Australian Payments Council 2019 Consultation - Payments in a global, digital world
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Australian Payments Council
2019 Consultation
Payments in a global, digital world
Review of the Australian Payments Plan
Contents
About the Consultation 3
Australian Payments in Global Context 4
• Since 2015, Australia’s payment landscape has continued to rapidly evolve
• Australian payment trends are part of a broader global evolution
• Global platforms have also become a significant force in payments
Objectives for the Australian Payments system 9
• The Payments Council is renewing its strategic agenda
• Your insight will help shape the future of payments
• The payments system must support a diverse range of users
• An effective payments system is reliable, efficient, accessible and adaptable
• Digitisation is changing the way we pay
Collaborative Industry Work Since 2015 14
• The 2015 plan provided a strategic vision for the payments industry
• This vision has helped shape collaborative industry work
• Other industry initiatives are also driving change
A Renewed Vision for Payments 17
• Areas for industry collaboration
• How to have your say
Appendices 21
• Glossary
• What is ‘fintech’?
• References
2 / Australian Payments Council
About the
Consultation
The payments system plays a foundational role in our
economy, as part of our financial system infrastructure. It
includes the instruments, rules and systems that govern
the way people transfer funds to and from each other.
With globalised commerce requiring a global payments system, other countries
provide glimpses into possible futures, suggest alternative paths forward and
influence our own payments system. The future of Australian payments has local,
regional and global dimensions.
In 2015, the Australian Payments Plan identified that the way we pay was rapidly
evolving. Since then, these trends have accelerated.
Alongside evolving technology and customer expectation, regulation plays a key
role in shaping the payments system. Recently, the Australian Government has
explored areas such as:
• O
pen Data: The Government has announced open banking will commence
1 July 2019, as part of an economy-wide Consumer Data Right;1
• A
New Framework for Stored Value: Government is reviewing how it regulates
stored value facilities. A simplified regime may encourage more service providers
to enter the payments industry;2
• T
he Role of Cash in the Economy: The Black Economy Taskforce recommended
a cash payment limit of $10,000 for many transactions. If adopted, this may
impact the payments mix in the economy;3
To renew our strategic vision for the payments system, we are seeking views from
a range of stakeholders – businesses, NGOs, government and consumers. Your
feedback will help ensure the payments system continues to meet the changing
needs of Australians.
We welcome written responses and will also be facilitating consultation workshops in
Sydney and Melbourne.
The deadline for written submissions is 5pm, Friday 22 February 2019. Information
on how to make a submission is provided on page 20.
Australian Payments Council 2019 Consultation Payments in a global, digital world / 3
8.8
AMOUNT
CHEQUE DATE
2015
PURPOSE
Direct Entry
2018201
ADDRESS / CITY / STATE / ZIP CODE
0152 - 635486565 - 4526589 -60045
152.5
FROM
Billion
-47%
AMOUNT
8.8
PURPOSE
2018
0152 - 635486565 - 4526589 -60045
2015
6.2 Billion
Million
80.3 Billion
2015
CREDIT
CARD 6.2
Million Billion
➧ ➧
DEBIT CARD CRED
IT CARD
CHEQUE DATE
42%
Australian Payments in Global Context
DEBIT CARD
ADDRESS / CITY / STATE / ZIP CODE
18
42%
FROM
AMOUNT
CHEQUE DATE
15
20
PURPOSE
Direct Entry
ADDRESS / CITY / STATE / ZIP CODE
0152 - 635486565 - 4526589 -60045
FROM
20
3.9
AMOUNT
PURPOSE
3.1
0152 - 635486565 - 4526589 -60045
Billion Billion
Cash Usage
➧
Cash Usage
18
Since 2015, Australia’s payment landscape
25%
15
20
20
3.1 3.9 2013
2013
Cheques
