"Our industry report card for FY 18 shows a series of landmark milestones, best described as a ‘year of acceleration’."
As we settle into the new financial year it’s timely to reflect on the progress made by the payments industry in FY18. New York Times columnist Thomas Friedman recently described our current era as ‘the age of accelerations’. While Friedman was referring to the non-linear acceleration in technology, globalisation and climate change, the concept is no less relevant to payments. Our industry report card for FY18 shows a series of landmark milestones, best described as a ‘year of acceleration’.
NPP – speedy payments take a big leap forward
By any measure, the highlight of the year was the launch of the New Payments Platform (NPP) in February. Although it’s early days, as more participants embrace the NPP we’re seeing the benefits of embedding this fast and easy way to pay into Australia’s payments ecosystem.
AusPayNet is proud of the role we played in getting this important initiative up and running. Now a standalone company, the NPP has its roots within AusPayNet, where our team led the early collaborative work with industry, regulators, and other stakeholders. The success of the NPP is a testament to the strength of our industry and we congratulate everyone involved.
From open loop to open data
FY 18 saw broad advances in account-based ticketing and open loop payments in transport. A highly successful Transport for NSW pilot in Sydney enabled commuters to pay their fare using cards, smartphones or wearables, rather than with a dedicated Opal card. The Open Loop Transport Payments Framework will ultimately see people use these payment methods across transport networks in Australia. State transport authorities are already aligning with the cause; version 2 of the framework is agreed, and version 3 is expected by the end of 2018.
I see a parallel between payments and the Britannia Physics’ definition of acceleration, the ‘rate of change in velocity in time and direction’. Acceleration in payments is fast and the direction wide ranging. Take consumer access to data for example. The Consumer Data Right (CDR) recently announced by the Federal Treasury has its foot firmly on the accelerator pedal with the initial implementation less than 12 months away. To get visibility on what some of that impact might be, in late 2017 AusPayNet enabled the Australian Payments Council’s highly successful two-day ‘hackathon’. The event saw teams using payments data to develop apps ranging from financial planning, to rewards program comparison and even dating – all illustrated the potential and challenges of this regulatory change. This event proved a great starting point for industry collaboration around Open Data.
Stepping up security for CNP payments
On the fraud front, data released by AusPayNet in December 2017 revealed two important trends: growth in e-commerce in Australia is the fastest in the world1, and card-not-present (CNP) fraud now accounts for 82% of all card fraud in Australia2. Clearly, chip technology has strengthened protections at the point-of-sale and criminal activity is migrating to the e-commerce space. AusPayNet has taken steps to accelerate industry-wide collaboration to combat CNP fraud. Together we have developed a leading-edge framework for reducing online fraud, with broader consultation underway.
Digital Identity was once again a fast-moving space for policy and technology development in FY 18. This too is a highly complex area requiring cross-industry collaboration. We are coordinating efforts through the Australian Payments Council, including working with the Federal Government’s Digital Transformation Agency.
Looking ahead
Friedman’s ‘age of accelerations’ is as relevant to global payments as it is to our local market. Looking outside Australia, we can see an emerging interest in payments by non-traditional participants, a by-product of the ubiquity of smartphones. The most popular social media platforms – WhatsApp, Facebook, Instagram, Snapchat – all embed native payments applications and therein lies a pointer to the future. We spotted an insight into how this might play out in India last February when one million users signed on for a WhatsApp payments pilot.
As the payments horizon expands, we need to ensure the system adapts to emerging technologies such as biometrics, voice QR codes and AI. In the year ahead, we will lead an investigation into these technologies for payments in Australia. Also this year, we will lead industry collaboration to develop a national payments roadmap. This roadmap will incorporate plans to upgrade and align systems to comply with new global standards such as ISO20022, and contemplate a move to a more agile and principles based self-regulation rule book.
As busy as FY 18 was in payments, this year is shaping up to be at least as busy again - so buckle up and get ready for another ‘year of acceleration’!
[This is an exerpt of a blog by our CEO onFY18: Australian Payments - our ‘year of acceleration’. The full version is available here.]
1B2C Ecommerce Growth Rate: By Country. Source: Ecommerce Foundation 2017
2AusPayNet fraud data
AusPayNet Events
Dr Lowe - RBA Governor
Professor Caetano - Speaker on AI
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RBA Governor keynote at our Australian Payment Summit
We are delighted that the Governor of the Reserve Bank of Australia, Dr Philip Lowe, will be the keynote speaker at our Australian Payment Summit on 26 November 2018. Dr Lowe heads up a program of thought-provoking topics and emerging trends.
