CEO’s Corner

I recently spent time at Pay360, the UK’s premier payments event. I was invited by The Payments Association’s Director General, Tony Craddock to discuss two topics: Australia’s Strategic Plan for Payments and Australia’s approach to scams. 

A Strategic Plan for Payments

The UK’s interest in Australia’s Strategic Plan for Payments originates in their Future of Payments Review, published late last year by the UK Government and authored by Joe Garner, former Head of HSBC UK and CEO of Nationwide Building Society. 

There are many similarities between the ‘Garner’ Review and our own 'Farrell' Review in 2021, one of which is the call for what Garner terms a “National Payments Vision” – to be published later in 2024 – which is analogous to our Strategic Plan for Payments, published in June 2023. 

Similar to Australia’s Plan, the UK’s intended Vision will start with Government’s policy objectives for payments; what the Garner review terms “its future desired outcomes for UK payments”. It also aims to solve the same key issue as our Strategic Plan, in the same way: by prioritising a “roadmap [that] is congested with multiple major initiatives”, and “simplifying the landscape”, through “an overriding vision and strategy … led [by] … Treasury”. 

It remains to be seen whether the UK’s National Payments Vision will include the same level of detail as Australia’s Strategic Plan, but it is a must-watch as an international comparator, akin to the recent announcement of an Australian financial sector regulatory grid demonstrating Australia deliberately learning from the UK (and their equivalent grid). 

Scams

As in Australia, scams remain a prominent issue in the UK. Interestingly there, the introduction of the contingent reimbursement mechanism has not seen a reduction in scams. Data from UK Finance shows that for the first half of 2023, there was only a 1 percent dip in scam losses, with losses still up 27 percent from 2020. Indeed, there is a view in the UK that the reimbursement model is part of the problem rather than the solution, in that it: 

• risks adding moral hazard to consumers
• guarantees the criminal’s revenue
• given only financial institutions contribute to reimbursement, the model does not incentivise participants in the scams lifecycle other than financial institutions, a particular problem when between 66 percent and 80 percent of scams are estimated to originate on Meta platforms. 

What is beyond doubt is that, unfortunately, the reimbursement model:

• has created a new type of scam, the “reimbursement” scam, where criminals pretend to have been scammed in order to be reimbursed
• is causing significant concerns in the UK fintech community, given it becomes mandatory for sending and receiving institutions in October 2024, up to a maximum of £415,000 per scam, which could be financially catastrophic for early-stage innovators.

In contrast, Australia’s approach to scams seeks to incentivise all participants in the scams lifecycle to meet their obligations to stop scams. 

Our National Anti-Scam Centre (NASC), established in the middle of last year, does that through its Advisory Board – on which I have the great honour of sitting – Fusion Cells and Working Groups involving all of those participants: financial institutions, other payment service providers (PSPs), digital communication platforms (DCPs), telcos and internet service providers (ISPs), digital currency exchanges (DCEs), consumers, and law enforcement. 

Involving all of those participants gives Australia the opportunity to stop scams at source.  We are already seeing some positive indicators of that happening: we have seen a 29 percent year-on-year reduction in scams in the last six months, with major contributory factors being bank-imposed friction on high risk transactions (e.g. to less reputable DCEs), the takedown of malicious investment scam websites by ASIC (nearly 3,500 in the second half of 2023), the development of an SMS Sender ID registry, telecommunications blocking, banks targeting mule accounts, and law enforcement action against the crime we call scams. 

Further incentivisation of the participants in the scams lifecycle will be provided in the form of new mandatory industry codes, setting out the scam-related obligations of those participants and the penalties that apply for non-compliance; draft legislation is expected in the second half of 2024. Some of those obligations will be common across all participants, for example, in data-sharing across the ecosystem and some specific to each sector, starting with banks, telcos, and DCPs and – we expect – extending to ISPs and PSPs. 

