I’m fortunate to be joining APCA at an exciting time in the world of payments. I join the Australian market with re-packaged knowledge from other global markets, a curious mind and a high regard for Australia and all it has to offer.
Australia has a strong economy that withstood the global crisis and robust household consumption expenditure underscored by a well-established digital economy. Additionally, Australians are fortunate to have a resilient and growing financial market, underpinned by a credible and sophisticated banking system. These factors all work together to create a positive spill-over effect for payments.
As I go about my first few weeks, getting to know this market intricately, I’m struck by how advanced Australia is in its move towards a less-cash society. With ATM withdrawals down by 6.6% (compared to the 4.9% decline in 2015) and cheque use down by 17.2% (compared to the 15.7% decline in 2015), Australia is making great strides in reducing its reliance on paper money. This is important from an efficiency view point, as evidenced in a recent article in The Economist which indicated that 0.5-1% of GDP a year is spent on managing cash world-wide. And it’s more than coincidence that as I build up my picture of this advanced market, I’m thoroughly enjoying esteemed economist Kenneth Rogoff’s “The Curse of Cash”. His discussion about how paper money supports criminal activity and can cripple monetary policy provides interesting context.
This reduced reliance on cash in Australia is paired with exceptional tap and go payment habits, impressive smartphone penetration and a rapidly maturing Fintech market. Moreover, we are on the brink of having a global reference point for data rich real time payments with the New Payments Platform that will provide a stimulus for yet more innovation.
Developments in payments are not limited to the NPP. Concurrent innovation includes new payment choices for public transport, early signs of a shift from cards to mobile, digital identity and industry wide consideration of access and APIs. My list wouldn’t be complete without mentioning blockchain technology, for which I keep coming back to a recent comment by IBM’s CEO Ginni Rommety, 'blockchain will do for transactions what the internet did for information'. As Standards Australia has been chosen to lead the development of international standards for blockchain, I’m particularly excited about the role that we can play in supporting this transformative technology.
As our digital future unfolds, I’m pleased to be developing APCA’s role in enabling the network effect, that is so crucial to payments, through collaboration with members and the growing number of new stakeholders. In response to the new and rapidly evolving landscape we have started to adjust our identity and to rethink how we engage the market. This new approach will deepen our engagement and collaboration with members and all stakeholders. In this new world, we will maintain and further evolve APCA's thought leadership role; position APCA as a contemporary, relevant, inclusive and representing organisation; aim to be the trusted advisor and best independent source for payments research; and be a leader in influencing regulatory and policy debates.
I look forward to working with you on the continued development of a world class payments system.
In September 2016, we were delighted to welcome Leila Fourie as our new Chief Executive Officer. APCA also congratulated former director Adrian Lovney on his appointment as inaugural Chief Executive Officer of NPP Australia.
Leila Fourie, Chief Executive Officer, APCA
Dr Fourie comes to APCA with over 20 years of international experience, primarily in financial services, having served on multiple boards and held senior roles in banking, capital markets and payments. Prior to joining APCA, she served on the board of the Johannesburg Stock Exchange as Executive Director.
Before this, Dr Fourie was the Managing Director of the Card Division for one of South Africa’s largest banks, Standard Bank. She also served as Chairman on the board of Diners Club SA and board member on Chicago-based Diners Club International Advisory board.
For more information click here.
Adrian Lovney, Chief Executive Officer, NPP Australia
Prior to joining NPP Australia, Mr Lovney was General Manager of Product & Service at Cuscal Ltd. This entailed responsibility for product, services, and customers across the business, including leading the organisation’s work in NPP. He was an APCA director representing Credit Union members from February 2013 until August 2016.
Before this, he was Cuscal’s General Manager Strategy & Communications, responsible for leading the evolution of Cuscal’s business over the last five years as well as the successful migration and transition of customers to a new and innovative payments platform.
