Speech
Panel Discussion – The Future of Account-to-Account Payments in Australia
Ellis Connolly
Head of Payments Policy
AusPayNet Summit 2024
Sydney
–
12 December 2024
Audio
42MB
Watch video: Panel Discussion – The Future of Account-to-Account Payments in Australia
Transcript
Speaker
Now, to our next panel of the Future of Account-to-Account Payments in Australia. I would like to
welcome the following panellists to the stage. First up, Sally Etherington, Acting Assistant
Secretary, Payments and Financial Innovation Branch of Digital Competition and Payments Division,
Treasury. Please welcome Sally to the stage. That is one mouthful of a title. You don’t want to
have to fit that on your name badge, right. Okay. Next we have Ellis Connolly, Head of Payments
Policy at the Reserve Bank. Ellis, come on up. Katrina Stuart, General Manager Business Payments,
Australian Payments Plus. Please welcome, Katrina. Now, we don’t need to introduce Luke Wilson
because he’s already been on stage but come on back, Luke, joining us for a second panel. Chief
Operating Officer at AusPayNet. And moderating this panel is Jackie Kallman, Head of Payments,
Industry and Engagement at ANZ. Please come on up, Jackie. She’s in charge of fielding the
Q&A.
Jackie Kallman
Hi everyone. Hi panel, it’s great to be here. Hi Sally, down there. It is really far away. Yeah.
Good thing we have mics. So good afternoon and thanks for sticking with us. I am really excited to be
moderating this panel today on the future of account-to-account payments. And I Chair the BECS
Management Committee at AusPayNet and ANZ is a member of BECS and we’re also a member of NPP and
there is also other systems we’re members of so I have a very, you know, relevant interest in
this discussion today. So we’ve been discussing this topic for some time now and as the world
moves to real-time payments, richer data, digitisation, really understanding, well, what does that
mean for Australia and the future of account-to-account payments in Australia. So in 2022 at this
summit actually we asked the question of, is it time to start thinking about ending BECS and
it’s - the RBA has called it the workhorse of the system. It’s deferred net settlement but
is it time to really move to more modern alternatives like the NPP. So last year after extensive
consultation with the industry, AusPayNet communicated a conditional target end date of 2030, June
2030 for BECS, subject to ensuring there is no risk to the security, stability and resilience of the
payment system and that’s really key. So the setting of this date was really important because,
and I think Brad mentioned it this morning, it focused the industry and it accelerated discussions
and initiatives to prepare for this eventual end date in the future. So some of those initiatives,
Treasury has done some targeted consultation on bulk payments. The RBA is in the process of a risk
assessment, as well as a study on account-to-account pricing. And at the same time the industry is
looking at initiatives with members of BECS and other modern payment systems, like the NPP, to
support payment service providers and members in adopting and realising the benefits of real-time
data rich payments. So in today’s discussion I’ll be speaking with our panellists who -
these are the people who think about the future of account-to-account payments daily. They’re
leading a number of these initiatives and we’re just going to talk about how the industry is
progressing and what the future looks like, what the next steps to get there are. So with that
I’ll start with Sally. So Treasury’s strategic plan for the payment system. That was
released last year. It includes payments modernisation as a priority. So can you give some colour as
to the importance of modernising account-to-account payments. So the government and for Australia and
Australians.
Sally Etherington
Yeah. Thanks, Jackie. So we outlined in the strategic plan last year how important it was for
Australia to have a modern payment system to support a modern and digitally enabled economy. We want
our payment system - in the plan we set out that we want our payment system to be safe, resilient and
encourage innovation, competition and productivity. And I think why we are very interested in the
account-to-account space is because I think there’s a lot of potential within it to really - if
done right, to progress the competition, the innovation and therefore productivity in the payment
system which will have onflows to the rest of the economy. I think the other reason that government
is really interested in this area is because we are a massive end user of the BECS payment rails. We
have all our welfare payments go through the BECS system. We have pensions going through there. We
pay all our staff. A massive payroll, superannuation goes through there. We also collect all our tax
- not all of our tax but a lot of our tax through the BECS payment rail. So we are a big end user of
the system and therefore the transition is going to be quite sizable for government.