has continued to rapidly evolve
Billion
Direct Entry 47
47
Billion
%%
➧
Cheques
25 -21.3
-21.3%% % 2015
152.5
2016-47%
2016 2018
Million
80.3
2015 37
37%% Million
152.5 -47%
18
CHEQUE DATE
2018
ADDRESS / CITY / STATE / ZIP CODE
80.3 15
FROM
20
Card Payments
Million
AMOUNT
PURPOSE
CHEQUE DATE
ADDRESS / CITY / STATE / ZIP CODE
0152 - 635486565 - 4526589 -60045
20
Australians continue to adopt digital payment methods
FROM
3.9
Million
AMOUNT
PURPOSE
3.1
0152 - 635486565 - 4526589 -60045
CHEQUE DATE
ADDRESS / CITY / STATE / ZIP CODE
FROM
AMOUNT
CHEQUE DATE
Billion
PURPOSE
ADDRESS / CITY / STATE / ZIP CODE
0 1 5 2 - 635486565 - 4526589 - 60045
Billion Card Payments Australians who hold
hold no
no cash
cashat
ataagiven
giventim
FROM
Australians
Direct entrywho ti
AMOUNT
Cheque use continues Cheques
PURPOSE
to drop transactions
0152 - 635486565 - 4 5 2 6 5 8 9 - 6 0 0 4 5
➧
25% continue to grow
Direct Entry
2018
2015 8.8
Direct Entry 152.5 -47% 2018 Billion
80.3
20 2018
Million 8.8
2015
6.2
18
Billion
15
Billion
20
Million
CREDIT
2015
CHEQUE CARD
6.2 3.9
3.1
DATE
ADDRESS / CITY / STATE / ZIP CODE
➧
Billion
18
DEBIT CARD
Source: RBA
FROM
CREDIT
Billion
15
20
AMOUNT
CHEQUE
CARD
42% Billion
DATE
PURPOSE
20
ADDRESS / CITY / STATE / ZIP CODE
Payment
0152 - 635486565 - 4526589 -60045
3.9
➧
➧
DEBIT CARD
FROM
Statistics3.1
AMOUNT
PURPOSE
42% 25%
Card Payments
0152 - 635486565 - 4526589 -60045
Billion Billion
➧
25% Mobile Payments
Card transactions are still growing Mobile Payments
2018
Cash Usage
Cash Usage
2018
Direct Entry Source:PAYRBA Payment Statistics
Card Payments
2018
8.8 PAY
Billion 2013
Card Payments 2013
2015
6.2 47% More people are
Billion 47% %
-21.3
18
CREDIT
shopping online
-21.342%
CARD
2018
15
8.8
20
Source: RBA 2016
20
➧
DEBIT CARD
Internet Commerce Billion
Payment
3.1 3.9 %
2016
2015
6.2
2018
8.8
Statistics Billion
Billion 37% Billion
Internet Commerce
CREDIT
Billion CARD
37%
2015
6.2
➧
DEBIT CARD
➧
CREDIT Billion 42%
CARD
25% 2016
➧
DEBIT CARD
42%
$20 Billion
Cash continues to fall
2016
32
2018
Australians who hold no$20
cash at a given time
%
Cash Usage $26.5
Billion
Billion
Cash
2018 Usage
1 inAustralians
5
CONSUMER PAYMENTS
Cash
MADEUsage
IN CASH who hold no cash at a given32
time
% $26.5 Billion
2013 2013
AUSTRALIANS
2013
OVER THE AGE 47%
Card
47%Payments
OF 18 HOLD NO -21.3
Source:%NAB Online Retail Sales Index
47%
-21.3% -21.3% CASH AT ANY
(June 2016, June 2018)
2016
Australians using fintech
2016 2016 GIVEN TIME 37%basis
on a regular
37%
37% Australians using fintech
Fintech is maturing 4
2017
on a regular basis
2018
8.8
Source: RBA 2016 Consumer
Billion
Mobile Payments
Source: RBA 2016 Consumer
Australians who hold no cash at a given tim 37%
2015
Payment Survey
Australians who hold no cash at a given time
Payment Survey 6.2 2017
37%
Billion
CRED IT CAR 2015
2018
13%
D
➧
Australians who hold no cash42%atPAYa given time
DEBIT CARD
Mobile
Consumers are starting to adopt mobile Payments
payments
2015
13%
11.5%
2018
OF AUSTRALIANS Source: EY 2017 Fintech Adoption Index
HAVE USED CARDLESS/MOBILE
Cash Usage
CONTACTLESS PAYMENTS
PAY
Internet Commerce Mobile Payments
Mobile Payments
Source: Roy Morgan, Digital Payment Solutions Currency Report
2013
2018
2018
47% 2016
Note: RBA Payment Statistics are for Financial Years
PAY
4 / Australian
PAY Payments Council
-21.3% $20 Billion
2016 Internet Commerce
32%
2018
$26.5 Billion
Technological developments and new business models are underpinning this consumer shift
New Payments Platform Smartphones
65+ 65+
78%
78%
LAUNCHED IN 2018, AUSTRALIA’S
FAST PAYMENTS SYSTEM IS ALREADY
SEEING
400,000 IN 2017, 88% OF AUSTRALIANS
OWNED A SMARTPHONE
transactions a day. UP 80%
INCLUDING 78% OF
AUSTRALIANS OVER 65
In 2017, 88% of Australians owned a smartphone including 78% of Australians over 65.
in 2017-18
Source: NPP Australia Limited Source: Deloitte 2017 Mobile Consumer Survey
In 2017, 88% of Australians owned a smartphone including 78% of Australians over 65.
