Australia’s government has launched a review of payments regulation to ensure it remains ‘fit for purpose’ as the popularity of digital payments surges during the COVID-19 pandemic.
The review is part of the ‘digital business package’ announced in the country’s 2020-21 Budget that aims to enable Australia to become a leading digital economy by 2030.
The payments system examination will be overseen by well-known financial lawyer Scott Farrell, who has also been leading the government’s inquiry into future directions for the country’s Consumer Data Right (CDR), as well as other government fintech-related inquiries. The high-profile CDR gives citizens the right to share their data between service providers, with banking the first sector to which it applies.
Farrell’s review will consult industry, consumer and privacy advocates, as well as other interested parties, in putting together a report and recommendations by April 2021.
Rules need to reflect technological advances
The Department of the Treasury said, in the terms of reference for the review, that it is seeking to ensure its payments architecture – which it described as having remained ‘largely unchanged’ for more than two decades – is responsive to advances in payments technology.
‘This is particularly important now as the COVID-19 pandemic has seen consumer appetite for using different payment platforms accelerate, including a significant increase in demand for digital payments. Continued innovation of this key economic infrastructure will be central to lowering transaction costs, reducing the cost to doing business and supporting the economic recovery,’ according to the terms of reference document.
The review will focus on how to create more ‘productivity-enhancing’ innovation and competition, including a look at Australia’s New Payments Platform – open access infrastructure for instant payments launched to the public more than two-and-a-half years ago. In addition, it will explore ways to ‘improve the understanding’ of businesses and consumers of alternative payment methods.
Exploring potential for service delivery
The review, which will take into account ‘international best practice’, will also examine whether government payment systems can take advantage of new payments functionality to enhance service delivery.
Melbourne-based media Banking Day wrote that payments experts see Farrell – a senior partner at Hong Kong-headquartered international law firm King & Wood Mallesons – as a supporter of the UK’s payments system overhaul over the past decade and likely to model his recommendations in line with those reforms.
Farrell, who will be supported by a secretariat located within Treasury, also chaired the government’s review into open banking in 2017. He has been co-chair of the government’s fintech advisory group since 2018, having been a member of the group since its formation two years previously.
Open banking, which aims to boost competition and encourage innovation, became a reality in Australia after the CDR legislation went live on 1 July. The country’s four major banks – ANZ, Commonwealth Bank, NAB and Westpac – are now obliged to share customers’ data when requested by citizens. The country’s open banking era began after a six-month postponement for further testing and “better ensure necessary security and privacy protections operate effectively”.
The payments regulation review gets underway less than two months after a parliamentary committee report into competition in Australia’s financial sector proposed 32 recommendations to ‘get the country’s house in order’. The select committee on financial technology and regulatory technology was set up in the Senate in September 2019 and – one year on –published a 281-page interim report. The report sent out a stark warning in its introduction, which said that ‘if we [Australia] are going to compete with Singapore and Tokyo, we first need to get our house in order at home. Much progress has been made but it’s time for some recalibration.’
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