Jackie Kallman
Thanks, Sally. So what do you see as Treasury’s role in, kind of, defining what the future of
account-to-account looks like, and how are you doing that?
Sally Etherington
So I think the strategic plan here has been a really important document, inaugural strategic plan
that was released last year. We did support the industry-led transition from the BECS system to a
solution like the NPP. And when we update the strategic plan next year we would hope to be able to
say a little bit more on that and really setting - working with industry and regulators to really set
a clear purpose and end state for the industry and working with the industry to create a roadmap on
how to get there. At the moment we’ve got one date out there but I think we want to work with
industry to find a bit more of a pathway to our future end state.
Jackie Kallman
Yep. Thank you. So, Ellis, the RBA. The RBA set in 2012, which a number of us will remember strategic
objectives for the retail payment system in Australia and the RBA’s also made a really clear
from the outset of that they want to see increased adoption of the NPP. So can you give us some
insight as to why the bank sees this as a priority and what modernisation of account-to-account more
broadly means to the RBA.
Ellis Connolly
Absolutely. Thanks, Jackie. I think it’s important to start this with the question of why is the
industry going through the process of considering and trying to achieve the decommissioning of BECS.
As you mentioned earlier we love to refer to BECS as the low cost workhorse of the Australian payment
system. And it has indeed been an incredible contributor to Australia’s payment system over the
years. But fundamentally it’s 20th century technology. It has limitations that relate - that
basically reflect the days when data exchange used to occur using magnetic tapes. So some of these
limitations. It’s slow. Payments take hours, if not days, to settle. The data that can transfer
with the payment is minimal. Just 18 characters. This leads to a lot more manual work arounds.
It also makes it very hard to properly screen for financial crime, when you have 18 characters
about the payment. And the addressing system. BSB, account numbers, it’s clunky and it’s
risky. So industry would have to confront and overcome these limitations. And to do that through BECS
would involve substantial investment. Instead the industry is going down the path of trying to shift
account-to-account payment flows away from BECS towards alternative, more modern systems, as the way
of achieving the eventual retirement of the BECS system. So then where does the NPP fit into all of
this? I think the NPP has a strong case to make as a much better tool for many account-to-account
payments in Australia. It provides a much better consumer experience. Just think about the speed and
the
24/7
nature of it. This means that consumers and businesses in
Australia can make payments whenever they want and expect the payment to be delivered almost
instantaneously. It’s much more data rich. This means that you can build new services on top of
the payment, which is going to be essential in our digital economy. It also means that you can
automate reconciliation and other business processes. And through PayIDs we’ve got a much better
addressing system there and when you combine it with confirmation of payee it also helps to make
payments safer. On top of all that we now have the PayTo service as well, which has the potential to
unleash another wave of payments innovation. It will modernise direct debits. It will also enable
nonbank payment service providers to engage in third party payment initiation. So it’s got a lot
of tremendous benefits over and above the existing systems. It can also provide potential competition
for card payments for merchants and consumers. So I think there’s a strong case that
there’s a lot more functionality being offered by the NPP and it can be an effective place to
move a lot of account-to-account payments in Australia.
Jackie Kallman
That’s great. Thank you. And I think really hearing the why is so important because also we
heard from Brad this morning that the adoption of NPP does need to come with some conditions because
the RBA needs to ensure it meets its mandate of controlling risk and promoting efficiency, promoting
competition and ultimately enabling a stable ecosystem. So can you shed a bit more light on some of
the challenges you see for the industry.