Following the success of our inaugural one-day Summit in 2017, this year’s event will run over two full days. The theme “Payments in the Platform Economy” highlights that data and digitisation are shaping a new era of payments super platforms with new opportunities for collaboration and innovation. Our Summit builds on these concepts to explore the implications of open data, AI, quantum computing and much more. Alongside this, it provides many opportunities for networking with local and international payments innovators and decision-makers.
Registration is now open, and discounts apply for AusPayNet members. Please get in touch for the member discount code, or if you would like to participate as a speaker or sponsor.
We look forward to seeing you at our premier industry event, at the Hyatt Regency Sydney, on 26-27 November 2018.
Artificial Intelligence
Artificial Intelligence (AI) is a widely discussed topic. Already used in fraud detection, transaction processing and the like, AI also offers great opportunities for improving customer experience.
With the potential uses for AI expanding, we brought members together in June to consider the implications for financial services and payments. Our guest speaker was Professor Tiberio Caetano, co-founder of Ambiata, Australia’s largest organisation dedicated to information communications technology research.
Professor Caetano helped shed light on some of the foundational questions about AI, starting his presentation by drawing a parallel between the evolution of human intelligence and how AI “learns”. He then explored the potential uses and limitations of AI in payments, concluding with the ethical issues facing human designers in influencing AI decisions.
More details about the presentation are available in our recent blog post. The topics for our September and October member events are Open Data and Blockchain - we hope you can join us.
Sibos in Sydney
Also in October, the Sibos conference will take place in Sydney for the first time since 2006. The theme for the 40th Sibos is “Enabling the digital economy”, which reflects the far-reaching transformation of banks and other financial service providers as they adjust to the realities of a digital world. Both our CEO, DrLeila Fourie, and our Chief Strategy Officer, Victoria Richardson, will be speaking at the event - which will take place at Sydney’s ICC.
Federal Budget 2018-19 contains measures that will impact payments in Australia including Open Banking, Combatting the Black Economy and Digital Identity.
We congratulate our new Deputy Chair and the directors taking on leadership roles.
Paul Franklin -Deputy Chair
Robert Milliner - APC Chairman
Our latest Digital Economy report reveals the growing preference for digital payments in Australia.
We are seeking feedback to help refine the industry framework to reduce CNP fraud.
Work on developing blockchain standards is on track.
Member Satisfaction
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Board update
Following recent changes to our Board, as announced last quarter, several directors have been appointed to new roles.
We would like to congratulate Paul Franklin, General Manager Payments at NAB, on his appointment as Deputy Chairman. He replaces Anne Collard, who left the Board in April 2018, following her resignation from ANZ.
We also congratulate directors taking on the following leadership roles:
Derek Weatherley, CEO of Indue Limited - Chairman of the BECS Management Committee (for direct entry)
Jackie Kallman, Head of Payments Industry at ANZ - Chairman of the HVCS Management Committee (for high value payments)
Lynda McMillan, Head of Payments Representation Institutional Banking and Markets at CBA - Chairman of the Fraud in Banking Forum
Further information on our Board can be accessed here.
New Chairman for Australian Payments Council
The Australian Payments Council (APC) has appointed a new Chairman, Robert Milliner, effective 10 September 2018.
Mr Milliner has worked extensively in global and regional business forums on major changes in economic and financial policy including the digital economy and is a highly experienced director. Among other tenures, he is currently an independent director of AusNet Services Ltd, and the Global Infrastructure Hub Ltd (a G20 initiative), Chairman of the Board of the Foundation for Young Australians and a member of the APEC Business Advisory Council.
In our role as secretariat to the Australian Payment Council, we welcome Mr Milliner and look forward to working closely with him to progress Council initiatives.
Mr Milliner replaces Mark Birrell who resigned as Chairman in June 2015, following a three-year term. We thank Mr Birrell for his leadership and direction, and wish him well.
Further information on the APC Board is available here.
Digital payments continue to thrive
Our June 2018Digital Economyreport shows that Australia’s shift to a digital economy is accelerating, with digital payments increasing rapidly while cash and cheque use decline.
Consumers made some 23 million transactions each day in 2017, which translates to an annual total of 8.3 billion transactions. This compares to 4.8 billion transactions in 2012.
The growing consumer preference for digital payments is further reflected in the rapid decline in cheque use, and ATM withdrawals, which together accounted for less than two million transactions a day in 2017. Cheques plummeted 19.7% on the previous year dropping to an annual total of 89.7 million, while ATM withdrawals declined 5.9% to 610.1 million.
Our ninth Digital Economy report and accompanying infographic are available here.
An industry framework for tackling online card fraud
Collaboration is critical to tackling card-not-present (CNP) fraud. Following on from the accelerator event held jointly with the Reserve Bank of Australia in February this year, AusPayNet has been working to document the industry framework to reduce CNP fraud, with assistance from the consulting firm, InnoPay.
