Banks and fintechs have lent their support to a new strategic plan for Australia’s payments system that was unveiled by the government on Wednesday.
The wide-ranging plan includes an update to the regulatory framework for payments; ongoing modernisation of payment options, systems and rails; and greater use of digital innovations in payments, such as Digital ID and artificial intelligence.
Treasurer Jim Chalmers said the plan recognised that digital products “are changing the way we make payments and the way businesses provide payments services."
It has five key components: improving resilience, security and supervision; making changes to payments legislation; modernising payments infrastructure; leveraging other "digital economy" innovations; and improving international currency transfers, potentially via stablecoins.
Australian Banking Association (ABA) CEO Anna Bligh welcomed the plan, stating the “strategic direction will help focus investment in payments technology and infrastructure that will benefit customers into the future.”
FinTech Australia general manager Rehan D’Almeida added in a statement that “fintech companies have been waiting years for these reforms to payments licensing to progress since they were first recommended in the Payments System Review.”
“This framework... paves the way for further innovation in fintech, which will be passed on in the form of further benefits to consumers," D’Almeida said.
“Historically, regulations were not fit-for-purpose as they rigidly restricted access to payment systems, meaning competition was slowed and innovation was frozen out.
“This latest framework rectifies this, giving a clear direction to the sector's regulators - RBA, APRA and ASIC - to allow for fair and equitable access to payment systems for compliant fintechs companies.”
Airwallex director of strategy Amelia Hamer also called the strategic plan a “welcome step” and urged the government to "act swiftly" on implementing it.
“Many of the regulations under which we operate were written in 1998 at a time when the internet barely existed, let alone the concept of a fintech," Hamer said.
“Australia is already as much as 10 years behind the United Kingdom and Singapore in delivering a fit-for-purpose regulation system for payments businesses.”
Hamer said the current system is “anti-competitive and outdated” meaning “capital and skills shifting to other markets, higher costs for Australian businesses, and ultimately less money in their coffers to train Australian staff and keep prices down for Australian consumers.”
A CBA spokesperson told iTnews the bank welcomes “the government’s announcement of a Strategic Plan and the increased certainty this brings to the payments system.”
“We are supportive of a regulatory framework that covers all participants to ensure the safety and efficiency of the payments system while also fostering innovation.
"We believe customers will be the ultimate beneficiaries, by ensuring consistent consumer protections within a modern and efficient system. We look forward to working with Treasury as they consult on the payments licensing regime. ”
Unpacking the strategy
The government made a series of announcements, a keynote speech, and opened consultations to action various parts of the plan.
Treasury opened a consultation on a portion of the regulatory change, publishing a consultation paper on the projected list of payment functions that need to be regulated.
Another consultation has been opened, calling for submissions on implementing reforms to the Payments Systems (Regulation) Act 1998.
Elsewhere, the government flagged an expansion of least-cost routing to mobile transactions by 2024; it is currently available for card-based payments.
In addition, paper cheques and associated processing will be phased out of the Australian payment system, in favour of payments initiated through the New Payments Platform. Chalmers said this would be led by AusPayNet, with an aim to make the transition "as streamlined, and inclusive as possible”.
The government also suggested aligning payments with specific digital and innovation activities happening outside the ecosystem, such as the consumer data right (CDR) framework, Digital ID, and the skills agenda.
Chalmers said the government is “confident that further innovation and productivity gains will be unlocked at the intersection between fast payments, AI and a growing digital skills base.”
“There are also some other specific things that we’re going to partner with you on to uplift productivity, innovation and competition across the economy," he said.
