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POLi under fire

Big banks take aim at a popular payment provider

Why are big banks taking aim at POLi?

Covid-19 lockdown in New Zealand has seen surges in online shopping as we all keep to our bubbles, but the big banks are warning against using a popular payment system. So what’s behind the warning?

This is not the first time the banks have questioned POLi’s security. Back in 2012 there were concerns raised that POLi was spoofing banking sites to capture customer information. POLi then, and again now, have have rebutted that claim stating they do not store customer credentials.

Big banks saying a particular payment system is unsafe will undoubtedly have an effect on consumer confidence, but is it purely customer interests they are they looking to protect?

POLi Payments, a business of Australia Post, is primarily designed for people who do not have, or do not want to use, a credit card for online transactions. POLi has been a payment option in New Zealand for around 11 years and the system utilises the same mechanisms that are used when you transfer money to someone else using internet banking, but without needing to manually create a transfer or set up a new payee. Big brands including the Warehouse and Air New Zealand use POLi as a payment option, along with around 4,000 other business, and it remains popular among consumers with 1.3 million of us using the system over the past few years.

We've recently integrated POLi into a client site to use alongside traditional card payments and we have to say we're impressed with the system. It's clear and easy to use from a consumer perspective, from a merchants perspective the advantages are obvious with low transaction fees, and from a developers perspective the integration is fluid and well documented.

The system works by using your internet banking credentials to perform an interbank transfer on your behalf. Think of this as giving someone else your bank login details and asking them to perform the transfer for you. This is called payment by proxy and this is how POLi operates.

One of the central arguments the banks have made is compliance with their terms and conditions, specifically entering your internet banking credentials into third party websites will breach those terms. POLi being a proxy service is clearly working in exactly that space. In this the banks are likely to be saying less about the authenticity of the request and more about setting expectations that responsibility for fraudulent payments may have to be shouldered by the customer.

There are plenty of reasons people don’t have credit cards, fees and interest rates primary among them. But credit cards do come with a certain amount of buyer protection that POLi does not. POLi is not a bank and no they do not have a financial services license, but they do hold an exemption and so remain fully compliant with the Australian Securities and Investments Commission. An important thing to note is that POLi does not need to have relationships with banks to offer their service, but you can be sure the banks are keeping a close eye on proceedings.

The banks have argued that they are unable to audit POLi, a claim countered by POLi’s insistence that the banks have an open invitation to audit them. So there appears to be ongoing tension as both parties feel they have a strong argument. New Zealand does not yet enjoy the wider range of low cost payment options found in overseas markets, so it is vital to both maintain and encourage competition in the market to ensure options are available for consumers.

Ultimately the customer will choose which payment method they use, but it is wise to be aware of the differences and the risks associated with each. From a merchant perspective its a no brainer, the fees are low and you are making online purchases whole lot easier for the card-less sector of the market.

This one has a while to run yet, but POLi is likely here for the long haul. In time there will be more services that enter into a market currently dominated by the big banks. Which is a good thing for merchants and consumers, and maybe even for the banks too.

If you’re interested in integrating POLi Payments, or indeed any payment provider into your business, get in touch.

 


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