Payments System Board Update: May 2023 Meeting

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

• The Bank’s targeted 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. The Board also considered an external review into the major outage of this system last October. The Bank will publish next week the targeted assessment and the external review, alongside its response.
• Pricing of New Payments Platform (NPP) services. The Bank will apply the same principles to the wholesale pricing of NPP transactions as it has applied to competing payment systems. In particular, interchange fees should not be set at a level that inhibits the efficiency and competitiveness of the payments system, and they should be published to provide transparency. The competitive implications of linking the pricing for one payment system with another payment system, and volume-based discounts, should be carefully considered.
• Competition in the debit card market. Currently, dual-network debit cards in Australia are issued with one network on the card having priority. As a result, contactless transactions automatically route to that network, unless the merchant has choice through least-cost routing. The Board is considering taking regulatory action to prohibit card schemes and issuers from setting a default routing network on dual-network debit cards. This would ensure that merchants can choose which network processes their debit transactions. The Bank will consult on the costs and benefits of such action.
• Improving the security of debit card transactions in the online environment. The tokenisation of dual-network debit cards has the potential to reduce the damage caused by cyber-attacks by reducing reliance on databases of card numbers. The Board discussed some impediments that are preventing the full security and efficiency benefits of tokenisation from being realised. The Bank will set some expectations for industry to address these impediments, with the aim of substantially reducing the reliance of merchants and payment service providers on databases of card numbers by the end of 2024. Following further consultation with industry, the Bank will publish detailed guidance on the steps that need to be taken and the deadlines for their completion.
• The results of the Bank’s 2022 Consumer Payments Survey. Members noted that the decline in the use of cash for consumer payments had accelerated following the pandemic. Consumers now use contactless card and mobile device payments for most of their in-person payments. At the same time, some members of the community continue to make the majority of their payments in cash. The main findings of the survey will be published in the June RBA Bulletin.