Australia’s government has published a strategic plan for the nation’s payments system including the phasing out of cheques within seven years.
The ‘Strategic Plan for Australia’s Payments System’ has five overarching priorities: promoting a ‘safe and resilient’ system; updating the payments regulatory framework; modernising payments infrastructure; boosting competition, productivity and innovation; and promoting Australia ‘as a leader in the global payments landscape’.
Treasurer Jim Chalmers MP and assistant treasurer and minister for financial services Stephen Jones MP jointly write in the 40-page strategy’s foreword that it will ‘help co-ordinate action between the public and private sectors and provide certainty for industry investment and support for new entrants to navigate the regulatory landscape’.
The strategy’s publication coincides with the launch of two major consultations: for ‘Reforms to the Payment Systems (Regulation) Act 1998’, which will run until 7 July; and for ‘Licensing of payment service providers – payment functions’ , which will run until 19 July.
The strategy, which will be reviewed every 18 months ‘to ensure it remains relevant in the face of changing circumstances’, was developed following a consultation from December 2022 to February 2023 that attracted 60 submissions.
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Cheque-ing out
The phasing out of cheques – whose usage has declined in volume by almost 90 per cent over the past decade – would be achieved in stages. The government wants to remove ‘legislative and other barriers that entrench payment by cheques as well as phasing out government cheque usage by the end of 2028’ as part of a plan for the ‘eventual wind-down’ of the cheques system by ‘no later than 2030’. The government plans to consult to determine the feasibility of the proposed end-date and an ‘appropriate transition plan’.
‘Although cheques represent a narrow segment of our payments system today, they continue to be issued in relatively large numbers by some corporates and government entities,’ the document notes. ‘They also continue to be used by certain cohorts of the population, particularly older Australians and those living in regional or rural areas or with limited digital proficiency or connectivity. Some types of businesses also rely more heavily on cheques (for example, charities and other not-for-profit organisations who take a large proportion of donations through cheques from their donors).’
Four main workstreams for ensuring a ‘smooth transition away from the cheques system’, are specified.
First, the government plans to work with agencies and departments with ‘high’ cheque usage to develop ‘transition plans’. This includes identifying products, such as health services or tax payments, that will need viable and alternative forms of payment with the ‘same level of reach and convenience’ as cheques.
Second, the government states that it will support industry in promoting the use, and removing barriers to adoption of, alternatives to cheque products, especially for institutional and commercial uses of cheques that cannot be serviced through existing digital channels. It adds that the private sector’s development of ‘education and outreach programmes to assist cohorts that are greater users of cheques will also be required’.
Third, the government will explore changes to legislation that ‘entrench’ the use and acceptance of cheques with an eye on amending legislation.
Fourth, it will ‘work with state and territory counterparts to encourage a co-ordinated approach to transitioning away from the cheques system’. It states that this includes encouraging state and territory governments to amend legislation that mandates the usage of cheques in certain industries such as gaming and insurance.
National Anti-Scam Centre to launch
The strategy gives prominence to tackling financial scams, which are a growing problem: Australians lost a record $3.1 billion (about £1.67bn) to scams in 2022.
A new National Anti-Scam Centre, ‘which will work across regulatory and industry boundaries, bringing needed coherence and focus to fragmented initiatives’, is set to launch on 1 July. It will be a ‘virtual’ centre that sits within the Australian Competition & Consumer Commission (ACCC).
The government states that it will be ‘considering options’ to bolster consumer protections as it develops the new payments licensing framework.
In terms of the country’s payments plumbing, the government plans to ‘support an industry-led, phased transition’ away from the Bulk Electronic Clearing System (BECS) to the New Payments Platform (NPP), which was launched in 2018.
‘The most significant challenge in transitioning away from BECS is likely to be bulk payments that are made by businesses and government’, the document states.
Other commitments in the document include ‘strengthening collaboration and communication’ between payment system regulators through Australia’s Inter-Agency Payments Forum, which was set up in July last year.
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Digital ID, AI and CBDC
Digital ID, artificial intelligence (AI) and central bank digital currency (CBDC) are among the further topics covered in the strategy.
The government will, the document states, ‘continue to design the policy and legislative foundations to transition to an economy-wide digital ID ecosystem with an independent regulator’.
In terms of AI, the government released a discussion paper entitled ‘Safe and responsible AI in Australia’ on 1 June. Consultation on this document closes on 26 July.
In terms of a potential Australian CBDC, potential use cases (ranging from payments in livestock auctions and for construction work) were among 14 projects selected for trials in Australia earlier this year. Less than one page is devoted to CBDC in the strategy, which states that the Treasury and Reserve Bank of Australia (RBA) ‘will release a paper in mid-2024 that takes stock of the work to date by the Treasury and the RBA on CBDC in Australia, and outlines the forward workplan for Treasury and the RBA on CBDC in the broader context of the future of digital money in Australia.’
With the government championing a vision of Australia becoming ‘the most cyber-secure nation in the world by 2030’, strengthening defences against cyber-attacks also receives a good airing in the payments strategy. The government plans to release its Cyber-Security Strategy 2023-2030 this year.
‘Long-overdue overhaul’: ABA
The Australian Banking Association (ABA) and FinTech Australia were among the private-sector bodies welcoming plan.
“A productive world-class economy needs a modern and efficient payments system – [the] announcement is a long-overdue overhaul of the payment arteries that drive the Australian economy,” said the ABA’s chief executive Anna Bligh.
“Australia is currently operating under payments legislation that was created in 1988,” she continued. “The proposed changes will help ensure clear consumer protections apply no matter who is processing your payment, and that the security of customers personal and financial information is maintained.”
FinTech Australia general manager Rehan D’Almeida stated in a newsletter that the association was ‘delighted’ to see finalisation of the plan and the consultations.
