CEO’s Corner

A Strategic Plan for the Payments System

On 14 December 2022, the day of AusPayNet’s annual Summit, Treasury released its consultation on a Strategic Plan for the Payments System (“the Plan”).

This consultation is critical to what comes next in Australian payments because the Plan, as envisaged by the Government in their Payments System Review (“the Review”), will “provide certainty on policy priorities and strategic directions for the payments ecosystem, while being adaptable to future challenges and opportunities”.

AusPayNet supports this objective and believes that the Plan’s utility will depend on it being executable in a timely manner and its progress being measurable according to appropriate time-based or outcomes-based milestones.

For this reason, in our submission to the consultation (which has not yet been published), we suggest that Treasury first establish a forward-looking vision of what the Australian payments system will look like in three to five years and how that differs from today, and a set of policy objectives that underpin that vision. Together, these set the destination for the roadmap.

With this clear goal in mind, Treasury will then be able to determine the necessary policy priorities and initiatives, including new work programs to address identified gaps, to drive towards that vision. We also suggest that the Plan needs to be significantly more granular than that included in the consultation, so that the priorities show the order of work programs and the initiatives demonstrate clear action.

In our view, a comprehensive Plan should have clear priorities and supporting initiatives/actions with milestones, owners, sequencing, incentives and consequence management. In suggesting this, we point to the UK’s Regulatory Initiative Grid as a best practice example.

In terms of the priorities already identified by Treasury, our proposed top priority for 2023 is “ensuring the regulatory framework is fit-for-purpose and promotes competition”. In considering this, it is worth highlighting that the Review concluded that the Australian regulatory architecture needs to progress in three aspects:

1. enhanced payments leadership
2. aligned payments regulation, and
3. simplified payments licensing.

The Plan itself – with an appropriate vision and set of policy objectives – will provide leadership and set the scene for aligning payments regulation and simplifying payments licensing. Again, the Review lays out clear next steps; in our view, these should be the actions under that priority for 2023:

1. introducing a list of payment functions requiring regulation (Review recommendation 8)
2. defining common access requirements (Recommendation 11)
3. implementing the changes to the Payment Systems (Regulation) Act (Recommendation 6)
4. the licensing framework itself (Recommendation 9)
5. mandating the ePayments Code for payments licensees (Recommendation 10)
6. compliance with technical standards set by authorised industry bodies (Recommendation 12).

Together, these will create a regulatory framework that is fit-for-purpose (and fit-for-future) which promotes competition (and consumer protection), based on a same risks, same rules principle.

That framework will also provide the bedrock for foundational programs on areas such as economic crime (in supporting a cross-sectorial National Anti-Scams Centre) and the transition to more modern payments infrastructure (by removing legislative barriers and through government taking a lead).

It is worth noting that collectively, these foundational programs in 2023 are government-led and that their completion will provide important clarity for the industry to proceed with follow-up (operational) work programs.

We look forward to working with Treasury and our members to finalise the Plan, and to actioning the initiatives underpinning the agreed priorities. As part of that, AusPayNet is currently undertaking a program of work to become an authorised standards-setting body as envisaged in Recommendation 12 of the Review, building on 30 years’ experience and expertise in developing industry standards.

AusPayNet Summit

Thank you to everyone who attended AusPayNet’s Summit 2022. We were delighted to welcome over 400 members of the industry to this sell-out event – our first opportunity to come together physically for such an occasion since 2019.

Emceed by award-winning journalist and presenter, Helen Dalley, the event had several highlights. Kicking off the day with his keynote address, the Governor of the Reserve Bank of Australia (RBA), Philip Lowe, reflected on the rapidly changing payments environment and the work the industry must undertake to support end-users of the payments system.

AusPayNet CEO Andy White interviewed Assistant Treasurer and Minister for Financial Services, The Hon Stephen Jones MP, about the role of government in payments – a particularly timely conversation, given the event coincided with the Government’s announcement of a Strategic Plan for the future of Australia’s payments system.

Throughout the day, panels canvassed a range of topics, including the future of payments, how the Australian industry can prepare to be post-quantum cryptography (PQC) ready, and making Australia a hard target for scams. The event culminated in our “Big Debate”, moderated by Ellis Connolly, the RBA’s Head of Payments Policy. In this session, panellists examined Australia’s readiness for a digital currency for payments.

Feedback we’ve received has been overwhelmingly positive, with many surveyed participants declaring AusPayNet’s 2022 Summit to be our best yet.

We invite you to view our photo gallery and a video capturing some of the day’s highlights, and anyone wishing to revisit Governor Lowe’s speech can do so on the RBA’s website.

We look forward to sharing details of AusPayNet’s 2023 Summit in the coming months.

Economic Crime Forum (ECF)

In February, several ECF representatives met the Assistant Treasurer and Minister for Financial Services, The Hon Stephen Jones, in Brisbane. ECF representatives took the opportunity to explain how the ECF’s work would complement a National Anti-Scams Centre (NASC), enabling the new centre to leverage ECF’s existing relationships and operational work. Law enforcement representatives emphasised how the ECF has become an important information channel for key law enforcement joint management groups, including those targeting serious financial crime such as fraud, money laundering, corruption, and cybercrime.

