The following is an adaptation of the introduction section of AusPayNet’s submission to the Review of Retail Payments Regulation.
The accelerated digitisation of all aspects of life, in the wake of the global pandemic, is increasingly well understood. Last year’s global survey by McKinsey indicated that, on average, companies have fast-tracked the digitisation of all areas of their business (including customer interactions, supply chains and internal systems) by three to four years. The report also notes that alongside this, “the share of digital or digitally enabled products in their portfolios has accelerated by seven years”.
This digitisation is readily apparent in payments, notably in two trends which have near-term implications for payment initiation and acceptance, and the business models that support them.
The distinction between online and offline channels has become less pronounced in recent years as consumers have taken up mobile phones and digital wallets, and as merchants have adopted payment methods that offer a similar customer experience across both channels. Recent figures from CBA suggest that mobile wallets may be the preferred method of payment by the end of the calendar year. As a result of this uptake, some issuers of payment products no longer issue physical cards.
The events of the last year, and in particular the roll out of QR codes for mandatory venue check-in, look set to blur this distinction further. QR code check-in has effectively educated consumers and merchants on the simplicity of this technology and increased focus on its potential for payments in the Australian market (while acknowledging that there is already widespread adoption in other jurisdictions with a non-card-based history). This heightened interest is reflected in the fact that AusPayNet, at the request of members, is in the process of creating a framework to support QR code interoperability.
What is critical here is that QR codes are payment rail and channel agnostic; that is, they are not specifically designed to work for either cards or account-to-account rails. A payment initiated in a face-to-face environment that may previously have resulted in a card transaction could result in a consumer choosing to have the funds drawn directly from their bank account. Consequently, payment initiation technology is no longer the only determining factor in payment method selection.
Accordingly, AusPayNet is strategically reviewing its approach to the governance of payments acceptance: as payment initiation changes – not just through QR, but through CDR (see below), and in future, through the Internet of Things – so too does payment acceptance. This is driven by technology advancements, notably mobile (e.g. Quest and MYPINPADM) but also, for example, cloud. Our strategic review will ensure our governance in this area keeps pace.
Building on the above, a range of service providers are offering greater consumer choice and flexibility. By way of example, Curve in the U.K provides consumers with the option to “go back in time” and change their choice of payment method up to 30 days after a transaction.
It seems likely that the focus on greater competition and choice envisaged as part of the Consumer Data Right’s (CDR) extension to Action Initiation will see similar services launch in the Australian market. Greater access to data is likely to see an increase in services that aim to help consumers make informed choices about managing their finances and payments, both pre and post payment.
We are currently working with members, regulators and other stakeholders on enabling Action Initiation, specifically in reviewing current capability and future plans to support third party payment initiation, and the likely impact of an instruction layer on existing rules and regulations that underpin payment choice.
Overall, the impact of both trends discussed above is that merchant and consumer choice is likely to be informed by an increasingly complex set of inputs. AusPayNet’s role remains to bring clarity to that complexity, to enable innovation, competition and choice, and to ensure the efficiency of Australia’s payment systems and their maximisation of benefits to those end users.
We are delighted to announce that our payments summit will be held at the ICC Sydney on Thursday, 9 December 2021. Following our successful online event last year, we’re excited to be holding an in-person event again in 2021. The program will explore the big issues facing the industry and we are thrilled to have the RBA Governor, Philip Lowe, opening the day with his annual address to the payments industry. Our annual payments summit is a firmly established event in the industry's calendar. We hope you can join us. More details will be announced soon.
For details and sponsorship opportunities please contact us.
In June, AusPayNet’s ISO 20022 Industry Migration team held a Program Walkthrough and Q&A for industry participants. The event brought together 200 key stakeholders (in-person and online), including payments leaders, project sponsors and delivery teams to discuss:
The session was rounded-up with a panel discussion on what these requirements mean for industry participants (Nicole Jolliffe (SWIFT), Sally Greer (CBA) and Elle Czesler (Westpac)).
A similar event will be held for vendors in the coming months. For more information on the vendor event, contact email@example.com. Information about the ISO 20022 migration is available here.
AusPayNet is leading and coordinating industry work to deliver the G20 cross-border payments roadmap developed by the Financial Stability Board (FSB). This work is being guided by our recently formed Cross-Border Payments Advisory Council (CBPAC) comprising financial institutions, the Reserve Bank and Treasury.
