CEO’s Corner

A Turning Point

The end of the year is shaping up to be a busy and exciting one.

On 12 December, we will be hosting our annual Summit, the premier event in Australian Payments. This year’s theme is ’A Turning Point’. This reflects what we have already witnessed in 2023: the Government releasing a Strategic Plan for Australia’s Payments System and progressing payments reform by consulting on licensing; Michele Bullock – who has significant experience in payments – being appointed as the Governor of the RBA; and the launch of the National Anti-Scam Centre (NASC). It also reflects what we’ll see before the end of the year, with significant Government consultations on licensing (part two), cheques and scams. I’ll briefly discuss those later. Together, all this activity through 2023 genuinely represents a turning point in payments.

The AusPayNet Summit

Now sold out, our Summit next month will be emceed by one of Australia’s best loved and experienced news presenters, Juanita Phillips. I’m also delighted to say that the Governor of the RBA, Michele Bullock, will give her first address on the topic of payments.

Following Michele’s address, I’m fortunate to then host an incredibly well credentialled panel on scams, which will consist of: The Hon Stephen Jones, MP, Assistant Treasurer and Minister, Financial Services; Sarah Court, Deputy Chair, ASIC; and Catriona Lowe, Deputy Chair, ACCC. We will focus on regulation as an enabler in the critical fight against scams, and their continued threat to Australian consumers and businesses, including the role of the NASC and national anti-scam codes.

Continuing the stellar line-up, I’ll then interview Nghi Luu, Division Head (acting), Financial Systems Division, Department of Treasury. Nghi and I will discuss the important topic of reforming Australia's regulatory architecture for payments, including the next steps in Government’s Strategic Plan for Australia’s Payments System, among them the second consultation on licensing.

We’ll then dive into some fascinating panel sessions on the new frontiers in payments: AI, innovation, and digital currencies. The AI panel includes representatives from PCI and Endava, and will cover threats and opportunities from AI for security in payments. That will be followed by a panel looking at the innovation challenge in Australian payments, which will benefit from the experience of representatives from CBA, Monoova, Stripe, and Visa. And the digital currency payments panel will share insights across the entire spectrum of digital currencies: CBDC, stablecoin and cryptocurrency.

Another panel will see representatives from Zepto, Westpac, and NSW Treasury consider how best to manage legacy payments systems and their decline, with key questions on cheques and BECS, including governments’ use of those systems.

And our big debate this year is on whether Australia should be cashless. Given the topic, both sides of the debate will no doubt be well elucidated, and the debate will again be expertly moderated by Ellis Connolly, Head of Payments Policy at the RBA.

Our post-Summit survey in 2022 saw consistent demand for more networking time. As a result, one of the enhancements to this year’s event is an extended two-hour networking function at the conclusion of the program.

Overall, the 2023 Summit has an excellent agenda and affords a great opportunity to network. I look forward to seeing you there. I’d also like to thank our event partners: Thales, Transaction Network Services, Endava, MessageXchange, PAX Technology Australia, Swift, ACI Worldwide, Indue, Quest Payment Systems, ASL, Deloitte, and Upplft.

End of Year Consultations

But 2023, and the turning point in payments, doesn’t end there! Before the end of the year, we expect the second round of consultation on payments licensing, continuing progress on payments reform. We also expect consultations on both cheques and scams.

The second consultation on payments licensing will focus on the obligations and rights associated with payments licenses and, as part of that, is likely to touch on standard-setting, including the role of authorised standard-setting bodies.

The consultation on cheques will consider the future of cheque use in Australia, and the support required to retire the cheques system, including testing the dates outlines in the Strategic Plan for Australia’s Payments System (2028 for Government’s use of cheques; 2030 for the retirement of the cheques system). As part of this process, the Government will also consider the ongoing role of the Cheques Act 1986.

The consultation on scams will propose a framework and principles for obligations on, and consumer expectations of, the various actors in the scams lifecycle. This will be a precursor to further work on individual regulatory codes on banks, telecommunications companies, and social media platforms in 2024.

All this important work means that the payments ecosystem really is at a turning point as we head towards the end of 2023. As always, I would like to acknowledge our Members, stakeholders, Commonwealth and State governments, regulators, and our staff for their collaboration and work over the course of the year.

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Update on payments reforms

Consultation on reforms to the Payment Systems (Regulation) Act 1998 (PSRA) - exposure draft legislation

In June 2023, Treasury consulted on proposed reforms to the PSRA that would ensure all entities that play a role in the payments ecosystem could be regulated, if there was a need to do so in the public or national interest. These changes are part of the Government’s broader payment system reform agenda under the Strategic Plan for Australia’s Payments System.

Following the June consultation, Treasury released the PSRA exposure draft legislation for industry feedback. The key changes in the draft legislation were in line with those proposed in the initial consultation paper, which were broadly supported in AusPayNet’s original submission: the expansion of the RBA’s regulatory remit, and the introduction of a ministerial designation power that would enable regulation of payment systems and their participants in the national interest. AusPayNet’s submission, therefore, focused on how these policy objectives had been translated into the proposed legislation. Based on our assessment and Member feedback, our submission was broadly supportive of the proposed legislative changes but suggested further review of the definition of ‘payment systems’ to ensure that the regulatory perimeter is sufficiently broad to capture all entities involved in the payment value chain.

