Watch video: Speech delivered by Michele Bullock, Governor, Australian Payments Network Summit, Sydney

Thanks for the invitation to talk at AusPayNet’s annual summit.

The funds panorama is altering quickly, with new enterprise fashions and applied sciences coming into the area.
The trade can be shifting from legacy techniques in the direction of new platforms that may ship cost providers
which can be quicker, safer and extra handy. We subsequently must modernise our regulatory structure
and funds infrastructure to assist these improvements, and we’ve got been working with the Authorities to
replace the regulatory framework.

This morning, I’ll discuss via how the Funds System Board is responding to this altering
surroundings. I’ll start by highlighting the Board’s strategic priorities via this era of
change. I’ll then concentrate on three key points for 2024:

  1. The RBA’s plan to conduct a complete assessment of retail funds regulation beneath its
    expanded regulatory perimeter.
  2. How trade and authorities can work collectively to keep up entry to money.
  3. How to make sure a profitable transition from BECS to fashionable cost techniques.

The Funds System Board’s strategic priorities

The Funds System Board just lately refreshed its strategic priorities given the adjustments within the funds
system and the regulatory panorama. These have been set out within the Funds System Board’s 2023 Annual

The primary precedence is to strengthen the resilience of Australia’s funds and market
. Companies and customers are extra reliant on digital cost techniques
than ever earlier than, with outages changing into more and more disruptive to on a regular basis life. We’re subsequently
stepping up our oversight of those techniques, notably the New Funds Platform (NPP) and the cardboard

The second precedence is to advance and implement the Authorities’s funds reforms.
These reforms will modernise the regulatory structure and make sure the RBA can proceed to advertise a
secure, environment friendly and aggressive funds system.

The third precedence is to promote aggressive, cost-effective and accessible digital
. Shoppers and companies are benefiting from new funds applied sciences which can be
extra versatile and simpler to make use of. However larger use of those digital strategies can be including to cost
prices for companies. We count on cost service suppliers to assist retailers decrease their cost prices by
implementing least-cost routing. We additionally count on monetary establishments to ship extra quick cost
capabilities to customers and companies via the NPP. Specifically, the NPP’s PayTo service
will assist to modernise how we make direct debits, giving prospects larger visibility and management over
these funds.

The fourth precedence is to improve cross-border funds. Australia is working with different
G20 international locations to make cross-border funds cheaper, quicker, extra clear and extra accessible.
One key initiative is standardising the messages related to cross-border funds – what
data is necessary for such funds, what’s elective and the way it’s introduced within the message. I
just lately chaired a global working group that developed such harmonised messaging necessities for
cross-border funds. The goal is to implement these necessities globally by 2027. The operators of
techniques processing cross-border funds in Australia have publicly acknowledged their intention to satisfy these
necessities on that timeline. We count on monetary establishments to even be able to
use the standardised messaging by 2027 in order that their prospects can get pleasure from extra seamless cross-border

One other key initiative is the NPP’s Worldwide Funds Enterprise Service, which can enable the
Australian greenback leg of inbound cross-border funds to be processed by way of the NPP on a real-time 24/7 foundation. This service was as a result of be carried out by all NPP
members this month, however a few of them should not prepared, which is disappointing. We count on the Australian
funds trade to ship on this dedication as quickly as potential.

Our fifth strategic precedence is to form the way forward for cash in Australia. This yr, we
accomplished a analysis mission that explored potential use instances for a central financial institution digital forex
(CBDC). Constructing on this, we are actually planning a mission that may look at how totally different types of digital
cash and infrastructure might assist the event of tokenised asset markets in Australia. We’re
wanting ahead to persevering with our engagement with trade on this work.

We’re additionally persevering with to work intently with the Treasury in exploring the coverage case for a CBDC in
Australia. We count on to launch a joint paper in mid-2024 that may take inventory of the CBDC evaluation in
Australia up to now and lay out a roadmap for future work.

Key points for 2024

Inside these strategic priorities, there are three key points that will likely be notably essential in 2024
that I wish to spotlight immediately.

Subsequent assessment of retail funds regulation

One of many key tasks beneath our second strategic precedence – advance and implement reforms –
is a complete assessment of our retail funds regulation. The RBA’s regulatory remit will quickly be
expanded, as a part of the Authorities’s funds reforms. Particularly, the Cost Methods
(Regulation) Act 1998
is being amended to make sure that newer gamers within the funds
system – together with ‘buy-now- pay-later’ suppliers, cost gateways, cost facilitators
and cellular pockets suppliers – might be regulated by the RBA. We count on these reforms to be in place
someday in 2024, at which level we intend to launch a holistic assessment of retail funds regulation.
This will likely be a possibility to seek the advice of broadly on present regulation in addition to on areas the place regulation
may be required within the pursuits of security, competitors and effectivity. This can assist us to set our
regulatory priorities within the expanded regulatory perimeter.

