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Breaking Down Australia's Payment Reform: What You Need to Know


In a move to reshape Australia's payment ecosystem, the Treasury has unveiled a trio of publications outlining the Government's strategic plan, the licensing of payment service providers, and reforms to the Payment Systems (Regulation) Act 1988 (Cth). This blog post dissects the Government's strategic plan for Australia's payments system, which sets the stage for a modern, world-class, and efficient financial landscape.


Strategic Plan for Australia's Payment System:

On June 7, 2023, the government laid out its comprehensive Strategic Plan, aiming to create a payments system that is safe, trusted, and accessible and fosters competition, innovation, and productivity across the economy. The plan revolves around five key priorities:



1. Promoting a Safe and Resilient System:

  • Addressing the rising issue of scams, the Government is committing to a long-term, coordinated approach, including establishing a National Anti-Scam Centre. The focus extends to controlling cyber risks and ensuring the security of critical infrastructure assets.

Next Steps:

  • Establish the National Anti-Scam Centre.

  • Consult on options for new industry codes.

  • Bolster consumer protections through the new payments licensing framework.

  • Release the Cyber Security Strategy 2023-2030.

  • Industry migration to the Advanced Encryption Standard by 2025.


2. Updating the Payments Regulatory Framework:

  • Payment service providers cite transparency issues and regulatory ambiguity. Treasury's Inter-Agency Payments Forum (IAPF), formed in July 2022 with RBA, APRA, ASIC, ACCC, and AUSTRAC, aims to address conflicts through continuous collaboration. Growing reliance on international debit card networks, notably Visa and Mastercard, has significantly inflated payment costs for businesses. The government's least-cost routing (LCR) initiative allows businesses to choose the most economical payment network, but only 50% of physical merchants have implemented it, prompting continued government support for RBA's efforts to boost LCR.

Next Steps:

  • Consult on updates to the PSRA and new Ministerial designation power.

  • Introduce legislation for PSRA changes and new Ministerial powers by the end of 2023.

  • Consult on the new licensing framework for payment service providers.

  • Introduce legislation for the new payments licensing regime in 2024.

  • RBA to continue to publish LCR data


3. Modernising Payments Infrastructure:

  • Acknowledging the decline of cheques and cash usage, the Government aims to remove barriers to cheque use and wind down the cheque system by 2030. Additionally, efforts are underway to modernise the Bulk Electronic Clearing System (BECS) and promote least-cost routing (LCR). The Government will prioritise the widespread adoption of PayTo-enabled consumer accounts, an alternative to direct debits in the NPP Direct Entry system, enhancing payer control over recurring payments. Following the October 2022 NPP Roadmap, the industry is expected to make PayTo available on most NPP accounts.

Next Steps:

  • Commence engagement on transitioning away from cheques.

  • Enable greater choice for Australians in payment methods.

  • Support industry-led transition away from BECS.

  • Ensure availability and adoption of LCR.

  • Monitor payment costs for small businesses.

  • Push for PayTo enablement.


4. Uplifting Competition, Productivity, and Innovation:

  • Strengthening the Consumer Data Right (CDR) framework, expanding Digital ID, and investing in digital skills are part of the plan to enhance competition and innovation. The Government also emphasises the safe and responsible deployment of AI. The Government's goal is to create 1.2 million tech-related jobs by 2030 through investments in training the domestic workforce and attracting global talent.

Next Steps:

  • Continue working on CDR framework and payments system interaction.

  • Design policy and legislative foundations for a Digital ID ecosystem.

  • Identify opportunities to build digital skills.

  • Consider recommendations on 'earn-while-you-learn' model.

  • Consult on safe and responsible AI use.


5. Maintaining Australia's Global Leadership:

  • Focused on fostering a cooperative yet effective payments system, the Government plans to hold an industry stakeholder roundtable. Cross-border payments and the potential introduction of an Australian central bank digital currency (CBDC) are also on the agenda.

Next Steps:

  • Host an industry stakeholder roundtable.

  • Enhance cross-border payments through NPP initiatives.

  • Explore linking fast payment systems with other jurisdictions.

  • Fully migrate the High-Value Clearing System to ISO20022 standard.

  • Monitor ACCC guidance on foreign currency conversion services.

  • Publish CBDC pilot outcomes and release a paper on CBDC progress.


Payment System Roadmap:

Image found on Page 36 of the strategic plan - "The Government's roadmap for Australias Payment System"


Australia's payments landscape is set for a significant overhaul, aligning with the Government's strategic plan. As the nation steers towards a modern, efficient, and globally competitive financial environment, all involved in the payments ecosystem should follow the outlined priorities and initiatives to stay ahead in this transformative journey.

 
 
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