Fintech Investment Contactless
Over CRED
IT CA
RD
$ UP 80%
$US830min 2018
WAS INVESTED IN
UP 80%
in 2017-18
AUSTRALIAN FINTECH
BETWEEN 2016 AND 82% OF AUSTRALIANS
JULY 2018. USE CONTACTLESS AT
LEAST ONCE A WEEK
UP 80%
Source: KPMG5 Source: Publicly reported card scheme data 2017
in 2017-18
Wearables 5G
COMMERCIAL 5G SERVICES
ARE SCHEDULED TO COME
IN THE FIRST HALF OF 2018,
ONLINE IN AUSTRALIA IN 2019.
SMARTWATCH SALES
grew 80%
$ 5G
UP 80% UP 80%
YEAR-ON-YEAR, in 2018 in 2017-18
TO 680,000 UNITS.
Source: Telsyte6 Source: Telsyte7
Australian Payments Council 2019 Consultation Payments in a global, digital world / 5Australian payment trends are part
of a broader global evolution
European Union
Scandinavia • Sectoral direction heavily influenced by regulation.8
• PSD2 has introduced open data with payment initiation.
• Cheques accounted for
• GDPR provides a high-level of privacy protection.
less than 0.1% of non-cash
payments in 2014.9
• In Sweden, cash is used
in less than 20% of
in-store transactions.10
Given the decline of cash,
the Riksbank is exploring a
digitally-issued eKrona.11
United Kingdom
• World first open banking
system debuted in 2018.12
• Card payments surpassed
cash payments in 2017.13
• The Bank of England is
consulting on adopting
ISO 20022 for UK payments.14
India South-East Asia
Africa
• Leading world adoption of • Chinese tech firms are
• The imperative to address non-cash payment methods.16 establishing their presence in
under-banking is driving retail payments.
mobile payments innovation. • Second highest rate of fintech
adoption, at 52%.17 • MAS has released a new law
• M-PESA is available in ten to simplify and consolidate
markets with around 29.5m • Demonetisation in 2016 sought
payments regulation.18
active customers.15 to reduce the black economy
and shift consumers to electronic • HKMA has issued guidelines
payments. for virtual banks.19
6 / Australian Payments CouncilGlobal Trends
• Mobile operators are projected to
invest $500bn worldwide in 2018-
2020, increasing 5G coverage to
11% of the world’s population.24
• Led by developing markets, global
non-cash transactions rose from
438bn in 2015 to a projected
597bn in 2018.25
• Cash-in-circulation continues to
rise, indicating it may be used as a
value store rather than a payment
instrument.26
• While crypto-currencies have not
seen wide adoption, blockchain
continues to be explored.
• Global fintech investment reached
$US58bn in the first half of 2018,
up from $US11.6bn in the first half
of 2017.27
• SWIFT is leading payment system
upgrades to ISO 20022.
• FATF continues to develop
best-practice anti-terrorist
laws and regulations.
• ISO/PCI continue to evolve
standards for payments.
United States
China • Comparatively high reliance on cheques.
• Retail payment innovation is driven by tech firms, • Private sector offerings, such as Venmo,
which are replacing cards and cash with mobile are driving innovation in retail payments.
app payments. • US tech firms are entering the payments space.
• China possesses 42% of global e-commerce and • Adoption of ISO 20022 for high-value clearing
11 times more mobile payments than the US.20 systems to be completed by 2023.23
• First half of 2018 saw over $14.4bn fintech
investment, principally Ant Financial.21
• China has the highest global fintech adoption
rate, at 69%.22
Australian Payments Council 2019 Consultation Payments in a global, digital world / 7Global platforms have also become
a significant force in payments
eCommerce Accommodation
Transport
Entertainment
Payments
Devices
Social Interaction
Cloud and
Business Services
Source: AusPayNet, A.T. Kearney 28
Consultation Questions
1. What are your views on the trends outlined on pages 4 to 8?
Are there other factors or issues to consider?
