Payments System Board Update: May 2022 Meeting

At its meeting today, the Payments System Board discussed a number of issues, including:

• The recently announced delay in the project to replace CHESS, ASX’s system for clearing and settlement of cash equities. Both the Bank and ASIC expect that CHESS be replaced as soon as this can safely be done by ASX and users of CHESS. The Board reiterated its expectation that ASX consult a broad range of stakeholders on setting a new timeline, and ensure that this timeline provides adequate contingency.
• The Bank’s assessment of Australia’s real-time gross settlement system – the Reserve Bank Information and Transfer System (RITS) – against the relevant international standards. The Board approved the assessment, which the Bank will publish in coming weeks.
• The Bank’s Review of Banknote Distribution Arrangements. The Board discussed the key issues facing participants in the cash distribution system. It reviewed options to help the system remain efficient, sustainable and resilient, and to enable the industry to transition, as cash use by the public evolves. A paper setting out stakeholder feedback and the Bank’s response will be published in the coming months.
• Payments system regulatory reforms. Members discussed the Bank’s work to support the payments system regulatory reforms announced by the previous Government in December. A number of the reform measures are relevant to the Bank, including the modernisation of the Payment Systems (Regulation) Act 1998. The Bank has been working on the development of common payment system access requirements that could be incorporated into a new payments licence. The Bank will continue to work with Treasury on the reforms.
• Recent market and regulatory developments relating to stablecoins. The Board discussed the recent volatility in crypto-asset markets, including the issues affecting a number of US-dollar denominated ‘stablecoin’ arrangements. The events highlighted some of the risks associated with stablecoins that regulators internationally are seeking to address. Members were supportive of the work being undertaken by the Council of Financial Regulators to develop options for the regulation of payment stablecoins as part of the proposed regulatory framework for stored-value facilities.
• Merchant payment costs. The Board reviewed the latest data on merchant payment costs. Members noted that the average fee incurred by merchants for processing card transactions continued to trend down during the pandemic, both in aggregate and across most merchant sizes. This had been driven by an accelerated shift away from credit cards to (less expensive) debit cards by consumers. An analysis of the latest data will be published in a RBA Bulletin article in September.