As highlighted in the Australian Payments Network’s (AusPayNet) recent Annual Review, the pace of change in the Australian payments landscape is accelerating but the industry is embracing the challenge.

Key statistics quoted in the report highlighting the rapid rate of change include:

• Online shopping continues to gain momentum increasing by 16.7% in value between 2017 and 2018 (source: NAB Online Retail Sales Index) yet card-not-present (CNP) fraud accounted for almost 85% of all fraud on Australian cards (source: AusPayNet);
• Card usage grew by 12.7% while ATM withdrawals dropped by 4% and cheque use plummeted by 20% between 2017 and 2018 (source: Reserve Bank of Australia);
• 7 out of 10 smartphone owners make payments on their phone (source: PayPal mCommerce Index);
• 56% of Australians are comfortable using their thumbprint, voice or retina for payment while 31% of all smartphone owners ages 16-75 use fingerprint recognition (source: Visa, Deloitte); and
• There have already been 2 million PayID registrations since the New Payments Platform launched in February 2018 (source: NPP Australia Limited).

Payments Consulting Network (PCN) Managing Director, Mangala Martinus, spoke to AusPayNet CEO, Leila Fourie, about the changing landscape and AusPayNet’s key areas of focus.

MM: It has been a big year for the payments industry, what have been the top three highlights from 2018 for you?

LF: It has been an exciting year and the three main highlights have been:

• New Payments Platform (NPP) – The NPP went live in February 2018. NPPA was incubated within AusPayNet but is now run as a separate legal entity. Some of the important features of NPP include the PayID addressing service and increased richness of data. More than 70 financial institutions have been rolling-out NPP enabled services. While the take-up has been gradual, the NPP’s layered architecture provides a great platform for future innovation.
• Digital Identity Trust Framework – Regulators have highlighted the fragmented approach to digital identity and the need to resolve this. Through the Australian Payments Council, industry is developing a standards-based trust framework. AusPayNet supported this work forming a working group of 18 stakeholders including the Digital Transformation Agency and representatives from diverse industries such as retail, telecommunications and financial services. We have just completed the initial phase and aim to develop and complete the Framework by 2019. The Framework will provide the foundation for increasing security and a platform for new digital identity services.
• Card-Not-Present (CNP) Fraud Mitigation Framework – CNP (or online) fraud represents 85% of all fraud on Australian cards. AusPayNet has joined forces in a collaborative approach across the e-commerce community (financial service providers, gateways and retailers) to address the issue. The initial round of industry consultation on the new framework has been completed and we are currently collating responses. The new framework will be implemented in 2019.

MM: AusPayNet lists its three main initiatives this year as being open loop transport, digital identity, and the CNP fraud mitigation framework. Looking forward to 2019, what do you see as AusPayNet’s top three focus areas?

LF: Our three main areas of focus will extend beyond 2019 and have far reaching implications:

• Managing Technology Impact – We aim to proactively assess technology changes and will be investigating voice authentication, biometrics, QR codes and the use of artificial intelligence (AI) in payments. We will be putting forward position papers that highlight and consider key issues such as security, a consistent customer experience, interoperability and global standards/governance. We helped set up a global payments thinktank with our international counterparts – known as P7 – and will be actively engaging with this group as we formulate our thinking. AusPayNet proactively encourages innovation although we need to make sure it is done responsibly.
• Payments Roadmap – AusPayNet will work collaboratively with industry to review existing payments rails and determine which of these needs to be updated to support a payments vision for all of Australia’s payments systems. We will be reviewing messaging standards (e.g. whether it makes sense to move to ISO 20022), including mandatory and optional fields, to define a common set of message formats to enable interoperability between different payment frameworks, e.g. between real-time payments and direct entry payments. The aim is to set-up an industry roadmap that ensures the solutions in place are integrated and share a common language.
• Responsive Self-Regulatory Regime – The pace of change has picked up remarkably and the development life cycle has become more rapid, so the industry needs to be more responsive. As a result, we are reviewing our self-regulatory framework with a view to moving to a more principles-based approach. This new approach involves more agile, decision-making. The aim is to make decision-making more streamlined so that payments rules, regulations and governance frameworks continue to be resilient and flexible enough to adapt to evolving industry requirements.

MM: The NPP development and implementation involved a significant investment by the industry. Changing the existing payments systems will require further major investment, so what is driving this initiative?

LF: The main driver has been to ensure future investment is properly planned to extract value from existing investments. For example, all payment systems need to use a common language and message formats, so they can interact with each other. This will be a multi-year program and could involve retiring or replacing some payments platforms.

It’s a very dynamic and exciting time to be in payments and the industry changes are sure to have an impact on the wider community.

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Leila Fourie was the opening speaker of the Australian Payments Summit from 26-27 November 2018 in Sydney, which is being co-hosted by AusPayNet and Currency Research.

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