Payments System Board Update: May 2024 Meeting

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

• The Reserve Bank of Australia’s (RBA’s) assessment of the Reserve Bank Information and Transfer System (RITS). The Board approved the RBA’s assessment of Australia’s real-time gross settlement system, RITS, against the Principles for Financial Market Infrastructures. The RBA will publish this assessment in coming weeks.
• The RBA’s detailed review into the ASX central counterparties’ (CCPs’) observance of the Segregation and Portability Financial Stability Standard (FSS). The review found that various obstacles made it unlikely that client positions would be successfully ported after a clearing participant default. Members discussed the financial stability implications of this finding, noting that successful porting depends on factors that are both within and outside the CCPs’ direct control. The review will be part of the RBA’s 2024 ASX Assessment that will be published later this year and will include the findings, ratings and any recommendations against all the FSS.
• Supervisory lessons learned from the CHESS replacement project. Members discussed the findings and recommendations from a Parliamentary Joint Committee report into the CHESS Replacement project. Members supported the Bank’s work in responding to the recommendations and contributing to the Government’s response.
• Central clearing of Australian bond and repo markets. In 2015, the RBA conducted a public consultation on the costs and benefits of centrally clearing the Australian repo market and concluded that the case was not as strong in Australia as in other markets. Members noted that changes to the size and structure of this market since 2015 may have increased the potential benefits of central clearing. Given these developments, the Board endorsed a consultation on reassessing the case for central clearing of bonds and repos in Australia.
• Review of retail payments regulation. Members discussed the upcoming review of retail payments regulation, which is expected to begin after anticipated changes to the Payment Systems (Regulation) Act (1998) pass parliament. This review will cover all aspects of the RBA’s regulation of retail payments and seek views on a range of emerging issues.
• Improving the security of card transactions in the online environment. Members reviewed the RBA’s expectations for industry to introduce more standardisation for payment card tokenisation to promote security, efficiency and competition in the payments system. Based on feedback from an industry working group convened by AusPayNet, the Board decided to adjust and clarify the RBA’s expectations. The Board also endorsed AusPayNet undertaking further work to develop potential technical standards to support token portability and to explore whether the Payment Account Reference (PAR) is a suitable unique identifier to aid the synchronisation of tokens across the payments chain. The Board reiterated its expectation that all relevant industry participants should support the portability of both scheme and proprietary tokens by the end of June 2025.
• Industry measures to disrupt scams. Members discussed various measures that the payments industry is implementing to stop scammers obtaining funds, including the sharing of scam intelligence and the introduction of new technologies (such as the broader confirmation of payee service for the New Payments Platform). Members welcomed the efforts of participants to work together and collaborate with regulatory agencies to combat scams. They noted that while restrictions on individual payments – such as blocks, delays and limits – can help to reduce scam losses, consideration should be given to the relative risk of payments and any impact on end users, other participants and the payments ecosystem.