Ellis Connolly
Yeah. As Brad highlighted this morning we’re currently conducting an assessment of how industry
is managing the very large amount of change that would have to occur to achieve the full
decommissioning of the BECS system. We’ve been conducting this risk assessment since June and
we’ve engaged extensively with banks, payment service providers, payment system operators and
administrators and end users, including businesses and government. So a lot of messages have come
through to us, and Brad really summarised some of those in his speech which I’ll go through a
little bit further here now. So the first clear message that’s come through, and it’s one
that Sally has also very much emphasised, is there needs to be more planning and coordination around
the BECS decommissioning. There’s that really foundational point that the industry does not yet
have a clear common set of objectives, a shared vision of where account-to-account payments is going
in Australia. Essentially, when we’re thinking about the BECS migration, what does success look
like? Any enormous program of work like this we have to have a common clear understanding of what
success looks like from the outset, if we’re going to achieve the objectives that we want to
achieve. So that’s the first point. The second point is making sure that in the industry
discussions that are going on, end user interests are at the heart of those discussions. We need to
make sure that end user concerns are being fully taken into account. Because in the end they’re
the ones that have to use the service and transition across. A good example of this is essential
payments. A lot of essential payments in Australia. The majority of them are settled across the BECS
system. So these payments, the people sending them, the businesses and governments, they need the
assurance that these payments are going to be reliably delivered to people who really need them. So
this is absolutely essential. The third point is the tricky area of dealing with bulk payments. This
is an area that the industry is doing a lot of work on, which is very important. We’re talking
here about welfare payments. We’re talking here about payroll. The businesses and the
governments that are sending these payments are very focused on cost efficiency. It is less obvious
what the speed and additional data benefits are that come with fast payments for these sorts of bulk
payments. So this is a very important use case. We know the industry is working on it and that is
absolutely the right thing to be doing. The fourth point is cost. The cost of a transition and the
cost per transaction. This is a big concern for end users that we need to face into as an industry.
What we’re trying to do at the RBA is collect some better data on what is the cost of
account-to-account payments in Australia at the moment. To be honest with you, we’re finding it
harder than we expected to get these data on a consistent basis across the industry. There’s
more work to do here. I think we’re going to need to do that work because the end users really
want transparency. It will help them get the confidence to be able to make this transition. What we
can say, we’re very confident faster payments do cost more than BECS payments. This is not
surprising. There’s a lot more functionality associated with fast payments than BECS payments.
At the same time we absolutely acknowledge that there are hidden costs associated with BECS.
You’ve got mistaken payments. You’ve got more fraud. You’ve got a lot more manual
processes that could be automated that could help to reduce cost. So that needs to be taken into
account as well. We also need to take into account, how much is the transition going to cost end
users. This is a very big concern for them. So we need to do more work on that as an industry and as
a regulator we’re ready to assist with this. And then the next issue is on resilience. This is
very important, given the breadth of payments that are going across BECS. We need a resilience
system. We also need to have effective contingency arrangements. We know operational outages are
inevitable, and particularly the essential payments that are going through BECS. The businesses and
governments sending these payments are going to need the confidence that these payments are going to
arrive, even in situations where there are operational outages. And last but certainly not least is
the issue of reach. At the moment there are a lot of customers out there that can send or receive
payments using BECS, that are not currently connected to the NPP. We really, as an industry, need to
address that issue because there are lots of use cases, you can think of bulk payments as an example
of that, where businesses and government aren’t going to be prepared to transition across to the
NPP until they’ve got the confidence that all the accounts they can reach on BECS they can reach
through the NPP. So that’s a very big issue. Quite a foundational one that needs to be
addressed. So there’s a lot of work to do for the industry to make the BECS migration a success.
Jackie Kallman
Thanks. And on that, Katrina. So Katrina is the Executive Sponsor of the Move to NPP Program at AP
Plus. So as part of that, how are you taking all of this, the opportunities, the challenges into
consideration as you look at how we drive adoption and increase the utilisation really of the benefit
and what do you think are the most important areas of change for the industry and users?
Katrina Stuart
Thanks, Jackie. I think certainly we recognise this is a significant undertaking by industry, in
terms of moving payments from BECS over to the NPP and the target date that was established last year
was so important to start to coalesce efforts around - as an industry how we’re going to achieve
that objective. One year in, I think we can all acknowledge a year in payments is not a long time.
