Fireside Chat at Australian Payments Plus Beyond Tomorrow
Brad Jones
Assistant Governor (Financial System)
Australian Payments Plus Beyond Tomorrow
Sydney
–
25 March 2025
Audio
36.5MB
Watch video: Panel participation by Brad Jones, Assistant Governor (Financial System) on 13 March 2025
Lynn Kraus
So, Brad, there is a lot to talk about in payments at the moment, several areas of focus, several
areas of improvement and change. But I’m going to warm us up with: what you think Australia is
getting right in payments?
Brad Jones
Thanks, Lynn. I’m glad you started there, because there is a lot to be proud of, I think, in
this country in our work in payments. I say that from a couple of perspectives. One, of course, as a
central banker, we look at the data and when we look at the data what we see is a picture of costs
having come down significantly, certainly in the retail space for merchants in the last couple of
decades. We’ve seen the speed of payments go up in no small part because of the NPP. When we
look globally at how the uptake of fast retail payment transaction volumes are tracking in Australia
vis-a-vis the rest of the world, there’s a good story to tell there. There are one or two
countries that might have seen slightly faster uptake, but we are tracking ahead of most of the pack.
I think that’s a good story to tell.
In addition to that, a particular area of passion for me, and consistent with our mandate
at the bank, we see parts of the payments ecosystem become real hotbeds of innovation. Given the national
productivity challenge we’re all wrestling with, our sense is that the payment system is one of
those sectors of the economy that’s making a really important contribution. So, all of those things
are really welcome. Now, that’s not to say that there are not some challenges and we’ll get
into that, I’m sure.
Lynn Kraus
We’re just going to stay on the good stuff. But, no, we definitely have seen that March change
and lowering the cost of payments. Obviously we have a budget coming out tonight. It’s really
interesting. I’ve spent a bit of time in Canberra over the last year and with small business,
and every line item counts, right, for a small business? What used to be just a line item that went
through, there’s a huge amount of focus on. So, I’m going to stick with that theme around
the cost of payments. Earlier this year, the RBA conducted the first stage of the Merchant Card
Payments Costs and Surcharging review. I understand you had over 100 submissions. Clearly, the
issues paper was very topical to have such a strong response, but I’m sure it also had a lot of
strong, diverse views that were expressed as well. Are you able to talk about some of the themes that
have come from your team’s analysis of those submissions?
Brad Jones
Yes. For those perhaps less familiar, the current surcharging framework was put in place more than
two decades ago. At that time, or basically since that time, we’ve seen a number of important, I
think, public policy outcomes achieved. We introduced basically a price signal. So, consumers began
to understand the implications of choosing different payment methods. And merchants had an ability to
recoup the costs of the choices that their customers were making, which is one of the reasons why
surcharging is a bit different to the costs incurred by businesses in other ways.
The problem is that 20-odd years on the landscape is quite different to the landscape of
the early 2000s. What we observe now is that it’s much more difficult for consumers to avoid
surcharging costs. It’s also the case that we’ve seen a proliferation in single rate or blended
price plans, which has had the practical effect of debit card users subsidising credit card users, which
from a price signalling perspective is not ideal. What we’ve heard from merchants also is some
concern over the opacity of fee structures that are wrapped up into their plans. We felt like it was time
to do stocktake and ask ourselves is that regime still fit for purpose? Or do we need to make some adjustments? Those adjustments could
span a spectrum from very minor tweaks all the way up to including scrapping surcharging on both
debit and credit. So, they’re like the boundary cases, if you like, and then there’s a
spectrum of possibilities in between.
The Payments System Board has had an initial discussion about the trade-offs around
different options, and we’ll be having a subsequent discussion at our next board meeting in June.
What I can say is there is a laser-like focus on making sure we fully understand all of the various
stakeholder concerns and preferences. You alluded to that in your question. This is an area where
it’s not unusual to have diametrically opposed perspectives. We see our role here as to step back,
think a bit beyond just a narrow interest and think about the public interest more broadly. We
haven’t yet landed on a policy proposal, but we are thinking very hard about, if we are to make an
adjustment on surcharging, just making an adjustment downstream -- making no adjustment upstream -- is
just going to redistribute cost in the system. What we are looking very hard at is how do we get
wholesale costs down? If we can get wholesale costs down, the need for merchants to surcharge diminishes
and we’re in a different sort of equilibrium. That’s just to give you a flavour of the sorts of
issues we’re wrestling with.