2. What are some other interesting international trends?
3. Is digitisation changing the way we view payments?
8 / Australian Payments CouncilObjectives for the Australian
Payments system
The Payments Council is renewing its strategic agenda
The Australian The Australian Payments Council (APC) was formed in 2014 as the strategic
coordination body for the Australian payments industry. Our role is to help ensure
Payments Council the Australian payments system continues to meet changing customer needs with
innovative, secure and competitive payment services.
The APC provides a forum for the Payments System Board (PSB) to consult directly
with industry. The PSB is one of two boards of the Reserve Bank of Australia (RBA),
and is responsible for the RBA’s payments system policy. This arrangement is
formalised in a Memorandum of Understanding established in August 2015.29 The
direct engagement with the PSB is an important part of the Council’s role and the
two parties convene a meeting in August each year.
The Australian The Australian Payments Plan was released in December 2015. Created in
consultation with consumers, government bodies, academics and business, the
Payments Plan plan outlined a roadmap for industry collaboration to ensure that our world-class
payments system continues to meet the changing needs of Australians. Over the
last three years, the plan has guided the strategic thinking of the APC in areas such
as digital identity, open data and the changing payments mix.
The Consultation Process
The current plan recommended a triennial review, the first to take place in 2018.
Given the pace of change, a new strategic agenda will help ensure our payments
system continues to effectively support the needs of all users. We are seeking
written submissions, and will facilitate roundtable sessions in the first half of 2019.
This consultation is your opportunity to help shape the next stage. Information on
how to make a submission is contained at the end of this document.
Concurrent Consultations
In the first half of 2019, the RBA and Australian Payments Network (AusPayNet)
will be consulting on specific aspects of the payments system’s future. These
consultations will run at the same time as this review. AusPayNet’s work will create
a vision and roadmap for Australia’s payment rails, while the RBA will be seeking
feedback on the timing, scope, approach and other strategic decisions for migrating
the RITS ecosystem to ISO 20022.
The intention of this review is not to duplicate the work of other bodies, but look to
identify common strategic issues. We will share any submissions received during
this review which relate to those reviews.
Australian Payments Council 2019 Consultation Payments in a global, digital world / 9Your insights will help shape
the future of payments
Your insights and perspective will help us shape our new strategic vision and help
ensure our payments system continues to meet the changing needs of Australians.
We welcome feedback from all users of the payments system, including both
general feedback on issues related to our strategic coordination role and specific
responses to the consultation questions within this document:
Australian Payments in Global Context
1. What are your views on the trends outlined on pages 4 to 8?
Are there other factors or issues to consider?
2. What are some other interesting international trends?
3. Is digitisation changing the way we view payments?
Objectives for the Australian Payments System
4. Within the four user-groups (individuals, business, community groups and
government), what sub-groupings have special needs or requirements that
we should consider?
5. Do Resilience, Efficiency, Accessibility and Adaptability remain appropriate
characteristics for our vision of an effective payments system?
6. Should digitisation change our vision for an effective payments system?
If so, how?
Areas for Industry Collaboration
7. Do the identified topics represent appropriate focus areas for the APC, given our
vision of an effective payment system?
8. Are there other potential focus areas that we have not identified?
9. How do you think we should prioritise our work within these focus areas?
10. Can you provide any information on emerging technologies that may impact
our work?
11. Can you provide any information on any other ongoing strategic work within
these focus areas? Including industry, government, academia, NGOs, etc.?
10 / Australian Payments CouncilThe payments system must support
a diverse range of users
Users of the payments system are grouped into four categories:
An individual’s habits and needs may vary based on
Individuals the basis of age, location, language spoken at home or
disability.
Community groups include charities, education institutions
Community
and recreational clubs. They may include large non-
Groups
governmental organisations, or small local sporting clubs.
Business range in size from micro-businesses through to
large multinational corporations. Businesses may operate
Businesses
onshore or internationally. Increasingly, B2B and B2C are
both moving online.
Local councils, state and federal governments each need
Government
to accept payments and distribute entitlements.
In turn, these users are supported by four groups of stakeholders:
Banks and other payment organisations who offer services
Service Providers
to payment users.
Operators provide the payment networks that link service
providers and users with each other. Examples include
Operators
American Express, BPAY, Diners Club, eftpos, Mastercard,
Union Pay and Visa.
Infrastructure providers administer common elements of the
Infrastructure payments system, often used by multiple payment networks
Providers and services, such as the Reserve Bank of Australia and
the New Payments Platform.
The Australian Government has reponsibility for the banking
Regulators and and financial system. The RBA is the primary regulator of
Government the payments system, with ASIC, APRA and the ACCC also
holding responsibility for some elements.