We’ve been really focusing on, kind of what I would call the two season, the RR’s from a
platform perspective. So we’ve been focusing on capability. What is the capability that’s
required to support the transition and to bring all of those payments across, in particular, for bulk
and how are we going to deal with those large bulk files and process them in the most efficient
manner across the NPP. Certainly on that front I’m really delighted to say that just in this
week we have achieved alignment and agreement from industry on how we’re going to move forward
with that, in terms of designing a new business service to cater to those large bulk files, and
we’ll be moving into a detailed design phase in 2025. So I think that’s a really
significant development, given that has been six months of work that’s been underway, involving
a number of people in this room. And so as we move into that next phase, that’s going to be
really - one of those, kind of, foundational, sort of, building blocks we need to put in place to
support the transition. And that detailed design phase will also include, how do we ensure that we
bring into those conversations a range of different stakeholders to address some of the concerns that
we heard this morning, to ensure that we are hearing from different segments and different
stakeholders around their needs and their requirements. We’ve also been looking at, what other
kind of capability do we need to have in place. So what do we need to do from a message perspective
and how we need to enhance the message that we have for NPP payments, and particularly using some of
the data capability that we know is there with the ISO message to use things like batch booking
indicators and other identifiers to help support the efficient processing of payments. How we know we
need to put in place a returns process for bulk payments as well. So a lot of focus has been on that
capability development, which I think is really going to be important contributions to helping us to
formulate that shared vision that we need to articulate as an industry. Then we’ve been focusing
very much on capacity, which obviously is another key area of concern in terms of as we think about
the volumes that are coming across and what that means from a platform perspective. And so at the end
of 2023 we did our first capacity uplift and so we can now support 50% of BECS volumes, as well as
accommodating for the NPP volumes we see today of, like, 1.4 billion and also allowing for
future NPP growth from other sources. And we’ve agreed with industry what the next uplift will
look like by the end of 2025. So we’ve, kind of, already started to get that in train. And then
moving on to the RR’s. Obviously account reach is really important. I think we’re starting
to see continued great progress on that front. We now have 114 million accounts that are
reachable on the NPP. That’s an improvement of about 12 million accounts since last year.
Still some work to be done, particularly in certain pockets that we know we need to address together
with some of the banks, but some great progress there. And then resilience is obviously a key area of
focus. How do we make sure that the platform is as resilient as it needs to be, noting that we have
quite high standards around the up time that’s required, in terms of our banks needing to be up
and running, basically all of the time except for two minutes a month, but obviously there’s
still work that needs to be done from that perspective. So that’s kind of really been what our
focus has been, from a platform perspective, but also how do we start to think about the broader
industry change management as well because this is a change that involves not just the banks,
it’s not just is the platform ready, but it’s about the whole ecosystem and what needs to
be done from a change management perspective and how do we start to work with others in the industry,
and particularly those organisations that play a really key intermediary role or supporting role from
a technology or a platform perspective to ensure that these payments can be transitioned across as
well and starting to engage with industry there. So that’s been a lot of our focus for the year.
I mean, I think we recognise there’s still a lot of work to be done. I think we certainly feel
that the observations from the RBA risk assessment is really valuable at this stage in the program.
This is a multi-year journey. So having early insight into some of those things enables us to ensure
that we’ve got the right areas of focus moving forward as we continue this journey.
Jackie Kallman
And, Katrina, you mentioned the end user, as obs Sally and Ellis have done as well, I’m
interested in, sort of, we note cheques, for example, the end user has that instrument. BECS is a
little bit different because the end user, there’s the members inbetween. And how are you
thinking about, really engaging the whole eco system but looking at, where do we need to look
specifically at end user. And I’m actually - after Katrina answers I’m interested in
Luke’s view on this too being across both cheques and BECS, but I think it’s a really
interesting one because the end user experience is actually controlled by the payment provider.
Katrina Stuart
Absolutely, and that’s been a really, kind of, important area to make sure we’ve got the
right balance because, yes, from an industry perspective obviously what financial institutions do to
support their customers or payment service providers or others that are involved in that payments
processing. They might do different things to support those customers in different ways, but also
where do we need to ensure that there is some consistency and standardisation as well. So we’ve
been focusing on things like, how do we ensure that people are also thinking about this consistently.
Do we need, like, an ABA file format replacement, for example. And then also as we think beyond, kind
of the payment service provider or the financial institution that’s providing those services to
the end user, who are some of the key segments that we want to ensure that we’ve engaged in a
conversation with, noting that obviously they have a relationship with whoever their provider is. And
so government has been a really key area of focus for us to really understand, in particular, some of
the needs and requirements of government agencies who are basically involved in those critical
payments. That it’s really important to make sure that we get right. But also others like
corporates, Fintex, others as well to make sure that they’re having a voice into the work that
we’re doing as well.