Lynn Kraus
The surcharging one has been really topical in the last number of months and it is quite complex, as
you mentioned. It sounds, though, like one of my questions -- and I feel like you’ve nailed it
-- is: do you believe there is a way to ban surcharging and still provide that protection to small
business who really carry the cost of payments? Do you believe that’s an achievable outcome?
Brad Jones
It is, but the starting point for our deliberation here is to think about surcharging in the context
of an ecosystem. You cannot pull one lever here and not expect it to have consequences that will
ripple right throughout that system. We’re really trying to think holistically and make sure
that the outcome we arrive at strikes the right balance between the competing priorities and
interests of the various stakeholders.
Lynn Kraus
Excellent. The one other thing that was highlighted in the paper that I just quickly wanted to ask
about was the need to make the various payment fees and charges more visible, as well as possibly
making them easier to compare if you are a merchant. That could really support merchants and users to
actually have more informed choices in the payment options and methods they accept. But I’m
assuming that is going to be as complex as surcharging in terms of getting alignment around appetite
for disclosure. Any thoughts on that?
Brad Jones
All I can say at this point is that we’re favourably disposed to looking at solutions that
reduce complexity, increase simplicity, increase transparency. They’re sort of the organising
principles, if you like.
Lynn Kraus
Great. I think it would be beneficial for all to have that greater transparency. I’m going to go
to the hot topic of the risk review on the move to the NPP. You’ve obviously spent a lot of time
reviewing the risks over the last number of months. I might start at the highest level. If you were
able to give us a report card with five years to run on the clock, how would you assess us at
the moment as an industry?
Brad Jones
Our risk assessment has revealed that there are some significant challenges that industry -- frankly
the country and all participants in this system -- need to lean into as a matter of priority. I would
say as a matter of urgency. At the same time, in the last few months we have detected a notable shift
in the way that the key stakeholders are engaging on this project. We take some comfort from this
pivot that is now starting to generate some momentum. We welcome that, we encourage it and we will do
what we can to facilitate and build on that momentum. But there are some quite material challenges
that our conversations with the entire ecosystem have revealed. The risk assessment was really
designed to surface those, make sure that everyone had visibility over the breadth and depth of the
challenges that are in front of us, give us a consistent, if you like, single source of truth
that we can each now lean into and start to address as a matter of priority. The five years will go
fast.
This is a project of national significance. I can tell you at the outset that the way
that the Bank will be engaging in this project is we will be looking to ensure that the public interest,
the national interest, is enshrined from the outset in whatever functional features our
account-to-account payment system eventually generates. That will be the prism through which we’ll
look to engage here. What is in the national interest -- not the parochial interest of one stakeholder,
but the national interest writ large?
Lynn Kraus
Excellent. I think, speaking to many people over the last week -- we welcomed the report to
crystallise the work that needs to be done. I do think many people in this room have also welcomed it
for their organisation to make sure it’s getting the priority that it needs to within their
organisation. I didn’t get an A, B or a C there, so I’m just going to -- not looking for an
F. So, we’ll just pass that. Two things you called out were a defined vision for what the future
of A to A payments should be in this country. And you also spoke a little bit in the report about has
there been a real assessment of the business case to close BECS? Did the industry look at options to
keep it open? Can you talk about why those two things are really important, the vision and the
alternative to keeping BECS open?
Brad Jones
What the quite extensive amount of consultation between our supervisory team and industry revealed
was a few things. The highest level finding, I would say, though, is that a lot of the challenges
that the risk assessment has laid out start from one proposition. That proposition is that there has
not been sufficient governance or coordination mechanisms up until this point. And from that a whole
bunch of things have flowed. One has been that end users have told us that they don’t feel that
their interests and perspectives were adequately captured in the initial part of the transition
planning. That’s one point. Another was that there was a presumption that all payments would be
shoehorned onto one rail because some institutions had the view that they had to just recoup their
costs.
