Australian Payments Network (AusPayNet) has led several industry initiatives in recent years, including development of the CNP Fraud Mitigation Framework and migration of the High Value Clearing System (HVCS) to the ISO 20022 message standard in March 2023.
There are further significant industry changes on the horizon such as the Federal Government’s goal to wind down the cheque system by no later than 2030 and the industry-led, phased transition away from BECs. AusPayNet will play a critical role in these changes and is also moving towards becoming an Authorised Standard-Setting Body.
Payments Consulting Network Managing Director, Mangala Martinus, recently caught up with AusPayNet CEO, Andy White, to discuss the changes in the organisation over the last five years and how it is positioning itself to support the payments industry navigate the upcoming changes.
1. Please provide a brief high-level overview of AusPayNet.
AusPayNet is the industry association and self-regulatory body for the Australian payments industry. We manage and develop standards and guidelines governing payments in Australia.
Our purpose is to create confidence in payments by setting enforceable industry standards for a safe, reliable and effective payments system; leading transformation in payments to drive efficiency, innovation and choice; and being the home for ecosystem collaboration and strategic insight.
AusPayNet currently has more than 150 members including financial institutions, payment system operators, major retailers and financial technology companies.
2. How has the organisation changed over the last 3-5 years?
We’ve made some key governance changes in moving to a model where all our members have the right to nominate and vote for Board positions; where our voting at Board level is one Director, one vote; and where our Board is informed by a Stakeholder Advisory Council, which includes end-users.
Membership has also increased by around 20% over the last five years, including through the addition of a membership category for Payment Service Providers (PSPs).
Finally, we’ve added significant program management capability, which has enabled us to deliver the ISO 20022 migration – the largest and most complex program of work AusPayNet has undertaken to date in-house – and which will enable us to lead similar scale transformation initiatives for the payments industry in future.
3. What are AusPayNet’s marquee initiatives for FY23-26?
Our strategy maps out our focus areas and marquee initiatives. Within that, I would highlight our work on payments transformation (cheques, BECS, ISO 20022 etc.), our scams mitigation program, and our program to become an Authorised Standards Setting Body (ASSB).
4. What structural, membership and governance changes may be required to help deliver these initiatives?
Such changes will build on the ones we’ve already made in terms of membership and governance, as outlined earlier. So, it’s evolution rather than revolution. Becoming an Authorised Standard-Setting Body (ASSB) will involve changes in terms of our governance (for example in the independence and transparency of standards approval and enforcement decisions) and funding. It’s also likely to lead to our membership growing further.
5. Moving from a self-regulatory body to an Australian Standard-Setting Body (ASSB) will be a significant change – what are the benefits and how supportive are members and stakeholders of this initiative?
Treasury’s “Payments system review: From system to ecosystem” (the Review) noted that, “Adherence to standards set by industry bodies is currently not mandatory, which undermines a level playing field for participants within the payments ecosystem. The Review recommends mandating compliance with core industry standards set by authorised standard-setting bodies for holders of the new payments licence. This would ensure consistency and transparency in the application of the standards, such that providers of services that give rise to the same risks would be subject to the same requirements.” Members and stakeholders are really supportive of this “same risk, same rules” approach to payments regulation, noting that it will both protect consumers and support innovation, as has happened with similar “e-money” licenses overseas.
They are also supportive of AusPayNet playing the role of such an authorised standard-setting body; as the Review again notes, “AusPayNet currently has the necessary expertise and capability to undertake the functions of the standard setting body.”
6. The High Value Clearing System (HVCS) migration to the ISO 20022 message standard was a success – what helped to ensure success and what will be the benefits for industry participants and end users?
The migration was the culmination of four years of collaboration between regulators and participants in the Australian payments industry. All 50 HVCS Participants, together with the small, dedicated and highly skilled AusPayNet team, did incredibly well to get everyone ready in unison, setting the bar for high-quality delivery and effective collaboration.