Jackie Kallman
Did you want to comment on that as well, Luke?
Luke Wilson
Yeah, I agree. It’s totally different to cheques, as you say, Jackie. I think whenever - and
everyone in this room has probably been through this where they’ve adopted a new piece of
technology or a new solution. You make a decision on how far you integrate that through to the users
of the system. Sometimes you don’t want to go through that change management and you protect the
users of the system from that change. Or there might be enough benefit to justify integrating that
all the way through and the use of ISO20022 is a great example of that kind of a benefit that end
users could take advantage of. So whilst I think there is an opportunity to do a level of protection,
it should also be a level of value realisation in this change by end users as well, based on the
characteristics of more modern alternatives. Yeah.
Jackie Kallman
Thanks. And I think it will also depend on the end user.
Luke Wilson
Yeah, that’s right. And what they need.
Jackie Kallman
So AusPayNet’s over seen BECS for over 30 years now.
Luke Wilson
Not me personally just - yeah.
Jackie Kallman
But as an organisation, there’s a strong organisational memory there. So you’ve got a
really deep understanding of its role as that workhorse of the Australian payment system. And
you’ve also been consulting very closely with members over a number of years. So what’s
your view of the progress made by the industry towards the transition, and what insights can you
share about your ongoing engagement with members?
Luke Wilson
So when we did announce the date and the conditional date was - those conditions were around BECS
member readiness, the viability of alternatives and end user adoption, all themes that you’ve
already heard from the other members of the panel, we’d been working with our members and
checking in on our members on their own progress as individual organisations but also progress
against those conditions. What members continue to tell us is they bought into the why, so what Ellis
described before about the reason that we’re doing this. Members have still bought into that and
are very much supportive of that. We haven’t seen any change in membership numbers, transaction
volume or value that’s remained flat, but that should also tell you that the natural
year-on-year growth is going somewhere else as well. And we wouldn’t expect to see a significant
change, given that there is more work to be done on those - on the viability of alternatives and
individual institutions becoming ready. So they still believe in the why and they believe in the
strategic direction and the long-term value of rationalisation of payment systems, but they’re
very, very hungry for more information on the how and when. So there is a massive opportunity to do
more in that space. So if our number one objective by setting a conditional target end date was to
generate accelerated conversations then we’d get a massive tick, but we know that’s not
enough. We now need to turn those conversations into the type of conversations that can answer the
questions that have been posed by the other members of the panel to give people meaningful
information so that they can plan for their individual institution and their customer’s needs to
work towards that target end date.
Katrina Stuart
And I think it’s also important to recognise that different organisations will move at different
paces as well, according to their - you know, their customer base and their business objectives and
other kind of considerations as well. So we know that some organisations already, sort of, in market
are taking BECS payments today and a bulk file, moving them across to the NPP. There’s basically
a lot of activity out there around PayTo and the adoption there and there will be others that will
take longer, in terms of what that journey looks like for them and what that sequencing of activity
looks like as well.
Jackie Kallman
So, I mean, I think this has been really great to get the perspectives from really the four key
bodies around the table here, and hopefully it’s given everyone a better understanding of where
things are today and roughly where - what we need to do to figure out where we’re going next,
but I guess I’ll ask this next question of each of you really, what you think the next key steps
are for the industry and we’ll start with Sally and go down. But, yeah, what do we need to do
next as an industry?
Sally Etherington
Thanks, Jackie. I have to agree with what the Assistant Governor said earlier today. I think
there’s really the next layer down of planning needs to happen. So it’s working out the
vision of what the end goal is and the transition of how we get there. I noted down some
preconditions of kind of switching off BECS and how we get there and they’re almost exactly the
same as what Ellis outlined. So making sure we’ve got appropriate account access, making sure
we’ve got a bulk solution, contingency and resilience plans, making sure the costs economics
works and then the only additional thing there I had was, do we have appropriate regulation. So I
think these are kind of questions that we need to grapple with in developing the plan going forward
and a more detailed transition plan.