Now, recouping costs is one quite reasonable desire. We understand that to build rails
you need the private sector. The private sector -- it’s not unreasonable for them to want to recoup
their costs. But that cannot be the only or the defining motivation for the system that we land on. There
has to be a broader range of considerations, including public interest tests. They weren’t fully
articulated. There was a sense that, ‘Well, we’ll just default to the system that we’ve
already made an investment in.’ And there was not a larger discussion, a more foundational
discussion about, ‘Let’s begin with a clean sheet of paper. What are the core features that
industry believe should define our future account-to-account payment system, not just in 2030 but for the
10 or 20 years after that point?’ That conversation never happened. At least it never
happened in a way where a broad range of stakeholders felt like they were included. Because of that there
has been a sense of a lack of legitimacy, because there was no inclusive discussion about what those
central features were. And, then, okay, how do we build a plan backwards from that point? That was
reflected in maybe the third element, which was there was no cost-benefit analysis done on alternative
paths to get to that end state or where the consensus has been formed to agree on these key features. So,
there’s no weighing of alternatives. There was not enough consultation. That’s where we were
late last year. In our discussions and discussions with industry we have detected a notable shift now,
particularly on the governance and coordination piece. I highlighted that at the outset because as I
said, if we can get that right, a lot of things will flow. If we don’t get that piece right, we are
pushing a big rock up a steep hill.
Lynn Kraus
Yes. I know you’ve welcomed the setting up of the NPP steering committee with an independent
chair. That’s really important for us too, because we need to be held accountable that
we’re meeting our milestones as we go. It’s a big step forward from a governance point of
view to have the right people, including RBA, Treasury and AusPayNet working together clearly under
an ACCC authorisation, of course. You have spent some time -- back to pricing -- thinking about and
exploring the end user pricing of NPP transactions. I know it hasn’t been an easy review, but
have you taken anything away from that initial review of the pricing of NPP?
Brad Jones
A couple of things there. One is what we have been able to deduce is a difference in wholesale costs
for NPP transactions vis-a-vis BECS. It’s been harder to get good visibility into differences in
costs faced by end users. That’s an area that the bank wants to do more work in -- work with
industry to lift the visibility over end user costs. There’s a related issue here beyond just
cost, which is value. We would very much encourage industry to think in those terms. This is where I
was encouraged, Lynn, by your opening remarks when you referred to the importance of developing batch
solutions. One of the very clear pieces of feedback we heard from very important end users in BECs
was their desire to ensure that they can continue to receive value for money in whatever batch
settlement solution is made available to them. Their starting point is that, ‘We don’t need
all of the bells and whistles of the NPP. We value reliability, security and batch settlement a
handful of times a day offered at very low cost, which is actually a good trade-off for us and
we’re comfortable with that. So, why would we be shoehorned into a more expensive set of rails
that offers functionality that we derive no benefit from? Why would we want to engage in that?’
It’s like the old Foxtel subscription. You’ve got 3,000 channels; you’d never
watched any of them. Why do you want to pay for that? It’s not an unreasonable starting
position. So, as we start to move from just a cost-based framework to think about value for money and
making sure that end user needs are firmly embedded in the solution set that’s devised,
recognising that not all end users have the same needs will be, I think, a really important feature
in building legitimacy for this migration.
Lynn Kraus
We’ve heard that loud and clear in our conversations with members and with users. There is a
variety of views. Some want to embrace every bit of value that real-time payments and 2000-plus
characters can give them to really achieve something different. And there is a view that we just for
now need to make sure the payment will flow when it flows at the right time to the right person. But
I’m also hopeful once we’re across the line they’ll also be open to exploring the
value that the NPP will give them. But we’re trying to meet users where they’re at with
what their particular issues are. Just a last question before I move on, and there have been quite a
number of questions that have come through on Slido about value. So, it’s great that you’ve
hit on that. We do focus on the cost of payments, but it truly is about not only the cost; it’s
about the value that’s being delivered. With five years to run before the planned
decommissioning date, what role is the RBA going to play to monitor the risks from this point
forward?
Brad Jones
At a high level, we will be monitoring and reviewing that migration and reporting and our staff will
be reporting back to the Payments System Board on a regular basis. And where our supervisory team is
becoming concerned that, say, public interest considerations are being subordinated to purely to
commercial decisions, that would be the sort of context where you would expect issues to be elevated.