In September 2016, we farewelled APCA’s longest serving director, Paul Inglis, following his resignation from the Board. Mr Inglis was appointed by the Australia and New Zealand Banking Group Limited as a director in July 1998. During his 18 years on the Board, he served on numerous Board committees as Chairman and member, as well as on various working groups. We thank Mr Inglis for his valuable contribution.
APCA also extends its welcome to two new directors. Anne Collard was appointed to the Board by ANZ following Mr Inglis’s resignation. Craig Kennedy represents Credit Union Members. Mr Kennedy joined the Board in August 2016 following Adrian Lovney’s resignation. APCA’s Board of Directors as at 12 September 2016 is available here.
APCA’s latest fraud report, ‘Australia Payments Fraud – Details and Data’, released in August 2016, shows that Australians spent nearly $690 million on their payment cards in 2015. Fraud accounted for 0.07% of this total.
Australia’s rate of card fraud increased to 66.8 cents per $1,000 spent, up from 58.8 cents in 2014. This reflects a 21% increase in card-not-present fraud which now accounts for 79% of all Australian card fraud by value. Most of this fraud due to sophisticated malware and phishing attacks, and large-scale data breaches. The increase in card fraud is in line with global trends; card fraud in the UK increased from 75 pence in 2014 to 83 pence per £1,000 in 2015.
Online fraud is increasing as measures to combat counterfeit / skimming fraud take effect. On Australian cards used domestically, counterfeit / skimming fraud dropped by 10% due to the increased security of chip technology. However, on Australian cards used overseas, counterfeit / skimming fraud increased by 77%. Criminals are targeting terminals that are only magnetic stripe in countries that are still rolling-out chip technology.
Closer cooperation between financial institutions and law enforcement is also helping to limit losses from ATM skimming attacks and card theft. Sharing information on payments fraud is helping to identify the activities of criminal gangs operating in Australia and to shut them down.
For tips on protecting against online card fraud and full stats and figures, visit Australia Payments Fraud – Details and Data.
Combating CNP fraud continues to be a strong focus for the industry. In the 12 months to June 2015, CNP fraud in Australia increased by 36% to $118 million. It now accounts for more than 70% of the total fraud occurring in Australia on Australian issued cards.
APCA lodged its submission to the Productivity Commission Inquiry into Data Availability and Use on 29 July 2016.
APCA's submission - Trusted Data Sharing, Now and in the Future - looks at how data sharing protects consumers, improves products and services, and assists governments and regulators. The submission highlights that trust is the cornerstone of data sharing arrangements in place within the payments industry today.
The APCA submission supports the alignment of the core requirements of data sharing: consumer interests, security, privacy, commercial incentives, compliance, and liability.
The numerous arrangements in place today deliver consumer benefits and provide a strong platform for using data to generate greater efficiency and innovation and deliver increased value for consumers. These arrangements should be used as the basis for greater payments data sharing.
The Commission will release a draft report in November 2016. Responses to the draft report will be due in December 2016.
For more information, read Trusted Data Sharing, Now and in the Future.
APCA is conducting preliminary engagement with members and other stakeholders to inform options for the future of the ATM Access Code and Regime.
The review is undertaken in the context of:
It is important to gain a clear understanding of what industry stakeholders need in relation to ATM access in the future and how best the payments system can support this.
Information gathered as part of this engagement will be used to develop recommendations for the future of ATM Access regulation.
APCA has been consulting with stakeholders since late September 2016.
For more information, read the Review of the ATM Access Code here.
APCA, in partnership with Women in Payments, hosted a discussion on the future of payments on Wednesday, 17 August 2016. The theme of Connections and Collaboration brought together 60 members and a panel of experts to discuss dominant themes in our changing payments landscape.
We’re grateful to our panellists for their time and the insights shared:
You can read an overview of some of the themes discussed in our blog post.
Thank you to everyone who attended and contributed to this lively and informative evening.