Consultation Question
4. Within the four user-groups (individuals, business, community groups and
government), what sub-groupings have special needs or requirements that
we should consider?
Australian Payments Council 2019 Consultation Payments in a global, digital world / 11An effective payments system is resilient,
efficient, accessible and adaptable
To accommodate this diverse set of needs, the APC is guided by a vision of a
payments system that demonstrates four desirable characteristics:
Payments infrastructure is certain and predictable and
provides a basis for delivery of well-defined and valued
Stability
payment services to users through operators and service
providers.
Resilience Payment services are available when users and service
Reliability
providers want them, and outages are minimised.
The system is structured to protect against unauthorised
Security
access to value and data.
Resource Finite system resources are allocated for maximum
Allocation stakeholder value.
Operators and service providers are able to develop and
Sustainability
maintain sustainable business models.
Efficiency
Standardised, automated processes and straight-through
Integration
processing minimise cost and risk.
Liquidity Money circulates rapidly at minimal friction cost.
Consumers and businesses have access to a range of
Ease of Use user-friendly payment services so they can choose how to
make and receive payments.
The payments system is widely accessible amongst users,
Accessibility Reach
so that payers can reach payees.
Payment service providers and operators have equitable
Competitiveness access to underlying infrastructure so as to promote
competition.
The payments system is flexible to accommodate new
Openness
business models, business strategies and technologies.
Innovation in payment networks and payment services is
Innovation
encouraged, so that changing user needs are met over time.
Adaptability Where there are strong network effects, governance
Collaboration frameworks encourage operators and service providers to
cooperate to bring about payments system improvements.
Regulation (including self-regulation and industry
Regulatory
standards) is clear, up to date and supportive of both
Certainty
cooperation and competition.
Consultation Question
5. Do Resilience, Efficiency, Accessibility and Adaptability remain appropriate
characteristics for our vision of an effective payments system?
12 / Australian Payments CouncilDigitisation is changing the way we pay
As the payments system becomes more digital, new challenges and opportunities
will emerge:
• The resilience of the payments system will become more dependent on
electronic systems and people will continue to move away from traditional
payment methods that once served as ‘back-ups’
• Digitisation will improve efficiency through innovation and replacing physical
processes
• While accessibility will be enhanced, it is important to ensure appropriate
payment options are retained in the transition to digital payments
• To maintain adaptability, regulation and self-regulation will need to accommodate
and support the pace of innovation
Consultation Question
6. Should digitisation change our vision for an effective payments system? If so, how?
Australian Payments Council 2019 Consultation Payments in a global, digital world / 13Collaborative Industry Work Since 2015
The 2015 plan provided a strategic
vision for the payments industry
In 2015, the APC identified that industry was already responding well to Australia’s
changing payment needs. Globally, Australia has an advanced payments system
and initiatives (such as the then-recently announced NPP) were underway to ensure
we continued to lead international best practice.
Within three themes, the APC identified areas not covered by existing initiatives
that required further exploration, where there was capacity to complement existing
industry work:
The APC committed to ensure that the consumer-led decline of cash and cheques
is appropriately managed, by developing strategies on The Transition Away from
Managing the Cheques and A Less-Cash Society.
Payments Mix The changing payments mix may require changing existing payments system
frameworks, with the APC identifying a need to Review the Future of Existing
Payment Systems.
Given the rapid rise in online transactions, collaborative industry efforts to develop
and implement effective anti-fraud measures were already advanced.
Progressing work in Digital Identity and Data Management would see the APC
take an active role in the development of a national identity framework that builds
Security and Trust on the industry’s expertise and payments innovation.
Given that the Financial System Inquiry had recently recommended formal
mechanisms be developed for public-private information sharing, the plan
suggested that the APC Lead Work on Cyber-Security, representing the
payments industry in discussions with Government.
The plan found the APC was in a strong position to assess developments in
payments and to promote an environment where innovation and community
Enabling the Future benefits can flourish. The APC recommended that it Enable Technology
Innovation by regularly assessing the state of innovation, assessing impacts and
recommending areas for further strategic consideration.
14 / Australian Payments CouncilThis vision has helped shape
collaborative industry work
The APC researched community attitudes towards the decline of cheques. We
spoke to dozens of consumer groups, representative organisations, industry,
regulators and individuals; and facilitated industry workshops to consider these
findings.