The roadmap provides a high-level plan for enhancing cross-border payments by addressing the key challenges: high costs, low speed, limited access and insufficient transparency. Of the 19 ‘building blocks’ set out under the roadmap, the CBPAC has prioritised 10 that require industry coordination. AusPayNet has established four working groups to progress the initial priorities. The first has been to respond to the FSB’s consultation on Targets for Addressing the Four Challenges of Cross-Border Payments. AusPayNet consulted stakeholders, through the Public and Private Sector Working Group (PPSWG), to produce the response submitted on 16 July 2021.
Read more in our recent blog.
Work on the development of an interoperability framework is ongoing, managed by a working group under the Emerging Technology Experts Group (ETEG).
A first draft of the framework, which is based on EMVCo Merchant Presented Mode, will be available in September 2021.
The payments industry is experiencing a period of rapid change; new technology and new business models mean that the way that we initiate and accept payments is evolving fast.
To evolve in kind, we are reviewing our approach to payment acceptance governance. While there are many drivers for this review, at the highest level our intention is to ensure that the governance mechanisms that we manage, on behalf of the industry, are fit for purpose. In the current phase, we are looking at payment acceptance in the context of physical devices that enable a merchant to accept a payment, initiated by a customer, in a face-to-face environment.
Over the last year we have seen a decline in standalone devices, such as the traditional point of sale terminals, and a rise in the number of solutions that look to enable mobile phones for payments acceptance.
In order to ensure that our review and any recommended changes are informed by the latest technology and business models, we are working with a range of technology and service providers, based in the local market and overseas. If you would like to contribute to this review, please get in touch at firstname.lastname@example.org.
The Inquiry into Future Directions for the Consumer Data Right - Final Report introduces the concept of Action Initiation, which for payments translates to third party payment initiation.
AusPayNet is working with members on a position paper to ensure that the approach to enabling Action Initiation is efficient, building on existing and planned capability. Alongside this we are considering what implications this instruction layer may have for competition and choice.
We welcomed the opportunity to respond to the following consultations during this quarter.
In May 2021, ASIC issued the second of two consultation papers forming part of its review to ensure the ePayments Code remains relevant and effective. This paper set out a number of proposals on nine key areas for feedback. AusPayNet’s submission focused on those areas where the industry consensus indicates there is a need for further discussion and consideration. These included the need for more clarity around the proposals concerning amendments to Mistaken Internet Payments and the proposed extension of the Code to small business. In relation to modernising the Code, we also highlighted that the Code should remain responsive to future developments. Read our submission here.
The Reserve Bank’s consultation sought feedback on Preliminary Conclusions on proposed policy changes relating to dual-network debit cards and least-cost routing; interchange fees; and the transparency of scheme fees. AusPayNet’s submission reflected on the rapidly evolving context in which we are operating and the implications for retail payments. We highlighted that as emerging trends accelerate, merchant and consumer choice is likely to be informed by a more complex set of inputs than pricing. As such, any measures taken to address immediate concerns may require close monitoring and review to ensure continued competitive neutrality. Read our submission here.
On 25 March 2021, the Parliamentary Joint Committee on Corporations and Financial Services commenced an inquiry into mobile payment and digital wallet financial services and called for submissions. AusPayNet’s submission focused specifically on the implications of mobile payment and digital wallet services for licensing and consumer protection. It recognised the amendments proposed by the Council of Financial Regulators (CFR) in its Review of Retail Payments Regulation: Stored-Value Facilities (SVF) final report as a positive step in terms of the regulation of SVFs. But it also highlighted that the amendments fall short because not all participants now in the payments industry necessarily fit the definition of an ‘SVF’. It suggested regulation should apply to all industry participants and involve a consistent framework – a “same risk, same rules” approach. Read our submission here.
In June 2021, the Council of Financial Regulators formally announced AusPayNet’s role in the development of an industry e-conveyancing code. Following a review of the regulatory arrangements for e-conveyancing, the Council has supported addressing areas identified for improvement through a self-regulatory regime. The code will be “jointly developed by e-conveyancing platform providers and financial institutions under the governance of an industry steering committee facilitated by AusPayNet.” We look forward to working with industry to complete the code by September 2022. More information is available here.
The review of our governance framework and constitution is well underway. One of the recent recommendations arising from the review is the creation of the AusPayNet Stakeholder Advisory Council (ASAC). The ASAC, which will include members from consumer groups, fintechs, and retailers, was developed as a way of ensuring that wider stakeholder perspectives are shared with our Board. The first ASAC meeting will be held in August 2021.
Following recent changes to our IAF Affiliate membership criteria to include merchants that participate significantly in the payments industry, we welcomed three new members in June 2021.
For more information on AusPayNet membership contact email@example.com.