Jackie Kallman
Thanks. Ellis.
Ellis Connolly
I’ll just second that last point that you made, Sally. We did appropriate regulation, I think
that’s an excellent one so we’ll add that to our list.
Sally Etherington
You forgot it.
Ellis Connolly
Yeah, that’s right. It’s a good point. Yeah. So in terms of what our next steps are to help
contribute to this process, we’re completed our risk assessment. We’ll take it to the March
payment system Board meeting and then we intend to be reporting it back to industry. So we’ve
been very collaborative with this process. So you can expect to be hearing more between now and March
and after the March Board meeting. In the meantime I’d strongly encourage you to all read
Brad’s speech over and over again. Excellent list of things that the industry should be working
on to help to achieve a successful BECS migration.
Jackie Kallman
And then we go to the people who are bringing the industry together to work on such things. So,
Katrina, what do you see as the next steps for AP Plus, NPP and the industry?
Katrina Stuart
So our priority areas of focus are continuing that work around the capability development. So the
detailed design work around bulk for next year. We’ve also got some work planned to look at
contingency. We know that that’s going to be really important as we think about the transition
over to the NPP. But also equally important, how do we think about recoverability, in the event when
there is an incident as well and how as an industry we get ready for that and we start to
operationalise that within our current, sort of, frameworks and plans. So that’s a really kind
of key area of focus for us in 2025, is to really finalise some of that work and then that also
provides some of that certainty to banks and payment service providers and others as well as they
think about their plans and how they’re going to continue their migration journey.
Jackie Kallman
And, Luke, what do you see as the next steps for AusPayNet for the industry, and also I’m going
to throw in there because we just came off of this conversation about cheques and coordination, is
there a potential to take a coordinated approach here?
Luke Wilson
As you’d expect, Jackie, as a self-regulatory body we’re constantly juggling the issues of
coordination and competition, and rightly so. But, yes. The short answer we do think there’s an
opportunity. I mean, if you listened to the why and our participants in BECS are telling us they
believe in the why but they need more information in the how and what we’re struggling to do is
understanding what that scope would look like, what those key next steps are, what that roadmap would
look like. Then you need to dig into that next level of detail in order to get that information. So
we think it’s about weaving the threads together. You know, the threads of the work that AP Plus
are doing, the threads of the work the RBA are doing, the threads of the work the Treasury are doing
and AusPayNet and doing is also our members are doing and, importantly, our member’s customers,
the end users. So we kind of need to weave that together. How do we do that? Well, we have been
thinking about that and the word coordination has come up multiple times this morning and we’ve
been in discussions with key stakeholders, in particular, the likes of AP Plus about how we can
better coordinate as an industry to try and provide everyone that more information on how we get to
that end outcome. Now, that would obviously come with some serious considerations around competition.
It would require the appropriate regulatory approvals. But we think that could look like some form of
a roundtable discussion where we can bring all of this really good and positive work together to help
form that vision for account-to-account payments in the future. So we’re not there yet, in terms
of knowing exactly what it would look like, but we know it would have to have really good and strong
governance. We know that we’d have to have the right stakeholders round the table, the right
inputs for those stakeholders to make sure we give the right consideration to all the people that
would be impacted by this and it would require regulatory approval and we’re in the process of
trying to shape that up and work that out. And if we can, we’d love to host those type of
discussions in 2025 at the right time.
Jackie Kallman
Yeah. Great. So I think we really covered - you know, we sort of covered the why, the challenges, the
fact that having a date was really important to mobilise, so thank you AusPayNet and the industry for
that, but then that is just the date. So really we need to get to the how and the plan and the what
does it look like in detail and you’ve talked about the ways we’ll get there so that’s
excellent. Thank you. We can now really move to questions. And so I’m going to kick off with
one, which there are many bulk ACH systems in the world, there are also many real-time systems. So
I’m going to ask you this, Luke, given AusPayNet’s role in global engagement as well. Have
you seen this sort of thing in other countries and other payment systems and what can we learn from
other payment system migrations or considerations of not the same, and I think that’s important.