The RBA’s funds regulation over the previous couple of a long time has been formed by some key rules
that assist to advertise secure, environment friendly and aggressive markets. These embody:

  • The price of cost providers ought to be clear for companies and customers, as a result of transparency helps
    to advertise competitors.
  • Companies ought to be free to decide on which cost strategies they settle for.
  • Companies ought to be capable to go on the price of the cost strategies chosen by finish customers.

Some preliminary questions for the assessment are whether or not these rules are nonetheless enough and methods to apply
them to the broader vary of cost techniques and members that may fall throughout the RBA’s expanded
regulatory perimeter.

The assessment will even concentrate on some particular points, together with:

  1. Least-cost routing (LCR) – That is essential as a result of it places aggressive
    strain on card cost schemes to decrease charges to retailers. However whereas some progress has been made to
    allow LCR for companies, it has been gradual. So formal regulation could also be required to get acquirers
    and different service suppliers to ship the total advantages of LCR to companies.
  2. Cellular wallets – Utilization of cellular wallets has grown quickly, however the prices
    related to these providers stay opaque and cost service suppliers can face obstacles to
    entry. We might want to contemplate whether or not regulatory motion is required on this space.
  3. Purchase-now-pay-later (BNPL) providers – In earlier evaluations, we’ve got concluded
    that retailers ought to have the appropriate to surcharge BNPL providers, that are costly technique of
    cost, simply as they’ve the appropriate to surcharge card funds. The suitable to surcharge for cost
    strategies gives an essential incentive for cost schemes to maintain their charges low. Formal regulation
    could also be required to permit this.

As a part of the assessment, we look ahead to partaking constructively with trade on these points.

Sustaining entry to money

We additionally stay targeted on entry to money for Australians. This concern has acquired some consideration within the
media just lately and I wish to present some context and focus on the work that’s underway.

Using money for funds has been in decline for a few years as customers have switched to digital
funds. The share of shopper funds made utilizing money declined from 70 per cent in 2007 to
13 per cent in 2022 (when our newest shopper funds survey was carried out) (Graph 1).
Regardless of this decline, money stays an essential technique of cost for some folks and is broadly held for
precautionary or store-of-wealth functions. Money can be an essential backup technique of cost throughout
system outages or pure disasters, when digital funds may be unavailable.

For these causes, the RBA locations a excessive precedence on the group persevering with to have cheap entry to
money withdrawal and deposit providers. The Authorities additionally highlighted the significance of sustaining
enough entry to money providers as a key precedence in its Strategic Plan for the Funds System.

Graph 1

The problem we face is that because the transactional use of money declines, it’s affecting the economics of
offering money providers and placing strain on the money distribution system. These challenges prompted
the RBA to launch a Overview of Banknote Distribution Preparations in 2021, which sought to establish
adjustments to make the distribution system simpler, environment friendly, sustainable and resilient. The
assessment made suggestions, specializing in areas the place the RBA has a direct relationship with the trade
to enhance transparency and assist trade enter into distribution preparations. Nonetheless, it additionally
acknowledged that the adjustments, in themselves, can be unlikely to essentially reshape the medium-term
economics of the trade.

The difficult economics of money distribution was one of many important components behind the current merger of the
two largest cash-in-transit (CIT) suppliers, Linfox Armaguard and Prosegur, which the Australian
Competitors and Shopper Fee (ACCC) accepted earlier this yr. The merger was accepted topic to
a three-year enterprise from the corporations concerning pricing and repair ranges. As a part of this, Linfox
Armaguard gave an enterprise to proceed supplying CIT providers to present prospects till 2026. The
merger was supposed to deal with the structural decline and overcapacity within the CIT trade and cut back the
danger of 1 or each of the CIT firms all of the sudden exiting the trade, which might trigger disruption to
the supply of money within the financial system. Regardless of the merger having taken place as proposed, Linfox
Armaguard is now indicating that its CIT enterprise continues to be unsustainable.

Given these points, the RBA just lately convened a roundtable dialogue with trade members to
focus on what extra could possibly be accomplished to advertise the sustainability of the money distribution system. These
discussions are ongoing, and trade, regulators and authorities might want to proceed to work collectively
to place in place sustainable preparations for money distribution.

Many different international locations are dealing with comparable challenges related to declining transactional use of money.
There was a spread of coverage and legislative responses contemplated abroad, together with measures to
keep money entry and acceptance, and to shore up wholesale money distribution preparations. We
proceed to intently monitor developments abroad, although the range of coverage choices being
thought of means that options tailor-made to Australian circumstances will likely be required.

When it comes to wholesale distribution preparations, one mannequin that has been thought of in some international locations is a
utility through which quite a few organisations type a single entity to hold out wholesale money distribution
capabilities. Utility fashions goal to share fastened prices among the many members and obtain efficiencies,
although cooperative preparations can be difficult to implement. There are examples abroad the place
trade was unable to achieve consensus on shifting to a utility construction, and legislative choices to
handle dangers to money entry have subsequently been pursued. However, it could be price exploring the
deserves of a cooperative mannequin in Australia.

