The government has announced a wide-ranging modernisation of the country’s payments system, which includes an update to the Reserve Bank’s supervision framework.
In a statement on Wednesday, Treasurer Jim Chalmers explained that the Strategic Plan for Australia’s Payments System, published by Treasury, would dictate the policy objectives and priorities for the payments system, the modernisation of which, the government hopes, will ensure greater competition, innovation, and productivity.
Amid the revamp, the RBA would be granted new powers to regulate prominent payment systems, including NPP, Visa, Mastercard, and eftpos.
The central bank is now due to consult industry on the development and implementation of an updated framework.
According to the Treasurer, the changes come amid the realisation that new digital products are “changing the way we make payments” and the way businesses provide payments services.
“The government is acting to ensure Australia’s payments system remains fit for purpose now and into the future,” Mr Chalmers said.
“The plan will help coordinate action between the public and private sectors, provide certainty for industry investment, and support new entrants navigate the regulatory landscape.”
The government’s strategic plan has five components, including promoting a safe and resilient payments system; updating the payment regulatory framework; modernising payments infrastructure; uplifting competition, innovation and productivity; and making Australia a leader in global payments.
As part of its plan, the government also released two consultation papers — one proposing updates to the Payments Systems (Regulation) Act 1998 (PSRA) to address the risks posed by new payments technologies, and the other, inviting feedback on the proposed list of payments functions that would be regulated under the new licensing framework.
The first consultation paper proposes changes to ensure the RBA can regulate new and emerging payments systems, and the introduction of a new ministerial designation power that allows particular payments services or platforms that present risks of national significance to be subject to additional oversight by regulators.
Other proposed modernisations also include the phasing out of cheques by no later than 2030, and the winding down of the Bulk Electronic Clearing System, as well as the subsequent move to the New Payment Platform.
Addressing the Australian Banking Association (ABA) on Wednesday, the Treasurer spoke in detail about the five-step plan, noting that the government’s ultimate vision is to “create a modern, world‑class, and efficient payments system that is safe, trusted, and accessible”.
“In the next 12 months, we will introduce legislation to update the Payments System Regulation Act, make further progress on a new licensing regime, and partner with you on a transition plan for legacy systems,” Mr Chalmers said.
“Beyond payments, we’ll also be consulting on a licensing and custody framework for crypto assets, progressing mandatory climate risk disclosure, and undertaking new consultation with you on a comprehensive sustainable finance strategy.”
‘Current framework is out of date’
Commenting on the announced changes, Michele Bullock, deputy governor at the RBA, said that the current framework was in dire need of an update.
Speaking also at the ABA event on Wednesday, Ms Bullock said: “When I started in payments in 1998, payments, basically, were made up of people who are paying and people are receiving”.
“And then the bank for the person who was receiving and the bank for the person who was paying, and they were banks, they weren’t anyone else, they were banks. That system now is just so completely different.
“So, the current payment system framework regulation framework isn’t really fit for purpose.”
Stressing the need for new regulation, she explained the payments system has evolved from something that is taken for granted to something that needs to be nurtured.
“I think the payment system used to be the plumbing, no one was interested in it. It was just there. It’s actually really risen to prominence now,” Ms Bullock said.
“And it’s a really important part of the economic ecosystem. There’s a payments ecosystem, but it’s part of the economy. And we’re after competition to lower the cost of payments. That’s what we want.
“But what’s increasingly become obvious is that the safety and resilience of payments is really important as well. So, we’ve got this dual issue now we’ve been concentrating for so long on trying to get competition in payments and lower the cost of payments in the economy, but at the same time, now, we’re going to have to start focusing on safety and resilience.”
Looking forward, Ms Bullock outlined the RBA’s priorities which, she said, include the need for a plan of action on stablecoins, cryptocurrency, and central bank digital currencies.
“I think there’s a whole set of priorities which are looking at the future of payments,” Mr Bullock said.
“The regulators have got to move with this, because if we don’t, then things will move quickly without us.”
