A Tipping Point for Australian Payments
For more than 20 years, Australian payment regulators and industry participants have set the agenda for domestic payment-system development.
This collaboration has been the basis for innovation in the Australian payments sector during a time of accelerating change in technology and customer expectations. But, the increasing size of the network, pace of innovation and complexity of delivery means we have likely reached a tipping point for the way we govern and deliver payments in Australia.
"With rapid advances in technology, higher customer expectations and consistent threat of financial crime, concerted effort must be taken to advance the integrity of the payments system"
The continued demand for innovation is challenged by increased risk and downward pressure on cost. While short-term investment stretches and cost-cutting targets are achievable, these measures will ultimately fail unless we replace legacy systems with newer, more secure, resilient, and efficient platforms.
If we don’t address the technical debt of the multiple overlapping payment platforms that has evolved over time, we risk being weighed down by high cost, greater risk, and consumer confusion, instead of confidently building a competitive system that meets our social and economic needs.
The provision of low-cost payments services has been a critical factor in the development of competitive commercial offerings. Maintaining reasonable cost for payments is important, but policy should also consider the need to ensure payments and associated data are protected, along with consumer choice and convenience. A focus on costs alone risks downplaying the integrity of the payments system which requires an accessible, resilient, and trusted network.
For the sector to best serve our customers, we must factor in not only the payment experience, but the integrity of the end-to-end service. In addition to providing a highly accessible and convenient payment capability, the payments system must also address issues of privacy, security, abuse, and financial crime. The complex mix of economic and social priorities requires a level of collaboration and knowledge sharing across the network.
As technology advances, so do scammers. In 2020, Australians lost over $850 million to scams and made over 400,000 scam reports in total. According to the ACCC Scam watch data, the scams causing the most financial harm to Australians in 2020 involved investment, romance, and business email compromise.
In response, the Australian Payments Network, the Australian Banking Association, Australian Financial Crimes Exchange and IDCARE, Australia and New Zealand’s national identity and cyber support service, will work together to counteract payment scams targeting Australian consumers and businesses.
This collaboration will take a whole-of-economy approach to scams, moving the focus ‘upstream’ to scammers targeting consumers, and supporting repeat scam victims.
Furthermore, we cannot afford to think about payments domestically without considering the global landscape. Technology advancements are global, and fraudsters and scammers work internationally.
Digital assets and currencies move easily across borders and outside of the existing systems. The old ways of ensuring the system is secure, reliable, stable, equitable and convenient will not necessarily continue to work.
As each jurisdiction considers its treatment of digital assets and how they are regulated, it must also engage across borders on protection and clear liability frameworks that may be applied regardless of where the parties to the transactions reside.
With rapid advances in technology, higher customer expectations and consistent threat of financial crime, concerted effort must be taken to advance the integrity of the payments system.
The industry is moving to 24/7 payment processing, richer payment data, real-time domestic and cross-border settlement. Solutions like PayID and BPAY will enable confirmation of payee details, going a long way to tackle business email compromise scams.
Screening for AML/CTF compliance will improve with the richer ISO20022 message standards, with further uplift potential to come from emerging digital identity solutions. A government-led transformation of the Australian payments system, alongside its strategy for an open-data economy, will seek to take Australian payments to the next level.
But continued development of new systems without decommissioning old one will increase complexity and risk, and deplete our ability to invest in new, future-proofed solutions. If the industry continues to enhance modern infrastructure like the New Payments Platform, consumers and businesses may see less value in using cheque or direct-entry systems.
Newer alternatives will offer higher protection from fraud, faster access to funds, richer data, and greater levels of visibility and control. And efficiencies gained will free up resources necessary to uplift Australia’s payments system, for the benefit of all Australians.