The Australian Payments Council and the Payments System Board of the Reserve Bank of Australia held their second joint meeting on 19th August 2016.
Glenn Stevens, the then Governor of the RBA and Chairman of the Payments System Board, acknowledged the important role of the Australian Payments Plan in guiding the strategic development of the payments system.
Mark Birrell, Australian Payments Council Chairman, provided a progress report on the industry’s collaborative action and Council members provided information on initiatives currently being undertaken on the Australian Payments Plan. Glenn Stevens commended the Council for its work on the Plan.
Read more here.
Here is a selection of opinion articles from the APCA blog during the past quarter:
Are contactless bank cards the future of public transport ticketing?
by Alice Markie
The irony of Bitcoin and the future of Shared Ledger Technology
by Chris Hamilton
To read more articles, click here.
To receive notification of all new articles, click here to sign up to the APCA blog RSS feed.
For those who don’t know, this year was the first time Money 20/20 has been held outside the US. This was a great opportunity to gain insights considering that the European banking system is similar to the Australian system especially in comparison with the US, which is significantly more fragmented. The reason that I found a FinTech conference particularly useful is that it deals with innovation / disruption and the challenges these create for existing and new players as well as regulators.
I thought I’d share my thoughts on what Australia can learn about driving change in the payments system.
1. Distributed Ledger Technology
The conference participants and commentators seem to be divided into three groups:
There are also many, and varied, implementations of DLT regulation. For private networks it was suggested that participants could create a rulebook on which they mutually agree. Public DLT networks are a little more challenging and require some form of industry regulation. Because of the newness of the technology, governments are conservative with the changes – this in turn creates uncertainty for FinTechs.
Interestingly, Isle of Wight has decided to take a position within the distributed ledger marketplace by creating local legalisation that supports DLT. Isle of Wight is actively marketing itself as a sensible place for distributed ledger / blockchain FinTechs to domicile and launch their business from.
2. Improved point of sale devices and applications can grow businesses
Point of sale (POS) devices and applications received a lot of attention. Especially over the debate as to:
In contrast, the large hardware manufacturers were promoting their latest fully integrated suites, although some of them are opening up the software to create a platform for payment services companies to build applications on.
The example of improved POS commonly quoted was ordering your coffee on your smartphone just prior to arriving at the café so that it is already made when you get there and the payment is taken automatically. There was some debate, however, as to the degree of personalisation and the distinction for users between what’s creepy and what’s cool.
A second trend in the area of POS is digital wallets - what some commentators argue are inevitable. The combination of new generations of POS software and digital wallets certainly make the trend of ‘invisible payments’ a real possibility.
Some groups promoted a complete shift away from card transactions to fully digital transactions. They argued for using the mobile as the interaction device thus enabling fully integrated, or seamless, payments. Others believe that the card and physical terminal are here for the foreseeable future. It seems that both arguments have validity.
3. Consistent implementation across a market is critical to combat Card-Not-Present (CNP) Fraud
This discussion really revolved around balancing security versus customer experience. The main message conveyed was that FIs will need to keep testing fraud prevention and detection methods to balance the customer experience impact. Consistent implementation of a solution across a market was seen as a critical enabler of success. There was a reasonable degree of expectation that smart implementation of tokenised systems would significantly reduce CNP fraud.
4. Digital Identity is a cornerstone to solving various forms of fraud
One of the strongest digital identity examples is Sweden’s BankID system which sits alongside their national identification card but is actually a collaboration between the banks as opposed to a government initiative. This meant that it became commonly used - driven by regular internet banking use - and it was also designed to be interoperable including with government services from day one.
5. Open APIs are an enabler for customers that force FIs to focus on customer experience
It’s fair to say that the impact of the European Commission’s PSDII is far from clear and many of the detailed issues must be resolved at a country level. One of these issues is how liability will be managed, with country groups expected to report back on suggested approaches to managing liability in the near future.