Luke Wilson
Yeah.
Jackie Kallman
But maybe similar or similar thinking, what are we learning and seeing overseas?
Luke Wilson
I think in markets similar to ours, we’re quite advanced in our thinking. But when we talk to
those markets they go, yeah, that is an issue that we’re going to have to stare into and face
into at some point. I think in other markets that we’re possibly less advanced up until more
recent times, we’re seeing a leap frog effect. Where potentially they haven’t embraced
digital payments as much as we have in Australia and now they’re moving to broad, quick adoption
of faster payment system-type solutions. So there’s two things that are happening. It’s
always easy to build a brand new house on a blank block of land but it’s a lot harder to
renovate, and I think we’re in that challenge of renovating where we still need to find places
to live. We need to deal with the existing foundations of the home, the plumbing, the electricity and
all the rest of it. That makes change harder. So there’s markets that are dealing with that type
of change, like us or at least starting to think about it, there’s other markets that are
building from afresh and leap frogging from a technology perspective.
Jackie Kallman
Thanks. Anyone else have observations? I’m sure you all look outside the country.
Katrina Stuart
I mean, I think - the NPP, I think when it went live, is kind of seen as world leading and I know
with the development of PayTo, many markets have been looking at us in terms of that service and what
that capability can do and I think this is just the next step in that journey, in terms of as
Australia moves forward and we think about what does our modern payment system look like and so a
number of markets are looking to us. They’re all dealing with similar kind of issues but maybe a
little bit further behind.
Jackie Kallman
So I’ve got a question here for Ellis probably, it doesn’t have a name but how do we
encourage banks that are not yet connected to the NPP to connect and would the RBA mandate this?
Ellis Connolly
We’ve been directly engaging with the ADIs that are connected with BECS. They are not connected
to the NPP. We’ve written to them all. We’ve had discussions with them to understand their
plans and their timelines. Some of them do have plans that are reasonably well developed to move
across to the NPP and some are not as well developed. It’s a tricky space because for very small
institutions it can be quite a significant tech uplift to move to the NPP. So there’s a role for
regulators here but there’s also a role for infrastructure and technology in thinking about
what’s the right sizing of the ask for very small institutions to connect to the NPP. We also
are in discussions with APRA around these issues as well.
Jackie Kallman
So on that, this is maybe one for Katrina, will addressing a system of BSB and account number, do you
think that will continue into the future?
Katrina Stuart
I think probably at least for the foreseeable future. I think BSB and account numbers are fairly well
embedded in many processes related to payments and that was part of the decision, why we decided to
look to develop confirmation of PayU service because even though we had PayID that provided the
ability to validate who you’re paying before you make a payment, we were still only seeing a
certain percentage of payments being made using a PayID. So we acknowledge that there are a lot of
people who still use BSB and account numbers. We think that will still continue into the future. I
think there’s an opportunity with the transition for us to think about, can we clean up maybe
how some of those are used in certain processes as well and so where are there opportunities to make
some of that better as well, but I don’t see them disappearing anytime soon.
Jackie Kallman
So real-time payments - sorry. Real-time payment mandates in Europe are seeing fraud sky rocket. Is
that a concern if we force volume on to NPP, given there is more fraud now on NPP than BECS? I might
throw this to - I mean, I’m sure anyone could answer this but I might throw this to Sally. Is
that a worry from a government perspective and as we look at fraud and scams, that a move to NPP
increases that in any way?
Sally Etherington
I think it’s definitely a concern. There is - we heard from the panel earlier, scams and fraud
is a big priority of regulators and government at the moment. I don’t think - at the moment we
have not got any regulation mandating NPP adoption and it is really a commercial choice that we are
trusting industry to make in the best interests of their customers.
Jackie Kallman
Here’s one, and Ellis I think you spoke to some of the benefits of what we see in the NPP and
real-time payments. Why not let account-to-account evolve organically and let users use what suits
them best?
