A formal review of Australia’s payment systems infrastructure has called for the Treasury to take on a more active leadership role within the sector.
Concluding that payments now perform a vital role in enabling customers and businesses to engage with Australia’s digital economy, the report said that actors and regulators in the payments system needed to be better aligned in order to ensure better outcomes.
All in all, the report made 15 recommendations designed to improve alignment and outcomes in the sector.
The most significant of these was the enshrining of a greater role for the federal Treasury in the payments ecosystem, and the introduction of new powers for the current federal Treasurer, Josh Frydenberg.
“Given the increased complexity of payments issues and the acceleration of financial innovation, enhanced leadership, vision and oversight is needed in the payments ecosystem,” the report said.
As part of its newly expanded role in Australia’s payment ecosystem, the report said that the Treasury needed to be “strengthened with the necessary skills, capabilities and resources to perform this function effectively.”
The most significant detail here is a proposed power to designate payments systems in situations where the Treasurer deems that it is in the national interest to do so.
Under the current rules, this power rests with the Reserve Bank of Australia.
“Governments should use the payment systems that best serve the needs of Australians. The government should leverage its position as a large user of the payment ecosystem to support broader payments policy objectives,” the report said.
This power would be fairly broad, encompassing the ability to direct regulators and give binding instructions to both operators and participants within Australia’s payments systems.
On paper, this power could be used to designate digital wallet providers like Apple and Google as payment systems. Then, at this point, they would become subject to existing payment system regulations and directions from the federal Treasurer.
According to the report, “the purpose of this direction power is to provide the flexibility needed to address the challenges of the dynamic future of Australia’s payment ecosystem with strong governance around its use.”
The report also called on the government to develop a strategic plan for the sector in collaboration with industry, regulators and representatives of businesses and consumer interests.
“The plan should provide certainty on policy priorities and strategic directions for the payments ecosystem, while being adaptable to future challenges and opportunities,” the report said.
To help with the development of this strategic plan, the report recommended the Treasury delegate part of their expanded remit to a new payments industry convener.
This figure would collaborate with stakeholders to identify key issues, coordinate responses and provide strategic advice to the Treasury on payment-related matters.
Alongside this strategic plan, the report also recommended additional education around payments for consumers and business, a better alignment of both industry standards and regulatory approaches and the introduction of a single-tiered payments licensing framework.
“Applicants should be able to apply for this payments licence solely through ASIC, without the need to go through multiple regulators,” the report said.
Looking forward, the report said that future considerations should be given to how Australia’s payments system interacts with emerging developments in the space like digital wallets, cryptocurrencies, CBDCs and buy now, pay later apps.
Following the release of the report, the federal Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume emphasised that the payments ecosystem is in the midst of rapid change.
“New technology, business models and participants are transforming the old payments system. This is providing increased convenience and opportunities but also giving rise to greater complexity and new risks,” she said.
In a joint statement with Mr Frydenberg, Ms Hume said that promoting a more innovative and robust payments environment “is part of the Morrison Government’s plan to build a more competitive and productive economy as we recover from the COVID‑19 crisis.”
“The government will carefully consider the recommendations and observations made in the review,” she said.
A statement from the federal Treasury on the report confirmed that a consultation on the recommendations will be conducted before the department releases an official response later this year.