Debate focused on the belief that open APIs will push some FIs to be infrastructure providers (tracks) and some to be customer experience companies (trains). Both are argued to be valid market positions. However, the overall fear is that some FIs will fail to clearly land in one area or the other, and will be unsuccessful at both. Some argued that there are already FIs making a concerted effort to be the customer experience enabler, and that the drive to open up APIs simply accelerated this trend - putting pressure on the European FI to completely digitalise their business in a race to lift customer experience.
These are key learnings for Australia which are worth keeping in mind in the context of the Productivity Commission’s inquiry into Data Availability and Use.
6. There are many ways for FIs to participate in FinTech innovations
There was a reasonable amount of discussion on whether traditional FIs should embrace FinTech partners. The weight of the conference was certainly yes.
The core argument was that successful FinTechs will solve real customer challenges. That is, they could improve the experience/outcome for customers or the FI.
It is also clear that there are many ways for FIs to participate in FinTech innovations. These can include (each with their own pros and cons):
APCA’s latest Milestones Report, released in April 2016, shows that the digital economy is accelerating the decline in cheque use.
The report shows that both Australian businesses and consumers are choosing electronic payment methods in place of traditional payment systems.
Australians used 16.3% fewer cheques in 2015 than 2014. This rate of decline is accelerating, with a 14.3% drop the previous year. Meanwhile the use of cash has declined with ATM withdrawals dropping 5.5% over the past year. Globally, Australian cheque use is declining faster than most other nations, with a total decline of 71% over the last decade.
Australia was also ranked as one of the most digitally active nations in the world. We are fifth globally for smartphone banking uptake, and the sixth most smartphone concentrated nation. Meanwhile an impressive 86% of Australian households are online.
Click here to get the full infographics and report.
The Reserve Bank of Australia (RBA) released images in April of the new $5 banknote.
The new note will be issued into circulation from 1 September 2016. Existing banknotes do not need to be exchanged as the original issue can still be used.
The new banknote:
More information about the design and security features, which will be common to all banknotes in the new series, will be part of a RBA public awareness campaign over coming months.
APCA continues to support the introduction of the next generation banknotes and promote collaboration between RBA and industry stakeholders.
For more information visit the RBA Next Generation Banknote website.
On 24 May 2016 APCA issued ‘Third Party Digital Wallet Security Guidelines’. These voluntary Guidelines provide Issuers with a statement of industry best practice - and a frame of reference for considering and managing potential fraud and data / transaction security risks.
The Issuers and Acquirers Forum (IAF) will maintain the Guidelines and monitor developments in international standards for mobile wallet payments.
The Guidelines address the following three issues:
The IAF is also reviewing options for an industry response to card-not-present (CNP) fraud in Australia. This follows the ACCC's draft determination proposing not to grant authorisation for the application to mandate and coordinate implementation of 3D Secure by online merchants.
Combatting CNP fraud continues to be a strong focus for APCA and the IAF. In the 12 months to June 2015, CNP fraud in Australia increased by 36% to $118 million. It now accounts for more than 70% of the total fraud occurring in Australia on Australian issued cards.
The Productivity Commission has commenced a public inquiry into ‘Data Availability and Use’.
Following recommendations from the Murray and Harper inquiries, the Commission has been asked to conduct a broad ranging investigation to ‘examine the benefits and costs of options for increasing the availability of and improving the use of public and private sector data by individuals and organisations’.
An APCA working group is examining the implications of the inquiry.
The Australian Payments Council is drafting a response to the inquiry based on recent work completed on guiding principles for digital identity.
The Australian Government will use the output of this inquiry to consider policies regarding data availability with an aim to boost innovation and competition.
The issues paper looks at two areas of interest for APCA:
The Canadian Payments Association (CPA) released ‘The Vision for the Canadian Payments Ecosystem’ on 20 April 2016.
The paper outlines plans for modernisation of the Canadian payments system that “must be fast, flexible and secure, promote innovation and strengthen Canada’s competitive position”.
