On Wednesday 7 June 2023, the Australian Government released a strategic plan for Australia’s payments system, outlining an action plan to modernise the country’s payment infrastructure and set it up for the future.
There are five key areas to the plan: improving resilience and security; updating payments regulatory framework; modernising payments infrastructure; uplifting competition and innovations; and enhancing cross border payments, potentially via stablecoins.
Here are some of the key initiatives from the strategic plan that you need to know.
Say goodbye to cheques
According to the RBA, cheques have experienced a 90% decline in volumes in the last 10 years and account for only 0.2% of all payments. Expensive and slow compared to digital payments, cheques are still issued by certain sectors such as government entities, not-for-profits with its usage geared towards older generations and those living in remote regions.
With consideration to businesses and consumers who rely on this legacy payment method, the Government has announced its plan to phase out cheques by no later than 2030. The next step will be consultations with affected communities across the country by the end of the year.
Phasing out BECS
Another key priority in modernising Australia’s payment infrastructure is phasing out the Bulk Electronic Clearing System (BECS). BECS is a long-running electronic funds transfer system that facilitates the processing of direct entry payments.
Since the introduction of the New Payments Platform (NPP) there have been key features launched that provide significant advantages over BECS, including speed, security and richness of data.
AusPayNet is currently consulting industry participants on the future of BECS, and will come up with a transition plan by the end of 2023. Following this, Treasury will engage with relevant
government agencies and other key users of BECS bulk payments on their needs and readiness to transition away from BECS.
Prevention and protection against fraud
With $3.1 billion lost by Australians to scams in 2022, combating cyber crime is a key priority for the government. Of the various types of scams that are circulating, experts are most concerned about a Business Email Compromise (BEC), which takes place when a criminal impersonates a business or its employees via an email and asks for payments to an account the criminal controls.
In response, the government is coordinating a whole-of-industry approach by establishing a National Anti-Scam Centre that will bring together experts from government and the private sector.
The government is also looking to support and invest in new technologies to combat cyber crime, such as the confirmation of payee services, which are already enabled when customers choose to pay using the existing PayID service on the New Payments Platform.
Cross border payments
We previously talked about the Reserve Bank of Australia (RBA) and AusPayNetwork’s plans to adopt ISO 20022 by the end of 2024. This migration formally started in March 2023 with more than 11,000 institutions in over 200 countries and territories. In Australia, 50 participants have started to migrate the domestic real-time gross settlement system to ISO 20022.
Domestic payments will be fully migrated to ISO 20022 by November 2024, and cross border payments by November 2025.
The result of this migration will allow Australian consumers and businesses to benefit from faster payment times and lower costs in line with a richer, internationally harmonised payment system. One key benefit is a clearer identification of names and addresses on remittances that will allow anti-money laundering (AML) and know your customer (KYC) information to be processed more efficiently.
New licensing framework
With significant gaps in Australia’s licensing framework, a more robust, fit-for-purpose regulatory framework is needed to promote innovation, support competition and protect consumers.
The Government will update the Payment Systems (Regulation) Act 1998 (PSRA) and introduce a new payments licensing framework in 2024. With consultations underway, Australia’s regulatory reform will potentially follow the footsteps of the UK, Europe and Singapore that have their own payment licences.
Exploring the rationale for a CBDC in Australia
Australia is exploring the future of public and private digital currencies in Australia, The RBA, Treasury and the Digital Finance Cooperative Research Centre (DFCRC) have recently completed a pilot program to explore several use cases for an Australian CBDC, including for cross border payments. Novatti was selected as one of the pilot participants, where we successfully completed Australia’s first charitable donation using eAUD.