In terms of benefits, with ISO 20022 payment messages able to carry richer, more enhanced and structured data, the migration will lead to significant improvements to process-automation, interoperability and corporate customer experience in Australian payments. Among other benefits, the new messaging standard will allow more structured remittance information and identification of parties in the payments chain, aiding know-your-customer, anti-money laundering and counter-terrorism financing efforts, and sanctions-screening. Financial institutions will be able to create seamless experiences for corporate customers and ultimately deliver faster, cheaper, transparent and more accessible payments.
7. What is the process and timeframe for determining the future of the BECS framework? Do you have any views that you can share on where you believe it should go?
It’s clear that more modern payments systems such as card and real time payments offer capability and functionality that supersedes BECS and are therefore better placed to be able to meet consumer and business payment-related expectations. It’s also clear that a managed rationalisation of legacy payments systems reduces the need to invest in, to maintain compliance of, and to modernise multiple payments systems.
The Government’s recent announcement of “A Strategic Plan for Australia’s Payments System” (the Plan) noted that “AusPayNet … is currently consulting industry and key users on the future of BECS, including feasible timeframes or preconditions for transitioning different transaction types onto alternative payment systems.” The Government stated that it, “supports this industry-led process, encourages participation, and expects this work to conclude by the end of 2023”. So, we will have more to say at the end of the year!
8. What role will AusPayNet take in managing the decline of cheques and do you envisage a date when support for cheques will eventually be switched off?
The Plan also announced the phasing out of Government cheque usage by the end of 2028, with the eventualwind-down of the cheques system in Australia by no later than 2030. This will be subject to further consultation and the Government will also consider the ongoing role of the Cheques Act.
AusPayNet will continue to work with industry bodies and segments that are relatively frequent cheque users, with Government on ensuring payment neutrality in legislation, and with our members on ensuring the benefits of digital alternatives are understood by end-users. Together, that will mean that end-users are not left behind and individual financial institutions are empowered to make proprietary decisions about their payment products and services.
9. What are the potential implications for AusPayNet of the pending changes brought upon by the Treasury review of payments industry licencing and regulation?
The main implication is the move to AusPayNet becoming a standard-setting body and seeking authorisation to do so, as we covered above. That is important because it underpins the licensing framework following this review, which future proofs payments regulation moving forward in Australia, and through it, the protection of end-users and support of innovation. In practical terms, that will involve the governance changes I mentioned before, and will likely see our membership grow still further as the payments ecosystem itself grows.
10. What other key industry changes do you see on the horizon that AusPayNet may need to respond to in the future?
The main one is the need to ensure the ongoing (cyber)security and resilience of the payments system. We are currently working with members and stakeholders on planning for an industry-wide program to migrate the Australian card payments system to the post-quantum computer ready Advanced Encryption Standard. The migration – given it affects almost one million POS terminals, around 25,000 ATMs, all hardware security modules and all card networks in between – will be a large-scale industry effort requiring an estimated 6 to 7 years to complete.
11. Any final thoughts and observations?
We stand at a generational tipping point in payments, with two once-in-a-lifetime opportunities: to modernise payments regulation; and to simplify the payment system. We’ve covered those in the questions above.
However, alongside these two generational opportunities, we have one generational obligation: to mitigate scams, which unfortunately affect far too many Australian consumers and businesses. We’re really supportive of the National Anti-Scam Centre announced by the Government and of ACCC leveraging our Economic Crime Forum to assist with that. We’re also keen to contribute to the forthcoming consultation on national anti-scam codes, alongside all actors in the scams lifecycle: end-users, digital platforms, telcos/ISPs and financial institutions. In mitigating scams, we are better together.
Mangala has over 30 years experience in the financial services and payments industries. He focuses on supporting clients with business strategy, payments optimisation, market expansion, and industry round tables. His clients include major financial institutions, retailers, e-commerce marketplaces, not-for-profits, ATM deployers, card schemes, and payment processors.