In a speech in November 2018, the RBA Governor noted this trend, stating “it
The Transition Away will be appropriate at some point to wind up the cheque system”.30 The APC’s
from Cheques research found that cheque use is in long-term decline and, at a point in the future,
cheques will not be part of the payment landscape.
The resulting report31 made recommendations to help ensure appropriate payment
services are available to users of the Australian payments system, prior to the
removal of cheques. Following acceptance of the report, implementation passed to
the AusPayNet.
The APC researched global approaches to digital identity and created an Action
Plan to create a trust framework that will support portable, economy-wide digital
identity.
Eighteen organisations from the APC and the wider community including the
Digital Identity Digital Transformation Agency (DTA) are now delivering on this Action Plan and
have selected a model that will lead to the creation of an open and contestable
framework to support a wide range of interoperable identity services.
We anticipate that the development of a digital identity trust framework will be
finalised by mid-2019.
The APC developed a set of high-level principles for data-sharing, facilitated
international learnings and held an open data hackathon.
On 9 May 2018, the Australian Government announced it will introduce an economy-
Data Management wide ‘Consumer Data Right’.
The APC is pleased to have led early strategic thinking. Given Government’s
announcement, this has moved from strategic policy development to operational
implementation and the APC is no longer taking an active role.
Working with members of the APC and payments community, we identified the
core needs of the payments community as: (1) awareness generation, (2) timely
sharing of actionable intelligence, and (3) development and testing of incident
Cyber-Security management procedures. We have worked closely with government on how we
can jointly address these needs.
The APC is in the process of agreeing requirements for an information sharing
framework, which will form the basis of future collaboration.
Australian Payments Council 2019 Consultation Payments in a global, digital world / 15Other industry initiatives are also driving change
Other bodies are progressing important initiatives within payments. Some of this
work includes areas identified in the 2015 Plan and includes work by by industry
and Government.
Industry:
• The Australian Banking Association is leading industry technical work on the
CDR standards.
• AusPayNet is undertaking work to create a vision and roadmap for Australia’s
payment clearing systems, and is investigating the impact of new technologies.
• NPP Australia and SWIFT, in collaboration with a number of participating
financial institutions, are partnering to trial Australia-bound cross-border real-time
payments.
Government:
• The Productivity Commission Report, Data Availability and Use, recommended
the creation of the CDR.
• Following on from this, a Treasury Review, Open Banking in Australia, explored
and recommended an appropriate regulatory model, and the Government has
announced a phased implementation date starting in July 2019.
• Treasury investigated the taxation implications of the decline of cash, through the
Black Economy Taskforce.
• The Final Report of the Productivity Commission inquiry into Competition in
the Australian Financial System investigated and made recommendations into
financial sector regulation, including the payments system.
• The Council of Financial Regulators has commenced a Review of Retail
Payments Regulation: Stored Value Facilities.
• The Digital Transformation Agency is delivering a digital identity program, which
includes a trusted digital identity framework and the creation of a digital identity
provider, myGovID, to support convenient and secure access to government
services. The DTA is also collaborating with the Payments Council on this topic.
16 / Australian Payments CouncilA Renewed Vision for Payments
Areas for industry collaboration
This section outlines challenges that have emerged or intensified over the last three
years, and suggests new ideas for industry collaboration. We want to identify areas
that provide the greatest strategic value, whether in the form of project work or
ongoing strategic discussion. In doing so, we will take into account:
• Is there potential for strategic collaboration that supports market competition and
innovation?
• Would the APC be duplicating work already underway elsewhere?
• Is the area suited to industry collaboration, rather than market competition?
The following pages outline some initial thoughts on new focus areas. We welcome
your feedback on these areas, and also your views on any other areas.
The 2015 plan identified the decline of cash as a focus area, most recently
highlighted in November 2018 by the RBA Governor.32 There is scope to explore
the broader strategic implications of the decline of cash as a retail payment
method.
A paper by the International Monetary Fund (IMF)33 explored the concept of central
banks creating a ‘widely accessible digital form of fiat money that could be legal
tender’. This considered how digital currencies could extend the attributes of
cash to the digital world. While the paper concluded it was too early to draw firm
conclusions, it suggested that this may vary given the circumstances of individual
Decline of Cash countries. Potential benefits of a central bank digital currency may include
mimicking the benefits of cash in privacy and resilience.
Potential Output:
• Examine alternatives to cash that fulfil a similar role in the payments system
• Examine the role of cash in payments system resilience
• Examine the impact of the decline of cash on remaining cash-users in Australia
• Create an index to measure the decline of cash and payments system
digitisation
As more payments become more digital and fewer Australians carry cash, the
retail economy is becoming more reliant on electronic payment systems. There
is both an operational and strategic component to payments system resilience.
