Responding to Extraordinary Times by Andy White

I hope this edition of Payments Monitor finds you, your family and your friends safe and well in the extreme situation in which we find ourselves.

In line with government guidelines on COVID-19, AusPayNet made an early call to implement remote working and virtual meetings for the safety of its staff, members and stakeholders and that call has stood us in good stead to date. As an employer and an industry association, we understand that the new normal is in fact not normal. We know our people and our members are having to juggle personal and work lives and that their capability and capacity are different when working remotely. These are additional factors in how we are prioritising the work we do at this time and how we do it.

In terms of the impacts of COVID-19 on payments and on our work as an industry association, it is useful to think about them over the near, medium and far horizons.

In the near-term, we have seen specific COVID-19 issues and opportunities emerge. We worked with the industry to temporarily increase the contactless PIN limit from $100 to $200 (covered in more detail elsewhere in this Payments Monitor). This will make a difference to the spread of COVID-19: it means that hundreds of thousands of Australians each day will not have touch the payment terminal. I’m immensely proud of the way industry came together on this topic: extraordinary times require extraordinary leadership and the industry showed exactly that. In other early responses to COVID-19:

• We amended our BECS regulations to enable the efficient, customer-friendly processing of a large volume of direct-debit cancellations.
• Our ACDES Management Committee has been meeting frequently to monitor trends in cash withdrawals and usage.

In the medium-term, we have the opportunity for a more considered response. We have already reviewed our compliance requirements on members and relaxed the enforcement of those – as distinct from the requirements themselves – where appropriate. APRA and ASIC have made similar moves. We will continue to review the regulator and policy landscape, as policy priorities change. And we will also review timeline changes on industry initiatives such as ISO 20022, as timelines shift, so opportunities are created to prioritise other initiatives.

Another area of considered response is our work on the future of payment systems in Australia (also covered in more detail elsewhere in this Payments Monitor). Trends that we’re seeing today – growth, and blurring, of contactless, mobile and online payments – are likely to persist beyond the crisis as the new customer experience “sticks”. It is important we take the time to factor in these trends and draw the right conclusions.

Longer-term, strategic trends we need to consider include what the current crisis means for concepts such as digital identity. There is no doubt that many of the questions we are grappling with now – for example, potential scams/fraud as online payments increase and stimulus payments are made – would be more easily solved with a robust digital identity. We also need to review the role of open data as a potential cornerstone of the digital economy, and therefore the economy, post-crisis.

COVID-19 will influence our thinking on payment system resilience and efficiency. Resilience needs to be considered – as the Australian Payments Council has already identified – as more of a whole economy issue. In working remotely, we are aware of our dependencies as individuals on the resilience of enablers such as telecommunications and energy; this also applies to payments themselves. And efficiency will become even more important post-crisis given investment dollars will be scarcer: prioritising the right industry initiatives and implementing them efficiently will be critical.

We have all had to adapt to the situation in which we find ourselves - and that is perhaps the last strategic trend: adaptability. Previous crises (think the World Wars and their catalytic effect on engineering, for example) have led to radical economic acceleration. Our opportunity here is to build on the new ways of working we are discovering during the crisis, as organisations and as an industry, to change what we do and the way we do it in the future.

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Reducing the risk of COVID-19 transmission

The industry has temporarily increased the contactless PIN limit from $100 to $200 to reduce the need for customers to touch PIN pads when making purchases. From 8 April, the new limit is being gradually introduced on certain cards and at certain merchants, starting with major supermarkets. Consumers and merchants will know whether the new limit is available by following the prompts on the PIN pad. The increased limit is a temporary measure in response to COVID-19 and is expected to apply for a three-month period.

Read our media release and Q&As for further information.

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Other responses to the COVID-19 environment

To enable members to focus on COVID-19 related priorities, we have made changes to time-related rules in the cheques and direct entry systems, and postponed compliance requirements in the card system that depend on physical audits.

Through our cash system, we are also monitoring how cash is being used in the current environment and the potential impact on cash distribution.

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The Future State of Australian Payments

In light of COVID-19, we are postponing release of the Conclusions from AusPayNet’s Future State of Australian Payments consultation originally scheduled for late April. The consultation is being conducted to build a consensus view on what payment systems might look like in the next 5-10 years. The process began in November 2019, and despite the busy time of year, we had a strong response, with 36 submissions received by early February 2020. Having completed analysis of the feedback, the next steps involved meeting with those who responded to the consultation to gain further context. We now expect to publish the Conclusions paper in the second half of 2020.

For more information on the consultation, click here.