Several references are made throughout the document to similar modernisation efforts in Australia such as the New Payments Platform.
An extract from the Vision paper identified eight focus areas:
Public consultation is open until 20 June 2016.
The new organisational structure put in place in late 2015 established “Payments Direction” and “Payments Community” as distinct focuses for APCA. Recently, we welcomed new recruits to three newly formed roles within these units – we are delighted to introduce them.
Nick Cliff Payments Direction
Nick joined APCA on 21 March as Research Manager. His key focus is on monitoring how the world of payments is changing, globally and in Australia, and interpreting the implications for stakeholders. He is also assisting the Australian Payments Council's subcommittees for Digital Identity and Enabling the Future.
Damien Butler Payments Direction
Damien joined APCA on 30 May in the role of Executive Manager, Policy and Strategy. In his previous role, Damien headed public policy at Suncorp Group, leading the Group's major public affairs priorities. Damien has also held several senior roles at Insurance Australia Group across government and industry relations, policy & corporate affairs and joint venture partnership management.
Paul Anguita Payments Community
Paul Anguita joined APCA on 16 May as Manager, Member Engagement. Paul’s role is to further build and develop relationships with our members. He previously worked five years at HSBC in a mix of retail & commercial banking roles. Most recently, he was an Account Manager in HSBC's commercial transactional banking business. Paul is excited about getting to know all APCA members in 2016.
This is my last CEO Corner for APCA, after 10 years. For old times’ sake, I went back to my first CEO Corner of March 2006. Unsurprisingly, it is a bit of a sermon on the virtues of industry collaboration for systemic change. At least I’m consistent.
I’m something of a payments tragic: I’m passionate about efficient payments infrastructure as an enabler of economic development and prosperity. In Australia, our systems have evolved a lot in the last 10 years. We score well by global standards on measures like increase in electronic payments per capita, account penetration, rise in mobile banking usage, proportion of currency in virtual form, rate of chip and contactless take-up, decline in cheque use, decline in cash use, and so on. Australians take their highly automated payments system for granted, and also take for granted that they will get each innovation pretty much as soon as it rolls off the production line.
The New Payments Platform is a substantial investment by the leading payments institutions in seeking to ensure that this continues into the future. It’s not a new product or service, but a platform for bringing new payments products and services to market in the future in a better way than has been possible up to now.
Not that there isn’t plenty more innovation we could strive for. The rapidly evolving fintech ecosystem is a welcome opportunity to hothouse some further improvements in the payments system. I think it is very encouraging that we see a lot of engagement and dialogue amongst the fintech community and the payments community. At APCA, we were delighted to have Stone and Chalk present at our 2015 Annual Conference, giving them a platform to engage the who’s who of Australian payments. Once the New Payments Platform goes live in 2017, I hope the fintech community will play an important role in identifying and developing overlay service ideas to get the best out of the new real-time architecture. The formation of the Governments Fintech Advisory Council seems to be more evidence of that constructive engagement.
In our own payments community, we are more focused than ever on collaborative engagement to improve the system. Under new Chairman Mark Birrell, the Australian Payments Council is following through on the Australian Payments Plan it launched in December, to explore and prioritise areas of collaboration. Doing so requires engagement and debate from across our community, and in Government too. Some of this is under way already, and I hope you will see more in the coming year. In this endeavour, we have had the support and encouragement of the Reserve Bank of Australia, which has repeatedly demonstrated its preference for industry engagement and collaborative solutions over formal regulation. I applaud them for that.
So: the two things I am most pleased to see at the end of my time are payments infrastructure that has evolved, and will continue to evolve, to meet the needs of the changing economy, and a healthy, sophisticated policy debate amongst industry and regulator. Like all meaningful systemic improvements, these were the work of many – but I am happy to have been part of the team.