We’re at the start of, I think, a series of roundtable discussions, steer cos and so on, where
RBA staff will have roles as observers and will have a role in trying to ensure that some of those
public interest considerations like safety and reliability, value for money, end user choice, and so
on, are embedded into the solution set. There’s a couple of different ways that we’ll be
engaged.
Lynn Kraus
Wonderful. I’m just going to switch gears. I wanted to talk about cybersecurity. One of your
defined priorities is uplifting cyber resilience and clearly defined cyber strategies and, along with
that, rigorous cyber testing programs. I think in the current environment there is a real heightened
awareness and risk. I wanted to just cut straight to it, if I can. Can you share what it is
you’re worried about and, more importantly, what the industry and the people in this room need
to do to be prepared?
Brad Jones
You’re talking about cyber. There’s clearly a non-state and a state-based element to this.
I would say that our growing concern is the state-based dimension to cyber risk is very unlikely to
decline. We’re going to need to step up -- when I say ‘we’, the community of
regulators and industry, are all going to need to step up the intensity of how we address this
challenge. I would say for almost everyone in this room we have grown up in an era of the peace
dividend. That has meant we could focus on, say, speed over resilience. If you think about the global
trading system, what’s been the defining feature of the last three or four decades in the global
trading system? Speed over resilience. We’re now at an inflection point. The Payments System
Board had a really good discussion at the last board meeting about features of the new world order
that are with us now. The era of geostrategic competition is clearly going to be one of those and
will really define the context for everything that we’re doing. With that in mind, the types of
practical things that we think industry can do for financial market infrastructures is ensuring that
they are regularly testing their cyber controls against industry standards. We also offer the CORIE
program, which enables key FMIs and payment systems to subject themselves to very robust resilience
tests. So, that’s key. We’re also engaging with a number of institutions as part of a new
program on geopolitical risk which is designed to build offline payments capacity. If one of our
platforms is subject to a massive cyber attack, do we have a fallback operational capability to
ensure that payments, critical payments, can still be made? Perhaps not on a real-time basis, but
they can still go through? There’s a broad suite of things that we’re doing as regulators
and that we’re also urging and encouraging industry to take on.
Lynn Kraus
Yes, and I know that the industry is having lots of conversations around contingency and backup
plans. I think that work is definitely progressing. One, I just thought I might, if you’re
comfortable, pop over here in the slido, which is really interesting is that if we think about the
role of global tech at the moment, clearly they are influencing, and have seen a lot of influence
over the last decade, on how we pay and how everyday people choose to make a payment. There’s a
question here: do you have a view about whether that global tech influence is in any way eroding
domestic confidence in new value propositions such as the NPP? So, how do you think? Competition is
good. I know the RBA loves competition, but there is an influence beyond what we do here
domestically, right?
Brad Jones
You’re right; we are predisposed towards competition. In fact, it’s in our mandate. We also
value sunlight. So, if entities are engaging in our payment system in an opaque way and preventing
sunlight from radiating out, including on their cost structure, that will be problematic for us.
Now, we’re at a quite interesting juncture where we were hopeful a really important
piece of legislation would go through in this sitting of parliament. It looks like that’s not going
to happen now. All I can say for the record is the bank is very strongly, and the Payments System Board,
supportive of the payment system reforms that were proposed. Once the election has passed our support
will be just as firm as it is today that those reforms go through, because we are operating under a
regulatory regime that was set up for a different world. It’s no longer fit for purpose, and we
really need to expand the perimeter of the sorts of entities that we can regulate so that we can meet
some of the challenges that I think were implied in that question.
Lynn Kraus
Yes, great. I’m going to cast our minds a bit forward beyond the current payment rails and
reflect on what’s coming down the track. Treasury just really recently, even maybe in the last
week, announced a statement about developing an innovative Australian digital asset industry.
It’s important because that shows that there is momentum around getting some clarity around
digital assets in Australia. Very much like to hear your thoughts on the potential benefits of a
wholesale central bank digital currency, and also just to hear your aspirations for Project Acacia,
which is, I think, currently under assessment for all of those who’ve submitted, including us.
