is hoping to strike deals for the big banks to integrate its range of services with their packaged merchant offers.
The company’s chief products officer Tom Rundle yesterday acknowledged that the delayed PayTo rollouts at the major banks would slow Azupay’s business development, but he said the business would remain focused on deepening its merchant relationships.
“We’re focused on demonstrating the benefits of our service to billers and other merchants,” he said.
“It’s becoming clear that our biggest strength is servicing bigger merchants with large transaction volumes.”
Azupay landed its first big client last year when it began managing the real time settlement of NPP-enabled payments for several NSW Government agencies.
Rundle declined to name other big merchants that Azupay was in talks with, but Banking Day has been told they include most of the country’s high volume billers such as telcos and utility providers.
Ultimately, the ability of Azupay to gain commercial leverage with the banks will depend on the support it garners from large merchants.
If a swathe of merchants such as AGL, Optus and Woolworths eventually subscribe to Azupay, the banks will have little choice but to embed Azupay in their offers to merchants.
The challenge for Azupay will be to convince such merchants that the value of its service is sufficient for them to abandon existing solutions such as BPay that leverage the direct debit system.
That decision could be made for merchants if Australia’s payments standards body, AusPayNet, accepts a proposal to retire the direct debit system.
Another challenge for Azupay and mandated payments more generally will be to gain traction with consumers to hand the keys to their bank account to a biller.
However, Rundle said that in the digital age accountholders were likely to have more control over the mandates they grant merchants compared to the direct debit authorities.
“The consumer is about to have more control over how they pay billers through PayTo than they do with direct debits,” he said.
“It will be up to the banks to determine the design of mandate options for their customers, but it’s likely to be a case of the accountholder simply flicking a mandate button ‘on’ or ‘off’ in a mobile app.”