"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 FY 18. 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 FY 18 shows a series of landmark milestones, best described as a ‘year of acceleration’.
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.
Real-time payments is just one aspect of the payments system. By no means is our work done; as I said in my last blog, ours is one of the fastest-moving industries within the economy and the acceleration of innovation in payments is both complex and widespread. The acceleration of new technologies is exponential, we’re becoming more connected, regulations are changing and new payment streams, participants and risks are emerging. Today’s payments environment may be barely recognisable in the next decade and it’s critical our payment systems adapt and remain fit for purpose.
In his book Thank You for Being Late: An Optimist’s Guide to Thriving in the Age of Accelerations, Friedman points out that it’s easy to become overwhelmed by the rate of change. I’m pleased to say the industry is thriving and embracing the challenge, with inroads made across many different fronts during the financial year.
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 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 Britannica 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 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.
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.
Friedman’s ‘age of accelerations’ is as relevant to global payments as it is to our local market. Looking outside Australia, we can see the 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.
Elsewhere, cross-border payments is fast emerging as the next frontier for the payments industry. Fuelled partly by growth in remittances and e-commerce payments and partly by an increase in global supply chains. Industry investment to date has been in domestic payments - the cross-border variety are notably slower, more costly and less transparent by comparison. The risk we face is that the closed-loop systems enabling cross-border payments evolve without consistency in governance and compliance, security and messaging formats, among other things. A collective industry effort is needed to plug these holes and ensure that the development of international payment flows aligns with Australia’s domestic rails.
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. We will also continue to assess the implications for members and the effects on consumers. 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’!
1B2C Ecommerce Growth Rate: By Country. Source: Ecommerce Foundation 2017
2AusPayNet Fraud report