Payments System Board Update: August 2022 Meeting

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

• The annual assessment of the ASX Clearing and settlement facilities against the Bank’s Financial Stability Standards. The Board approved the Bank’s 2022 assessment, which will be published on 28 September. Members expressed their disappointment at the further delay to the CHESS Replacement program recently announced by ASX. The Board welcomed the external review initiated by ASX to assess the work required to complete the program and to determine a new go-live date. The Board expects ASX to keep the Bank and ASIC informed of progress.
• The oversight of international financial market infrastructures. The Bank’s 2022 assessments of Chicago Mercantile Exchange Inc. and LCH Limited’s SwapClear service will be published as part of the Payments System Board’s Annual Report on 28 September.
• Competition issues in the debit card market. The Board strongly supports making the debit card market more efficient and competitive through the issuance of dual-network debit cards (DNDCs) and least-cost routing (LCR). The Board welcomed the considerable progress that has been made in providing merchants with access to LCR. Notwithstanding this, some industry participants are not offering LCR to all their merchants. The Bank has asked for concrete plans and assurances from the relevant institutions that they will address this. The Board welcomed progress indicating that implementing LCR for mobile-wallet transactions would be more feasible and less costly than previously indicated. Given the benefits for competition and efficiency in the payments system, the Board now expects the industry to develop LCR functionality for mobile-wallet transactions. This will help to reduce payment costs for merchants, especially small businesses. The Bank will consult further with industry on the approach and timeline for meeting this expectation.
• Payments system regulatory reforms. Members discussed the Bank’s ongoing work to support the payments system regulatory reforms. In particular, the Bank has been working on two aspects of the new payments licence framework: the development of a set of common licence obligations that could help facilitate payment providers’ access to payment systems, and a new authorisation and oversight regime for industry standard-setting bodies. The Bank will continue to work with Treasury on the reforms, and engage with other regulators and industry stakeholders during this process.
• Research on central bank digital currency (CBDC). Members discussed the increasing interest in CBDCs internationally and in Australia. While most central banks are still investigating the potential merits, design and implications of CBDC, many see an increased likelihood of issuing some form of CBDC in the future, especially to support wholesale transactions. The Board also discussed the progress of the Bank’s research program on CBDC, including the project recently announced with the Digital Finance Cooperative Research Centre to explore use cases for a CBDC in Australia. This project will involve the development of a limited-scale CBDC pilot that industry participants will be invited to engage with to demonstrate innovative and value-added use cases for a CBDC. The project is expected to take around a year, after which a report on the findings will be published, including an assessment of the various use cases developed. These findings will contribute to the Bank’s ongoing research into the desirability and feasibility of a CBDC in Australia.
• The payments fintech ecosystem. Members discussed the rapid evolution of the payments ecosystem. The Bank is engaging actively with new players to understand the opportunities offered by innovation. As part of this engagement, the Board met this afternoon with a group of fintech firms to discuss innovation, access issues and regulatory reform in the payments system.