Strategically, in a world where the economy is ‘digital by default’, how should we
conceptualise systemic resilience?
Systemic Resilience
Potential Output:
• Assess stakeholder expectations of systemic resilience
and international best practice
• Develop high-level principles to guide industry and regulators
Australian Payments Council 2019 Consultation Payments in a global, digital world / 17Globally, we are now approaching 31 billion internet-connected devices. The
Internet of Things represents a vision where these devices have a level of
autonomy, including making purchases, which may present new challenges for
the identification and authentication of devices, as well as payment initiation and
confirmation.
5G, Hyper-Connectivity
and the Internet of Things
Potential Output:
• Examine the implications of these emerging trends on the payments system
• Examine privacy implications in a world of autonomous payments
While face-to-face card fraud has almost disappeared, the rise in internet
commerce has seen fraud migrate online, rising from $323m in financial year
2015 to $478m for the same period in 2018 on Australian cards. As advances in
payment systems make it quicker and easier to transfer money internationally, it
may become easier for fraudsters to move funds offshore, and harder for banks to
recover it.
AusPayNet has developed a draft framework to mitigate card-not-present (CNP)
fraud, and is consulting with the e-commerce community. The Australian Financial
Crimes Exchange (AFCX) is an independent Australian body that coordinates
efforts to combat financial and cyber crime.
Financial Crime Internationally, the G20 has positioned the Global Legal Entity Identifier (GLEI) as
an option to combat money laundering.
While there is already ongoing work within this space, there may be a strategic
element for further exploration.
Potential Output:
• Assess international trends to identify potential areas of financial crime that may
affect Australia in future
• Assess what payments system developments are providing opportunities to help
combat financial crime
• Develop a strategic industry policy to proactively respond to these areas
18 / Australian Payments CouncilConsumers and business increasingly expect that payments will operate across
borders, across platforms, across devices and across the physical/digital divide.
Global systems are needed to underpin a global economy. Historically, payments
systems were constructed on a national basis with international bodies such
as ISO, PCI and SWIFT providing standards and interoperability. However, the
WEF has identified that ‘different regulatory priorities, technological capabilities
and customer conditions are challenging the narrative of increasing financial
globalisation’.34 In an extreme case, after the introduction of the GDPR, it was
reported that some US websites blocked visitors from the EU.
New business models are emerging, with remittance providers offering new
Payment Interoperability: products to customers. As real-time payment systems come online globally,
Global and Domestic there may be scope to explore greater levels of interoperability, for example with
Dimensions countries in the South Pacific.
Concurrently, global platforms are becoming a significant force. Social media
platforms are ubiquitous throughout the world and seamless payment experiences
through social media are becoming more common.
Potential Output:
• Research international regulatory trends in financial services and privacy, to
identify if regionalisation poses risks for interoperability of Australian payments
• Assess the role for APC in establishing common data standards to ensure
payments can be easily integrated to platforms and user experiences outside of
existing banking channels
In many countries, digital innovations in payments system have helped improve
social inclusion outcomes, by bringing more people into the banking system.
Introduced in Kenya in 2007, M-PESA has proven highly effective in bringing more
people within the banking system.35
To date, much of this potential has been realised in countries with large unbanked
populations. While virtually all of the Australian population is banked,36 there
Social Inclusion may be an opportunity to explore other aspects of financial inclusion through
the payments system. Alternatively, the impact of certain trends – such as the
increased use of data analytics – could be examined.
Potential Output:
• Assess the potential for the Australian payments system to address underbanking
and financial inclusion, and identify appropriate collaborative programs
Consultation Questions
7. Do the identified topics represent appropriate focus areas for the APC, given our
vision of an effective payment system?
8. Are there other potential focus areas that we have not identified?
9. How do you think we should prioritise our work within these focus areas?
10. Can you provide any information on emerging technologies that may impact our work?
11. Can you provide any information on any other ongoing strategic work within these
focus areas? Including industry, government, academia, NGOs, etc.?
Australian Payments Council 2019 Consultation Payments in a global, digital world / 19How to have your say
Written submissions should be emailed to:
submissions@australianpaymentscouncil.com.au
Alternatively, submissions can be posted to:
Review of the Australian Payments Plan
Australian Payments Council
Level 23, 3 International Towers
300 Barangaroo Ave
SYDNEY NSW 2000
Submissions received will be reviewed by Council Members and posted on the
APC website (www.australianpaymentscouncil.com.au), though the APC reserves
the right to not post a submission it deems inappropriate. If you do not want your
submission posted on the APC website, please ensure it is clearly marked ‘non-
public’.