AusPayNet also participated in an industry scams roundtable, facilitated by the Minister in Parliament House, and outlined the work currently underway to combat scams. This includes:

• the ECF’s three joint operational work groups, which are identifying and disrupting criminals and their illicit activities
• AusPayNet’s engagement of an award-winning advertising agency to develop research-based creative concepts appropriate for a national consumer awareness campaign. The aim of the campaign is to drive behavioural change and address the current gap in consumer education about scams. Once the creative concepts have been developed, AusPayNet will be engaging its members, government, and wider scams lifecycle stakeholders (such as social media platforms and telcos) on how such a campaign might be implemented.

AusPayNet looks forward to ongoing engagement with Treasury around making Australia a hard target for scams, including its work to establish the NASC and a National Anti-Scams Code. It is important that all players across the scams value chain take action and collaborate to address the growing threat of scams.

Learn more about the ECF here.

Cheques

Cheque usage in Australia continued to decline in 2022, in line with trends observed over the last 10 years. According to RBA statistics, the total number of cheques issued in the 12 months to November 2022 was 19% lower than the previous 12-month period, with decline seen in the use of all three cheque types (personal, commercial, and bank). Cheques now make up less than 0.2% of non-cash consumer payments.

Given this decline, promoting the need for payment neutrality in legislation remains a priority. AusPayNet is continuing its dialogue with government departments about amending legislation that mandates cheques as the sole payment method and about the need to review the Cheques Act, which dates back to 1986.

As cheque use continues to fall, the availability of granular usage data will assist in use case identification. AusPayNet will work with members on uplifting data collection. We also encourage engagement from the broader community to ensure the last cheque users are appropriately supported as the system nears its end.

The clearing and settlement of cheques is currently governed by the Australian Paper Clearing System (APCS) Framework, administered by AusPayNet. Given the decline in cheque use and therefore use of the system governed by the APCS Framework, AusPayNet considered and has determined not to seek re-authorisation from the ACCC of the provisions in the APCS Framework that enable members to be suspended and/or terminated from the Framework (Regulations 4.14-4.21, 11.11 and 12.5). The ACCC authorisation of these provisions will therefore expire in 2025. The rest of the APCS Framework and the operation of the Framework itself will be unaffected.

Cross-border payments

Since commencing its work on the Financial Stability Board’s (FSB) ‘Targets for addressing the four challenges of cross-border payments’ in July 2021, AusPayNet’s Cross-Border Payments Advisory Council has overseen a significant number of consultation responses and engagements with both the FSB and the Committee on Payments and Market Infrastructure (CPMI).

Together, the G20 and the FSB have agreed the targets for addressing the four challenges of cross-border payments (speed, cost, transparency, and access). AusPayNet has published these targets in Appendix 1 of the second issue of the Cross-Border Payments Round-Up.

The FSB has now reached an inflection point after two years of stocktakes, consultations and analyses. In their note to the G20 Leaders, ‘G20 Roadmap for Enhancing Cross-Border Payments’, the FSB seeks endorsement of its priorities for the next phase of work:

1. Payment system interoperability and extension
2. Legal, regulatory and supervisory frameworks
3. Cross-border data exchange and message standards.

These priorities encompass improvements to underlying systems and arrangements, and the development of new systems with coordination and commitment between public authorities and the private sector. The intention is to incorporate actions into an updated roadmap, for the G20 Finance Ministers and Central Bank Governors meeting in Bengaluru, India this week, followed by the April 2023 meeting in Washington D.C.

But Australia is not waiting. In his keynote address at AusPayNet’s 2022 Summit, the RBA Governor Philip Lowe specifically addressed the cost and speed of cross-border payments. He indicated that in 2023, the RBA – together with the Australian industry – will study the economic, business, and technical issues involved with linking up our fast payments system to those elsewhere in the world. Additionally, the NPP will be delivering its International Payments Business Service . Together, these initiatives will assist Australia in meeting its G20 commitments.

Adoption of the ISO 20022 financial messaging standard has been ongoing globally. Migration is underway in many countries, including Australia, with go-live due on 20 March 2023. ISO 20022’s richer data format should, over time, lower costs and speed up payment times. To achieve this and maintain a global harmonised approach, CPMI, in collaboration with the Payment Market Practice Group, is evaluating options for both the maintenance and governance of the core message set and data model for cross-border payments that fully leverages the potential of the ISO 20022 standard for cross-border payments. It is hoped that the guidance that is developed will underpin the minimum requirements and foster continued harmonisation of ISO 20022 among the global community when the co-existence period ends in 2025.

Look out for our next issue of the Cross-Border Payments Round-Up in April.

ISO 20022 migration

For a high-level update regarding the progress of the ISO 20022 Industry Migration Program, please refer to the December 2022 Migration Monitor on AusPayNet’s website.

The next edition of the Monitor will be published in early Q2 2023 after completion of our Transition to Live, with a wrap up of our Go Live on 20 March 2023 and commencement of co-existence.

Regulatory round-up

A series of consultations have commenced this year, signalling government focus on the payments reform agenda. Within two months, AusPayNet has made submissions on:

• Strategic Plan for the Payments System
• 2023-24 Budget
• Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022
• National Anti-Scams Centre
• Regulatory Reform for Digital Platforms

In these submissions, we have highlighted the importance of transforming to enable productivity and cost efficiencies in the payment ecosystem, ensuring the Australian payments system can benefit from the rapidly advancing technological environment and contribute to the digital economy. This should include updating regulatory frameworks, removing technologically prescriptive legislative barriers, and developing pragmatic milestones, sequencing, and focused program funding.

New members

AusPayNet is pleased to welcome a new IAC Member:

• Till Payments Solutions Pty Ltd (effective 13 February 2023)

For more information on AusPayNet membership, please visit our website.