Implementing a framework to reduce CNP fraud is important because CNP fraud now accounts for over 80% of card fraud in Australia. The framework is designed to reduce CNP fraud while ensuring that online card transactions continue to grow. The framework builds on a tradition of strong authentication in the Australian market (such as entering your PIN at POS), and does so in a way that has customer experience at its heart. The framework proposes making online transactions more secure, through a combination of risk-based authentication and strong customer authentication (SCA). On the basis of risk, the framework proposes exemptions from SCA for merchants with low fraud rates, for recurring transactions, for trusted parties and for certain wallets where SCA is part of the wallet design.
AusPayNet is seeking feedback from card issuers, acquirers, merchants and payment schemes to help us refine the framework. Stakeholders who attended the Accelerator forum in February were invited to attend workshops held in Brisbane, Melbourne and Sydney during July to provide feedback on the draft framework. Formal consultation with the wider payments community is scheduled to commence later this month.
Once the framework has been finalised, AusPayNet will co-ordinate implementation. It is anticipated that compliance with the framework will be managed through AusPayNet’s existing Issuer and Acquirer Community Code Set.
Standards update
AusPayNet’s Nick Cliff joined 130 participants, from 35 ISO members world-wide, for the third ISO/TC 307 (blockchain and distributed ledger technologies) plenary on 14-18 May 2018. The meeting was hosted by the British Standards Institute in London, with Standards Australia acting as Secretariat.
At the meeting, a number of working groups presented initial draft reports for internal review, including those developing standards for:
Foundations – covering reference architecture, taxonomy, ontology and interoperability
Security, Privacy and Identity
Smart Contracts
The Governance and Potential Applications working groups have also made good progress.
ISO/TC 307 expects to release its first blockchain reports within the next 12 months.
To better serve our members, each year we seek feedback on our services through a member satisfaction survey, with the results greatly helping to inform our work.
We are delighted to report that this year 89% of members are satisfied with our services, up from 84% in 2017. Our members were clear on what they thought our strategic focus should be over the next three years – managing the payments mix, emerging technology/digital disruption, fraud prevention and digital identity.
One area that they feel could be further enhanced is member communications.
Thanks to all the members who participated in the survey.
Regulatory Round-up
Policy updates for the quarter include the Black Economy Taskforce cash payment limit of $10,000, and the Consumer Data Right.
COO, Andy White - DSB advisory committee.
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Economy-wide cash payment limit
On 27 June 2018, we lodged AusPayNet’s submission to Treasury’s consultation on the Government’s proposed $10,000 Cash Limit.
One of the recommendations from the Black Economy Taskforce (BET) is the introduction of an economy-wide cash payment limit of $10,000 made to businesses for goods or services from 1 July 2019. The government in its response to the BET report agreed. On 25 May 2018, Treasury released a consultation to seek stakeholder feedback on implementation issues resulting from such a limit.
Our submission to the consultation highlighted the need for cash distribution and transfer systems to be excluded from the operation of the cash limit. We also suggested that the mandate of a $10,000 cash payment limit was an excellent opportunity for government to support industry’s work in helping all Australians transition to digital payment methods.
Treasury’s consultation paper, and our submission are available here.
Consumer Data Right
Our Chief Operating Officer, Andy White, is a member of the committee advising the Data Standards Body to the Consumer Data Right (CDR), as recently announced by the CSIRO.
The CDR is an economy-wide right to data, which will be rolled-out first in banking - via open banking - followed by the energy and telecommunications sectors. The Government has accepted in large the recommendations of the Treasury Open Banking Review. There is a phased timeframe for implementation of open banking. The four major banks will be required to comply by 1 July 2019 for credit and debit card, deposit and transaction accounts. Smaller institutions will have an additional 12 months. The ACCC will be responsible for determining the detail of phasing, and have the flexibility to adjust the implementation deadlines.
The CSIRO’s Data61 is leading the development of technical standards for the CDR, as the Data Standards Body (DSB). Its advisory committee includes representatives from data holders, data recipients and consumer and privacy advocates. Andy White is participating in a personal capacity.
“AusPayNet is skilled in supporting secure innovation in payments; I look forward to applying those skills to the DSB’s work to develop open standards to give Australians greater control over their data,” says Andy.
The Government has committed $45m over four years towards the implementation of the CDR. This includes funding to the Australian Competition and Consumer Commission, Office of the Australian Information Commissioner, and the CSIRO for various parts of the implementation.
Registrations are now open. Following the sell-out success of our inaugural Summit in 2017, this year’s event has been extended to two days and is themed: 'Payments in the Platform Economy'.
Our COO, Andy White, joins the Opening Power Hour panel to talk about the NPP. The Summit will explore the drivers for faster payments along with opportunities and challenges.
