Laura Lively, Senior Director of Conference and Webinar Programming at Merchant Risk Council (MRC), introduced Ellis Connolly, Head of Payments Policy Department at the Reserve Bank of Australia (RBA), who addressed the audience at the MRC Conference in Melbourne on June 18, 2024.  

Ellis Connolly, Head of Payments Policy Department at the Reserve Bank of Australia (RBA)

Mr. Connolly’s keynote speech at the MRC Conference was a significant highlight. He delved into the evolving payment landscape in Australia, with a specific focus on online retail. His insights into how emerging technologies and business models are changing the retail industry and the Australian Government’s reforms to the Reserve Bank’s regulatory role in payments were particularly insightful.  

The RBA has been working with the Government to modernise the regulatory framework and is preparing to launch a holistic review of retail payments regulation once the Payment Systems (Regulation) Act 1998 (PSRA) reforms are in place. Mr. Connolly has requested input from the industry during the review process on specific issues to promote competition that benefits end users.  

The review will focus on some specific issues, including:  

• Transparency of payment services  
• Merchant payment costs  
• Surcharging  
• Mobile wallets  
• The cost and transparency of cross-border payments  

“The RBA will continue to have a broad mandate to promote efficiency, competition, and safety in the payments system.”  

– Ellis Connolly, Head of Payments Policy Department, Reserve Bank of Australia 

Over the past decade, cards have played a significant role in the expansion of online payments. Among the policy issues being discussed are the cost of card payments for end users, especially the trend in scheme fees and international card transaction costs, exploring the benefits of least-cost routing, fostering competition for payment services, and introducing tokenisation for online card payments. 

In Australia, cards are the main method for in-person and online payments. In some Southeast Asian countries, merchants offer QR codes for low-cost electronic payments through account transfers. Australia could see similar retail payment innovation through the New Payments Platform (NPP) and its PayTo service, with PayTo transactions rapidly increasing.  

There is potential to link fast payment systems across countries, offering an alternative for international e-commerce payments. The ASEAN-5 countries are working together to connect their fast payment systems to support low-cost remittances and retail transactions. The RBA is monitoring these developments to assess Australia’s potential involvement. They recently published a report highlighting the benefits and challenges of linking fast payment systems across countries.  

Throughout the day, we heard from industry leaders and merchants who discussed current trends and challenges in the retail industry. These included fraud reduction, customer identification challenges, AI, payment orchestration strategies, tokenisation, and strategies for reducing authorisation costs and integrating 3D technology.  

Tackling Customer Identification Challenges and Fraud Reduction in the Payment Ecosystem

from left to right – Rick Iversen, Head of Product and Scheme ConnectID at Australian Payments Plus, Andrew Wolf, Central Loss Manager at Officeworks and moderator Luke Dynan, VP & General Manager APAC at Accertify

The customer identity and authentication session focused on streamlining the process seamlessly and digitally. It discussed ConnectID and other innovative solutions, aiming to find a balance where Australians, who are naturally sceptical about Government and big institutions, are willing to adopt a digital ID solution in a way they may not have been ten years ago.  

The Digital ID Bill will take effect on December 1 of this year and is designed to enhance trust by providing strong security and privacy safeguards. The bill seeks to create a system that allows seamless interaction between public and private entities, with specific regulations relating to privacy and cybersecurity. Organisations will be required to undergo thorough accreditation processes and will be accountable to the ACCC.  

AI in Fraud Control

AI in fraud control was the next topic of discussion. It focused on the evolving strategies of fraudsters and the role of artificial intelligence in committing and combating fraud. A delicate balance exists between fraud losses and user friction. The goal is to make fraud measures more optimal to lower the cost of fraud and align them with the organisation’s risk appetite. Finding that sweet spot is an ongoing challenge, but there are many models that data can be fed into to help decide whether to proceed with a transaction. Knowledge of the customer and their preferences and using the data is crucial at every decision point.  

Payments Orchestration Strategies

from left to right – Nabeel Siddiqui, Product Manager at Canva, Rod Williams, General Manager Digital & Online at Baby Bunting and moderator Gary Kemper, Head of Commercial APAC at Gr4vy.

Moving on to payments orchestration, which remains top of mind for many merchants, we listened to use cases and the benefits for payments orchestration, as well as the buy versus build case. 