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ISO 20022 Migration for the Australian Payments System

In February 2020, we welcomed the RBA’s ISO 20022 Migration for the Australian Payments System – Conclusions Paper appointing AusPayNet as the project’s central coordination authority. In this role, we are leading work to migrate the messaging that underpins the high value clearing system to ISO 20022. While SWIFT recently announced a delay of one year to the migration day, work to establish the governance arrangements is well underway. The Steering Committee is due to meet later this month, when it will provide direction on resourcing models for the Project Management Office (PMO). The PMO is expected to mobilise in the coming months and will guide work under five streams: Design and Requirements; Industry Testing; Back Office Requirements; Project Delivery; and Governance and Legal.

Further information on the ISO 20022 migration is available on the RBA website.

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Consumers choosing cards over cash

The recently published RBA Consumer Payments Survey shows a further decline in cash use as consumers increasingly prefer digital payment methods. Of all consumer payments made in 2019:

• 27% were made with cash, down from 37% in 2016.
• 63% were made with cards, up from 52% in 2016; 44% of card payments were made with debit cards and 19% with credit cards.

Find out more in our blog.

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TrustID workshop

On 3 March, we brought together representatives from financial institutions, solution providers, fintechs and prospective digital identity consumers to explore opportunities relating to the TrustID framework. It was a full house with 60 delegates attending onsite and a further 40 participating online. Attendees discussed different use cases, the potential to improve customer experience and streamline processes. There was also discussion on the challenges of educating consumers on the benefits of digital identity in an environment where there is increasing scepticism about the use of personally identifiable information.
 
More broadly, the TrustID framework continues to attract the attention of prospective participants. To facilitate greater involvement, AusPayNet is forming a Special Purpose Committee allowing broader participation as we move toward the establishment of pilot services.
 

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Upcoming events

• We're delighted to be hosting a 3-part webinar series in partnership with global digital identity and security leader, Thales. Join our technical security experts on 29 April, 6 May and 13 May as they canvas the trends, technologies and regulations shaping payment security.  Register, and find more information here.
• We expect to announce the date for our 2020 Summit - to be held in early December - next month.  In the meantime, please contact us for sponsorship and speaking opportunities. Those who missed our 2019 Summit can view the highlights here.

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Emerging Technologies

AusPayNet’s Emerging Technologies group continues to focus on key themes and technologies that impact the payments landscape. The Authentication workstream is nearing consensus on its Authentication Principles Discussion Paper, whilst the Privacy workstream has its inaugural workgroup this month. Common themes across both workstreams are requirement to identify users and how this can be achieved in an environment of increasing focus on privacy. With the Consumer Data Right soon to facilitate greater access to customer data (see below), these topics will likely remain in focus as new innovative offerings come to market.

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Supporting innovation

Mobeewave, in partnership with Samsung and the Commonwealth Bank of Australia, is set to pilot its mPOS solution in Australia. The solution enables merchants to accept contactless payments on their Samsung NFC-enabled mobile device. The security of these types of POS solutions is ensured by the PCI Contactless on COTS (commercial-off the shelf) (CPoC) standard, which PCI published in December 2019.

Read our blog here.

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Fintech and Regtech

AusPayNet has been an active participant in the inquiry by the Senate Select Committee on Financial Technology and Regulatory Technology. In November 2019, we responded to the Issues Paper, and on 19 February 2020, our CEO Andy White provided further context at the Public Hearing held by the Committee in Sydney. Our submission highlighted that the ways in which we pay have changed dramatically over recent years, with consumers are now able to choose from a range of convenient and secure digital payment options. This change has been consumer-led, enabled by technological innovation both by fintechs and by incumbents. Opportunities for fintechs to provide complementary services to existing payment systems are growing - and are being taken.

Our submission and opening statement are available here. Read our blog here.

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Consumer Data Right

Following the Treasurer’s announcement in January 2020 of an Inquiry into Future Directions for the Consumer Data Right (CDR), Treasury released an Issues Paper for consultation in early March. The Issues Paper states that the "Inquiry is looking at how the CDR could be enhanced and leveraged to boost innovation and competition, and support the development of a safe and efficient digital economy, benefiting Australians and Australia. This includes examining how the CDR could be expanded to include ‘write’ access". The Inquiry is being led by Scott Farrell, King & Wood Mallesons partner, who conducted the original report on Open Banking.

More information on the consultation is available here.

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Review of Retail Payments Regulation

The Reserve Bank has announced that it has put on hold its Review of Retail Payments Regulation, in light of COVID-19. The RBA now expects to complete the Review in late 2021, a year later than the original date. AusPayNet provided a response to the Issues Paper in January, and we welcome the opportunity to continue to work with the RBA on this ongoing review.

Our submission is available here.

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