Brad Jones
I can maybe link our interest in wholesale CBDC back to your first question, Lynn, which was: tell us
all of the good things about retail payments? Just at a really high level, part of the reason why in
Australia we haven’t seen the public policy case really emerge for a retail CBDC is because we
already have a fast payment system that’s working well. The usage is going up. We hope costs
continue to come down. There’s nothing obviously broken in our retail payment system that would
motivate us to, certainly within the next few years at least, really seriously consider that. Now,
that framing is not the case for a number of other countries. For a number of other countries they
are pushing towards issuing a retail CBDC because there’s some big issue in their retail payment
system that they think a CBDC could address. That’s not where we’re at.
On the wholesale side, we haven’t seen quite the same level of innovation that we
have on the retail side. We don’t have quite the same level of transparency. We can see there being
potentially a stronger public policy benefit from uplifting the performance of wholesale clearing and
settlement. And it would arguably be less disruptive than, say, introducing a retail CBDC, because we
already issue central bank money to a select number of wholesale institutions. So, it would be more
evolutionary than revolutionary. We see bigger potential benefits, fewer potential disruptions from
moving into the wholesale CBDC space. One area of particular interest for Project Acacia, which for those
that are less familiar is our new project, is we’re interested in looking at the role that
tokenisation/tokenised assets could play in helping to uplift the performance of our wholesale markets.
There could be a role for wholesale CBDC to facilitate those new markets, if wholesale CBDC was the
settlement asset that basically allowed those transactions to be settled.
There are also alternative worlds where private digital money acted as a settlement
asset. One example would be stablecoins, which are very much in scope for Project Acacia, and also
tokenised bank deposits, which is an area where I think generally there has been less progress relative
to stablecoins. But we are going to have a really good look at the role that tokenised bank deposits
could also play in this future system.
Lynn Kraus
Excellent. We’ve got a plus talk this afternoon from the DFCRC, which will include a lot of that
conversation, so that’s great. I’m going to go to a few questions that are on the Slido,
and you are welcome if there are any there that really jump out at you. I felt like there’s one
that’s probably for me. I might start with that. In consultation around end users preferring to
stay with batch, how well do you believe the downstream cost of managing the unhappy paths in batch
is understood? Now, clearly I think that was meant for Brad, but I think the onus is on AP-plus to
really understand the implications of unhappy paths in batch. We have been doing a lot of work.
Particularly right now that work has focused largely with government and government agencies spending
time in Canberra to truly understand the outcomes around batch payments. We are listening and we are
learning, and obviously I think now that we have applied for the ACCC authorisation to be able to
work closer with AusPayNet -- I think having the two organisations working together will help us
understand that. We still have work to do right across corporate Australia to understand the end user
impacts. But if you want to add anything to that? I think there’s clearly a lot to learn in
terms of the impacts around batch.
Brad Jones
I think you’ve summed it up well, Lynn. Understanding what are the features of batch settlement
that end users most value today. There may be some ways to introduce features that they would equally
value in the future. I think that’s absolutely worth exploring. But without the value-for-money
proposition holding, I think we’re really going to struggle. Industry is really going to
struggle to get those end users brought in. Back to that Foxtel analogy that I drew, paying for TV
stations you don’t use does not represent value for money.
Lynn Kraus
This first one, radical idea -- I’m going to go there even though I won’t have a job! Has
the RBA considered making the NPP rails a public service where payments are free in the same way that
UPI and Pix have done?
Brad Jones
No.
Lynn Kraus
Phew! Okay.
Brad Jones
Just stepping back a bit from first principles, the central bank has a really important role to play
in the financial system and in payments in a couple of ways. Providing confidence in the finality of
settlement. Trust in the value of money. And providing a level playing field for competition. Beyond
that, we look to the private sector to take up the challenge of competing and offering the best
possible services at the lowest possible price for consumers. That’s something the private
sector is perfectly equipped to do. You can do that better than the public sector. You don’t
want the public sector in that space. So, no.
Lynn Kraus
We’ve got quite a number of PSPs with us today and there is a question here about the BECS risk
review. The question is: what triggered the inclusion of the statement about ensuring a PSP does not
create a proprietary solution to problems in the BECS transitions risk paper?
