RBA's Payments System Board 2023 Annual Report - TL:DR
Last month the RBA's Payment System Board released their annual report. This annual report offers payments nerds a wealth of fresh stats and a good summary of key trends. This year's version did not disappoint.
The key points from this year's annual report:
Additional regulatory reform is coming and Big Tech is going to be pulled in line with traditional players - a big win for CBA who has objected to ApplePay fees and how the NFC capability is locked down on the iPhone/iPad
PSPs licensing changes to come in the new year
Acceleration of Digital Wallet adoption and contactless payments are nearly ubiquitous (95% of in-person payments) in Australia
A continuation of other payment method changes including demise of cash, cheques are dead, NPP is still growing fast and debit cards remain king
Finally, fraud and scams are growing at an alarming rate costing the economy $2.9Bn in 2022 up 63%
Regulatory Reform and Strategic Planning:
The Payment Systems Board of the Reserve Bank of Australia (RBA) has outlined significant reforms and strategic plans aimed at enhancing the payments system. A notable regulatory reform seeks to align big tech companies with the stipulations of the Payment Systems (Regulation) Act 1998, ensuring that new and traditional payment providers operate under a consistent regulatory framework. This move underscores the Government’s commitment to modernising the payments landscape to keep pace with technological advancements and emerging industry players.
The RBA’s Payment System Board Annual Report lays down a comprehensive roadmap for advancing Australia's payment systems, balancing innovation with security and resilience to build a future-ready financial ecosystem.
New Licensing Framework for Payment Service Providers:
In a progressive move, the introduction of a new Payment Service Provider Licensing framework is set to invigorate the industry with heightened competition, particularly among non-bank payment service providers. This framework is anticipated to benefit Australian businesses and consumers by providing a more diverse and competitive market. It aims to establish common access requirements that will facilitate direct access to the payments system, democratizing the financial landscape.
Dominance of Contactless Payments:
In a striking testament to changing consumer behaviour, contactless card payments now represent 95% of all card-present transactions. This trend highlights the consumer preference for speed and convenience in everyday transactions. Australia has one of the highest contactless card payment penetrations in the world.
Emergence of Digital Wallets:
Digital wallets are gaining a substantial share of the payments market, reflecting a shift in the way consumers store and use their financial assets. This transition to digital forms of wallets underscores the importance of digital readiness for payment service providers.
New Payments Platform (NPP) Growth:
The NPP has shown remarkable growth, processing over 1.3 billion transfers in the fiscal year 2023, with a total value exceeding $1.5 trillion. Despite the rapid growth of the NPP, there are still short comings. It is worth noting that the NPP's reliability is currently inferior to other payments types as indicated by the downtime stats:
Central Bank Digital Currency (CBDC):
As the digital economy continues to expand, the Board is exploring the potential policy rationale for introducing a CBDC. The exploration into CBDC is part of a broader strategy to ensure that the national payments system remains at the forefront of global financial innovation.
Concern Over Financial Scams:
The report also sheds light on a concerning surge in financial scams, with losses amounting to $2.9 billion in 2022, marking a 63% increase. This staggering figure underlines the critical need for enhanced security measures and consumer education to combat financial fraud.
