Banks can win against the fast-growing PayPal because they are more trusted by customers, according to Bendigo and Adelaide Bank managing director, Mike Hirst.
On a full year financial results call this morning, Hirst also outlined a variety of tech initiatives at Bendigo Bank, including a refreshed mobile app, support for smartwatch payments and a new payment terminal supporting mobile payments.
“Banks and others in financial service industry who currently have incumbency do have that trust element working for them at the moment,” Hirst said.
The presence of financial regulations means banks must meet a “more onerous standard” than payment companies like PayPal, he said.
Hirst acknowledged PayPal's growth, but said customers do not seem willing to put as much money in a PayPal account as they would in a bank.
“You see PayPal and other people coming into the market and … PayPal in Australia now has about 5.5 million accounts. Well, that’s a significant part of the market. What they don’t have, though, is a lot of money in those accounts.”
A PayPal Australia spokeswoman clarified that the payments company is regulated by ASIC and APRA, and subscribes to ASIC's ePayments code.
"It holds an Australian financial services licence under the Corporations Act to provide non-cash payment facilities and an authority under the Banking Act to carry on banking business confined to providing ‘purchased payment facilities’."
Bendigo Bank sees technology partnerships as a key way to keep ahead of competition, said Hirst.
“More and more we see consumers are quite willing to dispose of whatever they’re using if something better comes along,” he said.
“That disposability piece really means you have to be very careful about how you apply your investment, and one of the ways to avoid that bleeding edge of technology investment is to partner with people going forward.”
Earlier this year, Bendigo Bank formed a partnership with Samsung Australia in which the companies will work together on digital projects and Bendigo will roll out Samsung devices to its staff. Hirst said that one of the first projects with Samsung will allow Bendigo users to make payments using a Samsung Galaxy Gear II smartwatch.
The separate announcement of a new payment terminal will support virtual currencies and loyalty programs in addition to traditional payments. Coming in the next six months, it will support payments using Redy, a recently launched mobile payments app the combines loyalty points and QR codes. Currently, stores must have a separate device to take Redy payments.
Bendigo plans to release new mobile apps including a business banking app in October, a redesigned mobile e-banking app in September and a university-focused mobile wallet that includes virtual currency for on-campus purchases, said Hirst.
The new e-banking app will make Bendigo more competitive with other banks, and Bendigo plan to frequently update the app to keep it fresh, he said.
“In some ways it will catch up to the rest of the market, but in other ways there are things in there that will be market leading.”
Behind the scenes, Bendigo Bank is conducting a refresh of its lending systems platform, according to Hirst. The bank has started with its third-party mortgage unit, but eventually the new platform will extend to everything, he said.
The refresh is expected to bring cost savings for the bank and a better experience for customers, he said.
The bank announced an after tax statutory profit of $372.3.million for the year ending 30 June 2014.