Such cross-sectoral obligations and penalties appear to have much more of an opportunity of stopping scams at source than the – structurally reactive – reimbursement model used in the UK. Nonetheless, the opportunity here is to learn from the best of breed internationally: Australia will be watching the UK – and countries like Singapore and Malaysia (which have both banned SMS with links) – in the same way that increasingly they are looking to Australia for best practice.

My travels to the UK coincided with the Global Fraud Summit, where a number of countries including Australia signed a four-part communique to tackle scams. This is an important step in building international collaboration, to identify and pursue the criminal syndicates behind the scams and to repatriate funds.

Ultimately scams are a crime, and a multinational one at that. In preventing that crime, we truly are better together. 

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Update on payments reforms

In the last Payments Monitor, CEO Andy White outlined three major Government consultations that we responded to in early 2024: the payments licensing framework, the wind-down of the Australian cheques system, and mandatory industry scam codes.  

At this stage, Treasury continues to review stakeholder submissions and determine the path forward on all of these policy issues. We will engage with Members once Treasury releases its conclusions and next steps for each of these consultations. 

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Advanced Encryption Standard (AES) migration program update

In April, the fifth Standards and Requirements Working Group meeting was held, where Members endorsed the latest version of the AES Technical Blueprint Handbook, representing the target state that could be used for migrating to AES. The handbook will be taken to the Issuers and Acquirers Forum (IAF) for approval.

The third Migration Planning Working Group was also held in April. Members were presented with a proposal on the principles, approach, and assumptions to be adopted for the AES Migration Plan (as set out in the Migration Strategy (Approach and Plan)).

Following approval of the Industry Testing Working Group Terms of Reference at the IAF meeting in March, a testing consultancy has been engaged to deliver the following plans in 2024:

• Industry Testing Assessment of requirements for the migration
• Industry Testing Strategy (Approach and Plan) for the migration
• Industry Testing Inputs for assurance of the AES Migration Program.

The Member nominations for the Industry Testing Working Group were requested in April, with the first meeting due to be held in June.

A Member Readiness Survey was issued to the Issuers and Acquirers Community in April. The survey results will provide an understanding to AusPayNet of Member readiness for an AES migration and confidence in the AES Migration Program; they will be anonymised, summarised, and provided to the IAF in due course. Further surveys will be issued in August and November, and the results will provide input to development of an overall Change Management Plan for the AES Migration Program.

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Authorised standards-setting body (ASSB) program update

Treasury’s response to its second consultation on the new payments service provider (PSP) licensing framework is expected to be released later this year. In the interim, AusPayNet is continuing to develop the supporting processes to facilitate standards-setting and a potential standards pipeline. The Standards Pipeline and Process Consultation will be released following Treasury’s conclusions.

One of the proposed test case topics on the standards pipeline relates to addressing frictions to merchants in the porting of gateway tokens, an area the RBA identified in its Expectations for Tokenisation of Payment Cards and Storage of PANs. The initial discovery phase for this is underway; it has included consultation with 30 entities involved in the end-to-end tokenisation value chain and the convening of a Tokenisation Industry Working Group (TIWG).

The TIWG acknowledged that the current lack of standardisation in information ported between gateways can cause lock-in for merchants if the merchant does not hold the PAN, and there is merit in addressing this problem statement and improving token portability. Further exploration, as part of the standards scoping process, is now underway to establish whether a minimum set of technical standards for gateway token portability could address the identified issues. 

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Cross-border payments update

Technical assistance

Recognising the need to extend the benefits of the G20 Roadmap for Enhancing Cross-Border Payments for both G20 and non-G20 countries, the World Bank and International Monetary Fund (IMF) will collaborate on providing technical assistance, particularly to those payment corridors of emerging markets and developing economies which face urgent issues, to address cross-border payment challenges.

Interlinking fast payment systems

In April, the RBA published a study group report, Interlinking Fast Payment Systems for Cross-Border Payments. A full business case assessment for interlinking the New Payments Platform was outside the scope of the study group, but the findings show clear benefits for end-users including speed, price and non-price transparency, and access.