The deadline for written submissions is 5pm, Friday 22 February 2019.
During the consultation period, stakeholder forums will be held to discuss the issues
raised in the Consultation Paper. For more information or to discuss any aspect of
the consultation process, please email info@australianpaymentscouncil.com.au.
20 / Australian Payments CouncilAppendices
Appendix 1:
Glossary
ABA Australian Banking Association
ACCC Australian Competition and Consumer Commission
AFCX Australian Financial Crimes Exchange
APC Australian Payments Council
APRA Australian Prudential Regulation Authority
ASIC Australian Securities & Investments Commission
AusPayNet Australian Payments Network
BAT Baidu Alibaba Tencent
BIS Bank for International Settlements
CDR Consumer Data Right
CHIPS Clearing House Interbank Payments System
COBA Community-Owned Banking Association
DTA Digital Transformation Agency
EMV Europay Mastercard Visa
FATF Financial Action Task Force
FIDO Fast Identity Online
GAF Google Apple Facebook
GDPR General Data Protection Regulation
GLEI Global Legal Entity Identifier
HKMA Hong Kong Monetary Authority
ISO International Organization for Standardization
MAS Monetary Authority of Singapore
NPP New Payments Platform
NPPA NPP Australia
PCI Payment Card International
PPF Purchased Payment Facility
PSB Payments System Board
PSD2 Payment Services Directive 2
RBA Reserve Bank of Australia
RITS Reserve Bank Information and Transfer System
SWIFT Society for Worldwide Interbank Financial Telecommunications
TCH The Clearing House
W3C World Wide Web Consortium
WTO World Trade Organization
Australian Payments Council 2019 Consultation Payments in a global, digital world / 21Appendix 2:
What is ‘fintech’?
There is no single • Many definitions agree that fintech refers to firms that focus on applying
technological solutions to financial products. Traditional financial institutions are
agreed meaning rarely included, even where they have sophisticated technological offerings. The
but most definitions term was traditionally applied to small start-ups but, as the fintech industry has
matured, larger firms are also included.
of ‘fintech’ share
• FinTech Australia, the industry association, provides a short and expansive
commonalities definition, noting that fintech is short for ‘financial technology’ and ‘part of the
worldwide innovation boom’.
• The Financial Stability Board defines fintech as ‘technologically enabled financial
innovation that could result in new business models, applications, processes or
products’.
• The World Economic Forum Report Beyond Fintech defines a fintech as ‘a small,
technology‐enabled, new entrant to financial services’ and excludes ‘large
technology firms that enter financial servies’ and ‘incumbent financial institutions
who increase their focus on technology’.
• The EY 2017 FinTech Adoption Index defines a fintech as ‘an industry that
includes not only early-stage start-ups and new entrants, but also scale-ups,
maturing firms and even non-financial services firms’.
• Some definitions of fintech include large tech firms. The Roy Morgan Digital
Payment Solutions Currency Report describes Apple, Samsung and Google as
fintechs.
• Although the KPMG 2018 Fintech 100: Leading Global Fintech Innovators does
not include Google or Apple, it does list Chinese tech giant Ant Financial.
Fintechs encompass • Given the expansiveness of the definition, the fintech industry encompasses a
diverse range of services to consumers and business. Fintechs can offer entirely
a diverse range of new experiences, or can use technology to automate and enhance existing
business models business models.
• Fintechs range from automated financial advice software, budgeting and financial
management tools, lending marketplaces, payment solutions, micro-savings tools
through to challenger digital banks.
• Fintech includes several emerging specialised sub-fields. ‘Regtech’ focuses
on helping businesses utilise technology to fulfill regulatory and compliance
obligations while ‘suptech’ assists supervisory agencies in their regulatory
functions. ‘Insurtech’ focuses on the insurance industry.
22 / Australian Payments CouncilReferences
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reasury (May 2018), Government Response to the Review into Open Banking
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F
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Telsyte (August 2018), Australian Smartphone Sales Slow Ahead of 5G
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Telsyte (October 2018), Household Interest in 5G Gathers Pace
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Riksbank (October 2018), E-Krona Project, Report 2
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Australian Payments Council 2019 Consultation Payments in a global, digital world / 23You can also read