Brad Jones
I think what that statement was getting at was this issue around interoperability. We want
interoperability as a guiding principle to be reflected in whatever our future solution set looks
like. Similarly, we don’t want walled gardens to pop up all over our payment system. We
don’t think that will be particularly helpful. That’s basically the subtext.
Lynn Kraus
Yes. So, not locking in, and allowing people to move freely?
SMEs pay a lot more for payments than big business. Is the RBA concerned about this,
particularly if surcharging is banned and blended rates stay? Clearly, volume discounts seem to be alive
and well for larger organisations. What’s your concern level on that difference between small
business and large business?
Brad Jones
Significant and ongoing.
Lynn Kraus
Wonderful. Just two more questions here. The risk assessment points prioritising low end user prices
-- would the RBA consider taking a similar approach to merchant costs by looking at the full
ecosystem? I think you’ve started that with some of the NPP pricing work already.
Brad Jones
Yes, we are thinking very hard about full ecosystem costs. One of the areas in particular on merchant
costs that has been surfaced by some of our discussions is the lack of transparency also around
scheme fees. That’s a particular area where we want to learn more and where we’re inclined
to want to have more sunlight on those fees.
Lynn Kraus
Yes, very similar to the merchant -- transparency, visibility, simplicity. We’ve had a question
about crypto. What do you observe in recent changes with how other countries are regulating crypto
and the implications of that for Australia’s thinking?
Brad Jones
A quite landmark paper dropped out of Treasury late last week, which I think was designed to give
industry a sense of the direction of travel. Certainly the feedback that we’ve heard for some
time, and that our colleagues at Treasury have heard, is they need a bit more guidance; industry
needs a bit more guidance. Industry has been certainly communicating to us and to ASIC and Treasury.
There’s a lot of activity now going on globally. If we don’t move, if legislation is not
updated, if regulation is not updated, we risk a brain drain. People very astute in the digital asset
space. They will just go to Singapore, Dubai or the UK. I think that message has got some traction,
and now you are seeing momentum building again. We would welcome that. We think this is a really
important space for the country. At the Reserve Bank, we’ve got some ability to move the needle,
and that’s what Project Acacia is trying to achieve. Within our constraints, we’re prepared
to push into use cases, different types of ledgers, different types of wholesale infrastructure that
haven’t really been explored -- certainly not explored in Australia and even relative to some
other countries. We want to do our bit. I know our colleagues at Treasury want to do their bit. One
of the areas that our colleagues at Treasury are also committed to doing, which I think is really
important, including for some folks in this room, is facilitating the review of the enhanced
regulatory sandbox. There’s some, I think, really good prototypes internationally, including in
the UK, where we could learn a lot about adjustments we could make there that would help facilitate
more early stage innovation and smooth the pathway from ideation to commercialisation. I know our
colleagues at Treasury are very attuned to that and want to play a constructive role. I want to
assure industry that, from a regulator’s perspective, we are watching what’s going on
internationally very closely and we are committed to doing what we can to provide that extra clarity
that we know is essential for business planning purposes.
Lynn Kraus
Excellent. I’ve got one more question here and one more question for me, but I just have to call
out the first question. Why is it that people from the RBA look so fit, healthy and relaxed?
Honestly, just take that compliment and don’t even …
Brad Jones
I’m not going there!
Lynn Kraus
I do want to just ask you a wrap-up question. If we go back to the theme today of unleashing
opportunities, looking ahead five years, what opportunities do you want to see unleashed for the
Australian payments landscape by the people in this room?
Brad Jones
Most regulators of the last 30 or 40 years would equate more innovation with less
resilience; that there was a trade-off. The dream I have -- and I talk to my team about this -- is
that we can break that nexus, that we can move into an era where the Australian payment system
becomes this hotbed of innovation in a way that actually reinforces resilience. Given the sort of
world that we’re moving into, it’s going to be a more dangerous, less stable world. We need
innovation -- actually reinforcing resilience in the system, not undermining it. So, why don’t I
end on that note?
Lynn Kraus
Fantastic. I am so pleased. We have had 13 pages of questions. So, clearly, Brad, people really
wanted to hear from you. I’m sorry that we didn’t have you for a whole morning, because
there was a lot of appetite to ask you questions. So, we’ll ask you back next year. Please join
me in thanking Dr Brad Jones.