We look forward to continuing our engagement with Treasury and Members on the payment system reforms, including through the upcoming consultation on the regulatory obligations that would apply under the new licensing framework for payment service providers.

Consultation on screen scraping regulation

In August, Treasury released a consultation on options for regulating screen scraping practices in Australia. AusPayNet has a strategic commitment to working with Members, Government, and other stakeholders to improve cyber security in the payments ecosystem and defend against the growing threat of economic crime. As noted in Treasury’s consultation paper, screen scraping practices – which involve customers sharing their login details with third parties – generate risks that run counter to these objectives. In particular, screen scraping encourages customers to act in a way that is inconsistent with cybersecurity best practice, and can increase customer vulnerability to cybersecurity attacks, fraud, and scams as a result of personal authentication and other sensitive data being accessed, stored and used by third-party applications.

In our submission, we highlighted that efficiency and customer convenience should not come at the expense of data security, particularly in the current environment of rapidly growing cyber and economic crime threats. We therefore expressed support for a carefully managed phase out of riskier practices, such as screen scraping, where the Consumer Data Right (CDR) can provide a secure alternative for facilitating customer data sharing.

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Insights

Sustainability in payments

AusPayNet’s Emerging Technology Experts Group (ETEG) brings together a wide range of members to contribute to the assessment of innovation in payments technology. The goal of ETEG is to evaluate the potential opportunities, challenges and risks presented by technological developments for the Australian payments ecosystem, and to provide advice on how the industry can work together to address them. ETEG’s key focus areas for the coming year include artificial intelligence, digital assets, and sustainability.

At its meeting in October, ETEG focused its discussion on sustainability in payments. ETEG’s goal in this area is to undertake work to better understand the environmental impact of payments technology and processes in Australia, and to help establish an industry point of view on whether any collective actions should be taken to address this impact. AusPayNet has already produced some preliminary insights into the environmental impact of the payments industry and the role that industry participants can play in driving greater sustainability; these early insights will be shared in a blog post shortly. With the support of ETEG, AusPayNet will continue to work on developing these insights throughout 2024, with a view to presenting the findings to Members and other industry stakeholders through various AusPayNet publications and events.

Accessibility in payments

AusPayNet’s vision is convenient and secure payments for all. To achieve this vision, we are committed to enhancing accessibility and inclusion in payments, recognising that while innovation can provide many benefits for customers and businesses, it can also create new challenges for some users.

For this reason, AusPayNet developed the Guidelines for Accessibility in PIN Entry on Touchscreen Terminals in 2019. These guidelines were the first in the world to address access to POS touchscreen technology for people living with vision and/or motor impairments. In 2023, an independent review conducted by the consultancy firm Intopia concluded that the Accessibility Guidelines remain fit-for-purpose.

To further enhance accessibility and inclusion in payments, AusPayNet is planning to undertake work on expanding the Guidelines to include a broader range of payment products and services (including mobile payments), as well as a broader spectrum of disabilities. We look forward to collaborating with Members and key stakeholders on this important topic over the coming year.

Blog posts

AusPayNet regularly publishes blog posts, sharing important information and insights regarding Australia’s payments system. In case you missed them, our most recent posts are:

• Private-Public Collaboration and a Toolbox Approach to Preventing Economic Crime: In this blog, AusPayNet’s Head of Economic Crime, Toby Evans, highlights the growing threat of economic crime and the importance of adopting a ‘toolbox’ approach in response to that threat.
   
• Legal Entity Identifiers (LEIs): LEI codes – and the data captured within them – allow the legal entities participating in a financial transaction to be clearly and uniquely identified. In this blog, AusPayNet Business Analyst David O'Mahony reflects on the catalyst for the introduction of LEIs and considers the potential benefits of expanding their use across the economy.

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Advanced Encryption Standard (AES) migration program update

In July, work commenced on the first six months of the Initiation and Mobilisation phase of this project. This phase is focused on the technical blueprint and options to approach the migration.

Technical blueprint

In August, the first Standards and Requirements Working Group (SRWG) meeting was held, and a draft set of standards for the AES Technical Blueprint representing the industry target state for migrating Australian card payment system to AES.

Following this meeting, further SRWG meetings were held to develop a draft Technical Blueprint Handbook which underpins the set of standards for the AES Technical Blueprint. This handbook will enable Members to plan their respective projects in support of the AES Migration Program. AusPayNet anticipates the final release of the handbook will occur in April 2024.

Migration options

AusPayNet continues work to establish a set of viable options for approaching the migration to AES, including co-existence of AES with the current encryption standard for the Australian card payments system, TDES (Triple Data Encryption Standard).