Industry participants and jurisdictions will be able to consider a range of new opportunities, such as those presented by interlinking of fast payment systems, as they strive to improve the cross-border payments global targets. 

Cross-Border Payments Round-Up

In March, we published the latest edition of the Cross-Border Payments Round-Up, a biannual newsletter providing updates on the progress of the G20 Roadmap. Read the newsletter on AusPayNet’s website.

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Economic crime update

In April, the ECF met on the Gold Coast, coinciding with national law enforcement meetings. ECF working groups continue to consider how providing requested payments data to police can become more efficient.

Law enforcement agencies briefed the ECF on their priorities and proposed joint operational activity to target economic crime. We were pleased to learn of recent disruption efforts by law enforcement across Australia to target cyber-enabled phishing activity, including SMS phishing and fake websites. These crimes involve the use of sophisticated technology and are reportedly linked to transnational serious and organised crime groups, and we welcome measures aimed at deterring those criminals.  

As mentioned earlier, AusPayNet CEO Andy White continues to represent the Australian payments industry on the National Anti-Scam Centre’s (NASC’s) Advisory Board. Additionally, our Head of Economic Crime, Toby Evans, represents the industry on the NASC’s Fusion Cell and working groups. We are pleased to hear the cross-sectoral approach to targeting scams is coinciding with reported reductions in scam losses across several categories, particularly investment scams.  

The annual Targeting scams report was published in April, showing a 13.1 percent decline in reported scam losses. The first Fusion Cell report (on the Investment Scams Fusion Cell) will be published shortly, alongside the quarterly NASC report.

ASIC will be extending its scam website takedown capability, currently focused on investment scam sites, to include other scams, including online shopping scams. AusPayNet welcomes this action as a means of reducing card-not-present (CNP) fraud and phishing of data to facilitate other higher value scams.

While reported scam losses are down, much work remains to be done across the scam lifecycle. The Government’s mandatory industry codes, Tranche Two anti-money laundering reforms, real-time data sharing across the ecosystem, and global law enforcement action will all have a meaningful impact on efforts to combat scams. 

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ISO 20022 migration update

In March 2023, the High Value Clearing System (HVCS) successfully adopted the ISO 20022 message standard, one of the most significant transformations of the payments system in recent times. 

Marking the one-year anniversary of this achievement, Program Director of Australia’s ISO 20022 Industry Migration, Rob Magee, wrote about the impact of the transition, to date, as well as AusPayNet’s ongoing work to ensure the benefits and opportunities of this global standard are realised for payments system end-users. You can read Rob’s blog post on AusPayNet’s website.

In April, AusPayNet announced its support for the ISO 20022 Payments Interoperability Charter, published by High Value Payments Systems Plus (HVPS+). The charter sets out principles and objectives designed to enable the evolution and interoperability of cross-border and domestic high value ISO 20022 payments. Read more about HVPS+ and find a link to the ISO 20022 Payments Interoperability Charter on Swift’s website. 

For a further high-level update regarding the progress of the ISO 20022 Industry Migration Program, please refer to the latest issue of Migration Monitor on AusPayNet’s website.

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Save the date! 

We are pleased to announce that this year’s AusPayNet Summit will be held on Thursday, 12 December. To meet a growing demand for tickets, we will be holding the 2024 event in the Grand Ballroom of the International Convention Centre Sydney (ICC). Stay tuned for more information on this important industry event in future editions of Payments Monitor, our website, or follow us on LinkedIn or X. 

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New members

AusPayNet is pleased to welcome:

• Eftsure Pty Ltd as a PSP Member (effective 29 February 2024)
• FIS Australasia Pty Ltd as a PSP Member (effective 6 March 2024)
• Revolut Payments Australia Pty Ltd as a BECS Tier 2 Member (effective 25 March 2024) 

For more information on AusPayNet membership, please visit our website.