Payments orchestration gives merchants the agility and control to run payments how they want. This power shift allows merchants to ensure they get the best possible outcome from the market rather than being limited by using a single PSP. The flexibility to leverage multiple PSPs can be used to optimise payments success rates and costs by routing transactions to the PSP with the highest acceptance rates and/or lowest cost for that payment type.  

This also allows for the selective use of 3DS and provides flexibility in setting business rules to manage fraud. For the finance and customer care teams, access to consolidated reporting on a single platform and gaining real-time insights added value.   

There were a number of considerations in the build verses buy business case for payments orchestration including the existing technology stack, technical development capability and capacity, and the payments expertise of the in-house team. 

Navigating PayTo

With the BECS framework set to be decommissioned by the end of 2030, some inherent challenges are anticipated in moving the volume of all those transactions across to the NPP with the help of PayTo. These challenges include not only the merchants’ need to uplift their platforms, but also ensuring backend scalability in terms of resiliency, reliability, etc.  

Companies are advised to start scoping out new use cases and payment flows that weren’t possible via BECS-based solutions. For merchants who are digitally native and are using PSPs, this means working out how to best use PayTo as a core product, mapping out the flows to ensure they are properly optimising what PayTo can do, and potentially opening up those use cases and flows for their business.  

Given that customers have become very accustomed to using QR codes during the COVID era, retailers and physical stores could adopt PayTo as a point-of-sale option or integrate it into a digital wallet. While it is still in the early stages, practical applications are expected to emerge within the next 12 months. 

Although PayTo is still relatively young, having a major company on board will help drive adoption from a consumer awareness perspective.  

Tokenisation of Payment Cards and PAN Storage

The RBA mandate, which comes into effect by 30 June 2025, requires the portability of tokens and synchronisation of tokens for dual network debit cards. These requirements allow merchants to change their routing decisions more efficiently and enable the same tokenised card details to move between payment service providers, gateways, and acquirers without significantly impacting the customer experience. This will prevent the loss of tokens and the need for customers to re-enter their card details. From a merchant perspective, it’s not just about getting ready for tokenisation but about leveraging tokenisation to enhance fraud and customer experience.  

Enhancing Issuer-Merchant Relations

The final discussion focused on reducing operational expenses related to fraud and dispute, enhancing acceptance rates, and elevating the overall consumer experience. It also discussed the importance of introducing 3DS and its impact on the transaction process.  

The merchant perspective is to be very cognisant of the need to make their own risk assessment as much as possible rather than sending all transactions through to 3DS, as this can also trigger false positives. It’s a balancing act that each merchant needs to assess internally.   

Conclusion

Overall, the MRC event featured relevant discussions spanning the payments landscape. We are grateful to the speakers who provided insights, regulatory information, and use cases of the various platforms they have implemented.  

The organisers expressed their excitement about the event. “We, at the MRC, are thrilled to help facilitate Payments and Fraud Prevention professionals coming together at the MRC Melbourne 2024 event to forge new connections and deepen their understanding to enhance the industry in Australia. This was our second annual event, and we saw a 40% growth over 2023. We can’t wait to see what 2025 brings for the Payments and Fraud professionals in the ANZ Region.”  

We would like to thank the wonderful team at MRC, including Laura Lively, Julie Fergerson, Úna Dillon, Romeo Talento, Rhianna Collier, Tracy Kobeda Brown, and Susan Brown. We look forward to attending and supporting next year’s MRC Melbourne event and other MRC events globally.  

Author: Bernadette Walsh, Marketing Partnerships Manager, Melbourne, Payments Consulting Network
Bernadette’s diverse work experience has given her the opportunity to observe the different approaches to business and problem-solving, allowing her to develop a unique perspective on how to build relationships and solve problems. Her resourcefulness and willingness to think outside of the box have been invaluable assets in her ability to find creative solutions to complex problems. 

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Payments Consulting Network was one of the media partners of the Merchant Risk Council Melbourne 2024.

If you missed this or other MRC events, members have a year-round access their resources and community events and can even take advantage of their Payments Essentials course, which has the enrolment fee waived at present.

Stay updated and sign up for upcoming MRC programs by visiting their Events page. 

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