Back in 2006, I said that: “breaking in a new CEO is a rare opportunity for an organisation to re-evaluate everything: streamline processes, tweak structures, dust off the things in the too hard basket and generally recapture the spark”. This, I think is again relevant today. Being CEO of APCA is a great job, but it’s time to let someone else have some fun.
It has been my privilege to work with some wonderful folk at APCA, staff and members who are bringing new ideas and perspectives after only a few months, and some stalwarts who were delivering the goods when I started 10 years ago, and will do so after I finish. Each adds something valuable to our culture. These are turbulent, exciting times for payments, but APCA is in good hands. Thank you, all.
Further to recommendations in the Australian Payments Plan, the Australian Payments Council has started work on a set of Principles for Digital Identity. Members of the Council’s Payments Community, representatives from government bodies and the Fintech community have worked collaboratively over a number of weeks to agree a set of principles.
A workshop that attracted 40 attendees from a cross section of industry provided a forum for issues generation. Participants discussed five main topics:
The principles, that cover a range of issues including ethics, data ownership, control, value, and usage, will help shape the approach to digital identity in Australia. They are grouped according to three main themes; regulatory, technical and commercial.
Organisations and individuals that would like further information on this are invited to contact the Payments Council firstname.lastname@example.org.
APCA is seeking authorisation from the Australian Competition and Consumer Commission (ACCC) to implement a roadmap for combatting card-not-present (CNP) fraud.
In the 2015 financial year, CNP fraud accounted for 80% of all fraud perpetrated on Australian cards. It is the fastest growing type of card fraud worldwide.
The CNP roadmap initiative brings together issuers, acquirers, and the four major card schemes. It will target online card fraud occurring in Australia.
The main action is to progressively roll out 3D Secure to all Australian online merchants. Using a risk-based approach, the focus is on improving security while making the authentication process easy for consumers so as to address merchant concerns about shopping cart abandonment. The roll-out will be supported by an industry merchant and consumer education campaign.
APCA submitted its application to the ACCC at the end of January 2016.
The Reserve Bank of Australia (RBA) announced new security features will be introduced to Australia’s banknotes starting with the $5 banknote on 1 September 2016.
To promote collaboration between the RBA and industry stakeholders, APCA established the Next Generation Banknote Support Project in September 2015.
The project’s objective is to support the RBA’s introduction of the ‘Next Generation’ of banknotes to minimise impact during the introduction of each denomination.
The first new design will be released in the middle of the year. It will include a ‘tactile feature’ to aid the vision-impaired community, as well as a range of new security features intended to ensure the ongoing security of Australian banknotes. The colour palette, people and sizes will remain unchanged.
For more information visit the RBA banknotes website.
APCA made its submission to the RBA’s Review of Card Payments Regulation on 3 February 2016. This was in response to the Consultation Paper that was issued on 3 December 2015.
The APCA submission supports the following points:
The APCA submission can be found here.
Following its meeting on 19 February 2016, the Payments System Board said that it would work towards a decision on the Review at the May 2016 meeting. It identified the implementation period as an important issue, given the wide range of suggestions for an appropriate transition time.
Over 30 unique non-confidential submissions to the Review were published on the RBA website alongside the APCA submission.
The submissions noted the following:
The submissions are available here.
In early 2016, the US Federal Reserve Banks celebrated the first anniversary of the release of the Strategies for Improving the US Payment System paper.
The Faster Payments Task Force was established to progress the agenda outlined in the paper and an update of its activities was released on 2 February 2016 to mark the anniversary.
The main objectives of the Task Force are to foster debate within the USA about how to make the payments system faster and more secure; consider the needs of the unbanked and underbanked; and explore the role of the US Federal Reserve as a payments infrastructure provider.
To date the Task Force has developed:
The Task Force has also convened a Capability Showcase, which allows firms to demonstrate their capabilities. A number of these pitches are available through YouTube.
Development grants for finance sector women
by Alice Markie
Perspectives on the Australian Payments Plan
by Alice Markie
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