In February 2024, a Migration Planning Working Group (MPWG) will be established with Member representation across the Australian card payments system. The goal of the MPWG is to define a strategy, approach, and plan to migrate to AES. The first objective of the MPWG will be to define an interim release of AES Migration Strategy by June 2024. This strategy will provide support for Members to define their projects to migrate to AES.

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AusPayNet’s program to become an authorised standards-setting body (ASSB)

Over the past six months, we have been consulting with our Members and stakeholders on the framework, governance model and operating models being developed for AusPayNet to become an ASSB for the payments industry. This development and ongoing consultation continue and will be informed by the Treasury’s second consultation on the new payments service provider (PSP) licensing framework, expected to be released by the end of this year.

In parallel, AusPayNet has been developing a pipeline of potential standards that may be set by AusPayNet as an ASSB and the standards development processes and controls to support this. A shortlist of 18 topics has now been identified for a formal consultation, comprising of topics covered by existing frameworks or code sets that require wider applicability or greater enforcement (‘refresh and set’), and topics outside existing frameworks that may require technical standards for the Australian payments system (‘develop and set’). This latter category will include any specific requests by government or regulators for AusPayNet to develop technical standards that support defined policy initiatives (for example, in areas such as tokenisation or advanced encryption).

AusPayNet is expecting to release the Standards Pipeline and Process Consultation in Q1 2024, subject to calibration of timing with Treasury’s second consultation on the PSP licensing framework.

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eConveyancing Code update

This year marked an important milestone for AusPayNet and e-Conveyancing. In late 2021, following a request from Government and Members, we established a steering committee and two working groups comprising Electronic Lodgement Network Operators (ELNOs) and other subject matter experts to develop an Industry Code for eConveyancing payments. Development was halted at industry’s request during much of 2022; however, once resumed, a year of consultation with key participants in the eConveyancing industry, drafting and review, culminated in the eConveyancing Payments Industry Code (eC1) being approved by the AusPayNet Board on 31 August.

The Code marks the creation of the first Framework at AusPayNet for nearly a decade and provides regulations and operating procedures to ensure that all parties involved in eConveyancing financial transactions have a common set of rules and mutually understood obligations. This will be especially important as eConveyancing evolves to an interoperable model, with ELNOs sharing information related to the financial legs of a property settlement.

Now that the Code has been approved, we can move to the implementation stage of the project. In consultation with the e-conveyancing industry, in the coming months we will finalise the timeline for eC1 to be effective.

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Cross-border payments update

Recently, we published the latest edition of our Cross-Border Payments Round-Up, which provides a summary of activities, our responses to consultations, and other actions being undertaken to support and successfully implement the roadmap and domestic cross-border payment priorities. You can access the newsletter on AusPayNet’s website.

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ISO 20022 migration update

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

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Economic crime update

The Economic Crime Forum (ECF) was held on 13 November in Melbourne, coinciding with national police meetings and International Fraud Awareness Week.

We continue to represent Members on the National Anti-Scam Centre (NASC) Advisory Board and fusion cell workgroups. The NASC has been operational since July, and it is pleasing to see the Centre bringing in all industries across the scam lifecycle to do their part to address scams.

AusPayNet has participated in several legislative consultations that have touch points to scam mitigation and will inform the national codes and potential areas where technical standards may be required:

• Modernising Australia’s AML/CTF regime
• The PSRA
• The Digital Identity Bill
• The Regulation of Digital and Crypto Assets Bill
• The payments licensing framework.

Treasury is progressing its work on the national anti-scam codes, with consultation on the framework and legislation expected by the end of 2023. AusPayNet continues to engage closely with Treasury and the ACCC ahead of the release of the first consultation. We welcome thoughts, feedback, and suggestions.

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Board changes

Westpac-appointed Director

In recent months, Nish Dharmaratne replaced Chris Campbell on AusPayNet’s Board as the Westpac-appointed Director. Mr Campbell served as a Director of AusPayNet for over 20 years, including serving on various committees as chair and as a member.

We thank Mr Campbell for his contributions to the Board and to the committees on which he served.

Elected Director

Kees Kwakernaak resigned from AusPayNet’s Board on 31 August. By extension, his alternate, Mark Tibbles, also resigned.

Mr Kwakernaak’s resignation triggered an election for the vacant seat, which has a remaining term of two years. The outcome of this election was that Bianca Bates (JPMorgan Chase Bank, NA) was elected to the vacant Director’s position, with Kirstin Renner (Citibank NA) to be appointed as an Alternate Director.

We thank both Mr Kwakernaak and Mr Tibbles for their contributions to the Board and to the committees on which they served.

Alternate Director

Rebekah Murchie (National Australia Bank) was appointed as an Alternate Director.

Meet the AusPayNet Board here.

New members

AusPayNet is pleased to welcome:

• Evision Pty Ltd (trading as MessageXchange) as a PSP member (effective 28 August)
• Pax Technologies Australia Pty Ltd as a PSP Member (effective 12 September)
• BC Payments Australia Pty Ltd as a Tier 2 Member of BECS (effective 25 September)
• Islamic Bank Australia Pty Ltd as a Tier 2 Member of BECS (effective 25 September)

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