Regulation stifling financial tech innovation in Australia

Rebecca Merrett (CIO)

Timeliness of payments
Since the release of its Strategic Review of Innovation in the Payments System, the Reserve Bank of Australia (RBA) has been working with industry on developing a New Payments Platform (NPP) that enables consumers and businesses to make real-time payments around-the-clock.

“Total card transactions [grew] to around $480 billion in 2013,” the RBA said in its submission. “Direct entry payments are a key part of the Australian payments landscape.

"A DE payment is an instruction from a bank account holder to their bank to pay (or collect) an amount directly to (from) another bank account. These payments continue to account for the bulk of the value of non-cash retail payments (87 per cent in 2013).”

One of the objectives of the strategic review is to enable same-day settlement for all DE payments, which was achieved in November 2013.

Other objectives include the ability to make real-time retail payments, to make and receive low-value payments outside normal banking hours, and to send more complete remittance information with payments. These are expected to be achieved by the end of 2016.

“The bank [RBA] and Australian Payment Clearing Association have been consulting on the structure and scope of a new industry coordination body, to be known as the Australian Payments Council. “Accordingly, in conjunction with the establishment of the Payments Council, the [RBA] will also launch a new User Consultation Group," the RBA said.

"This will provide a more structured mechanism for users of the payments system to express views on payments system issues as an input to the bank's [RBA's] policy formulation process," it said.

"The RBA expects that both the Australian Payments Council and User Consultation Group will begin to meet this year and looks forward to working with both bodies.”

RBA said the NPP will be based on a hub infrastructure, which will be “more efficient and access-friendly than the existing bilateral payments architecture”.

“The hub will link ADIs [authorised deposit-taking institutions] and other approved entities and be capable of supporting the exchange of fast flexible payments messaging.

"It will be linked to a settlements service built by the bank [RBA] to provide real-time interbank settlement of each NPP payment. Both will be available on a 24/7 basis.

"This basic infrastructure will be accessible by commercial ‘overlay’ services that can be tailored to particular payment needs of customers,” the RBA said.

Commonwealth Bank of Australia said in its submission that non-traditional banking organisations can offer services without having the same kind of regulations imposed onto them as banks, creating an uneven playing field.

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