It didn’t take long for the competition in the payments market to heat up after the announcement of Apple Pay last week with PayPal launching a campaign asking if you’d trust your financials to a business that can’t protect your selfies.
While PayPal pokes fun at Apple, there are more serious competitive pressures developing as the big companies start negotiating with credit card providers and banks to reduce their rates. This is something that will have an immediate benefit for businesses of all sizes.
Most businesses, big and small, are poor at monitoring what they pay for a service; while they’ll shop around and negotiate when they’re looking for a provider, they’ll often let these contracts go for years without reviewing them – something that utilities like banks, telcos and power companies take advantage of.
I was reminded of this earlier this week at a lunch with some senior Qantas accountants who were quite open about how every supplier’s contract was constantly reviewed and discounts were aggressively pursued. It’s a tough life for the airline’s subcontractors.
Times are tough for Qantas though, having sustained a $A2.8 billion loss last year along with constant declines in market share and stock prices. So it’s not surprising they have an aggressive cost-cutting strategy in place.
Many other industries are now looking at the same problem as the global economy is now in a phase of, at best, anaemic growth for the foreseeable future, which makes it essential for all businesses to start reviewing their costs.
For Australian businesses, there’s another imperative; the inept federal budget has tipped the Australian economy into its first recession in a generation and the hapless Joe Hockey’s hubristic comments about the housing market this week probably indicate property prices have peaked.
Both of these factors take Australian business into unfamiliar waters and companies with the lowest cost base and most efficient operations have a better chance of surviving a lean period.
With the banking sector now being disrupted by companies like PayPal and Apple along with the economy taking a turn for the worse, it might be time for all businesses to ask some hard questions of their banks and payment providers. The time is right to strike a deal.