Ellis Connolly
So if we took that approach to everything then you end up maintaining a lot of infrastructure. And if
banks have to maintain a lot of infrastructure then there’s a lot of cost. So there are
potentially some efficiencies here, say on the - with BECS where it does have these limitations
around speed and addressing and data, that the choices are invest in it or decommission it. And that
is a tough choice that the industry has to face. Essentially those are the alternatives that are on
the table here. Industry’s proposal is to decommission it and move to alternative systems. Fewer
systems should then involve less cost for banks. I think that’s a relevant argument.
Jackie Kallman
And then subsequently for end users.
Ellis Connolly
Absolutely.
Jackie Kallman
So, Katrina, what about bulk direct debit PayTo, what are the plans? Surely you would set a milestone
date for bulk direct debit ahead of any bulk credit?
Katrina Stuart
So that’s a topic that will go into further discussion in detailed design. So there has been
quite a lot of conversation around that and so we need to do some further work to really, kind of,
analyse that and look at what we think is going to be the best approach. So bulk at the moment is
focused predominantly on credit but we still know that we need to address debit, in terms of is that
included or is it not included. Also recognising that we do have PayTo and so how do we bring that
all together.
Jackie Kallman
So this one’s from [audience member], when talking account-to-account payments how do
regulators make sure the requirements of accounts themselves, so the pools of fund at each end, are
properly considered too? It’s a sniper.
Ellis Connolly
Who’s the lucky winner?
Jackie Kallman
Well, I don’t know. It’s about regulators.
Luke Wilson
It might be RBA banking.
Jackie Kallman
It’s about regulators so I think there’s a regulator.
Luke Wilson
It’s basically a question of how do you ensure the funds are there.
Jackie Kallman
I think the question is there’s a payment but then because it’s account-to-account and
it’s going all the way through, how are the accounts and the liquidity, the interest, the
requirements around accounts set up to support account-to-account payments and the changes in them.
Luke Wilson
Excellent question for a banker to answer.
Katrina Stuart
More for APRA.
Luke Wilson
Such as [audience member].
Jackie Kallman
Maybe I’ll let you take that offline. Thank you for putting your name on that.
Katrina Stuart
Maybe it’s a conversation for the break.
Luke Wilson
Yeah.
Jackie Kallman
And while we’re at it just another one from [audience member], are there any myths about BECS you think
it’s important to bust to help users and banks transition away? That is a great question and I
think a really good one to wrap up with. So should we start with Luke there?
Luke Wilson
I can’t name a specific myth but I do think that we gloss over some challenges associated with
BECS because we’re so used to it. And in this conversation we need to realise to Ellis’
point that it’s been around for a long time. We’ve probably had a long time to smooth over
the cracks but it’s certainly not a perfect payment system.
Jackie Kallman
The RBA is probably the other one who knows BECS pretty well.
Ellis Connolly
Yeah. I mean, I would emphasise the cost point because people just look at the headline cost of a
BECS payment. It’s really, really low and they don’t necessarily - well, no-one’s
really well quantified the hidden costs, the manual processes, particularly when it’s not clear
who the payment came from, and also the additional mistaken payments and the fraud. Here it takes a
lot of time to resolve those issues but really hard to quantify that into a number to then compare to
the cost of vast payments where you’ve got - we’ve got rich data and you don’t have
those problems.
Sally Etherington
And we also don’t think about the costs that you would need to - what you would need to invest
in BECS to keep it running for a longer time period as well.
Jackie Kallman
I think that’s a really great point, that one of the myths is that we can just keep BECS running
as it is. And I think you called that out, Ellis. Sally, you have too. That’s not an option. So
if you’re going to have to uplift, are you going to uplift the older system or one that’s
purpose built.
Katrina Stuart
And I think to that point, Jackie, it’s really making sure that people do understand the
benefits of the NPP and it’s nots just about speed. It’s actually so much broader than
that. It is about the processing efficiency as well. We’ve heard that organisations see
reduction in their call centre volumes. They’ve seen a reduction in the cost of capital.
They’re also seeing the ability to deliver and enhance customer experiences. It’s around
the payment certainty. It’s some of those benefits and we need to really bring some of that to
life, I think, to really help drive the case for change.
Jackie Kallman
The indirect benefits of payments really. All right. We’ll wrap up there but thanks, everyone.
Thanks to the panel. Takes all of you.