To facilitate the event of choices to place the money distribution system on a extra sustainable
footing, the Australian Banking Affiliation (ABA) just lately utilized to the ACCC for authorisation to
develop in-principle options to the challenges dealing with the money distribution trade. The ACCC has
granted interim authorisation for the ABA and different stakeholders to debate these points. The RBA will
even be concerned in these discussions.

The declining use of money can be difficult the supply of retail money providers. This has been evident
within the vital discount within the variety of money entry factors over current years, together with ATMs and
financial institution branches (Graph 2). Regardless of this, the gap folks must journey to entry money providers
has been little modified lately. However this will not be the case sooner or later if entry
factors proceed to say no.

Graph 2

Graph 2: Cash Access Points

ATMs stay the popular means for accessing money for many Australians. The RBA regulates pricing elements
of the ATM trade by way of an Entry Regime. These regulatory preparations have been launched in 2009 to
promote competitors within the ATM trade at a time when money was far more closely used. We just lately
consulted trade members on the way forward for the entry framework given the substantial adjustments in
the trade since 2009. The suggestions was that the Entry Regime nonetheless performs a helpful function in defending
truthful entry and selling competitors within the trade. Primarily based on this, we’ve got determined to retain the
Entry Regime. Nonetheless, we recognise the continuing challenges the trade faces from declining money and
ATM use and the rising prices of deployment. We’re eager to see the trade sustaining a broad protection
of ATMs at cheap costs, notably in regional and distant areas. We’ll proceed to have interaction with
trade members to find out whether or not any adjustments are required to the RBA’s regulation of the
ATM trade to facilitate this.

Supporting the Transition from BECS to Trendy Cost Methods

The ultimate concern I wish to focus on is the trade’s plan to transition from the Bulk Digital
Clearing System (BECS, also called Direct Entry) to extra fashionable cost techniques. BECS has been a
low-cost and dependable workhorse of the Australian funds system for many years, processing wage and
welfare funds, recurring funds to retailers and different account-to-account transfers. In 2022/23, BECS processed round three-quarters of non-cash funds by worth
and continues to be closely relied on by many companies and authorities companies. For the reason that NPP was launched in
2018, account-to-account transfers have been migrating throughout to the quick cost system, with round
30 per cent of account-to-account transfers now remodeled the NPP (Graph 3).

Graph 3

Graph 3: NPP Share of Account-to-Account Transfers

The funds trade, via AusPayNet, has been discussing whether or not to transition away from BECS and has
just lately determined to retire the BECS framework with a goal finish date of 2030.

We perceive the explanation why the trade needs to wind down BECS. Aside from the price of sustaining the
system, it has limitations in contrast with extra fashionable alternate options such because the NPP:

  • It processes funds in batches solely on enterprise days, in contrast with the 24/7 operation of the NPP with funds transferred in near actual
  • BECS just isn’t in a position to ship full remittance data. As lots of you understand, the restricted variety of
    characters stems from the variety of characters that could possibly be carried on a punch card! A long time on,
    that is not match for objective. It prevents automating the reconciliation of funds and makes it
    more durable to display screen for monetary crimes. The NPP makes use of the data-rich ISO 20022 messaging format, which
    is the brand new world customary for funds techniques.
  • Funds via BECS can solely be addressed utilizing BSB and account numbers. Against this, the NPP
    incorporates the PayID addressing service, permitting funds to be addressed to an e mail handle or
    telephone quantity, and it additionally gives a affirmation of payee service. These options assist to cut back
    mistaken funds and fight some scams.

The restrictions of BECS have gotten extra vital as customers count on quick funds and the financial system
turns into more and more digitised. However there are some vital challenges that may have to be overcome
for the trade to efficiently transition all BECS funds to extra fashionable cost techniques.

Monetary establishments might want to join all related accounts that at present ship and obtain
funds by way of BECS to the NPP
. Some monetary establishments should not but related to the NPP,
whereas others which can be related haven’t but made all their accounts reachable. Till all accounts are
related, it will likely be tough for firms and governments emigrate present funds comparable to
payroll to the NPP. Finishing this may take appreciable funding and time. It can be crucial that work
begins now to make sure that finish customers should not disrupted when BECS is retired. We’re monitoring trade
progress on making accounts reachable by way of the NPP. We’re additionally partaking with establishments that aren’t
but related to debate their plans to make NPP providers obtainable to their prospects.

One other key concern is value. We hear from customers that processing funds via BECS is
considerably cheaper than processing them via the NPP, particularly for normal funds comparable to
payroll. Employers are sometimes making such funds each couple of weeks, generally for 1000’s of
workers, and so the price of every particular person transaction can actually add up. We count on that as the amount
of funds processed by the NPP rises, the per transaction value will come down. Additionally it is essential to
recognise that there are some much less seen prices related to BECS funds. These embody handbook
reconciliation and managing mistaken funds, given BECS’ restricted messaging and addressing

Given the mandate of the Funds System Board to advertise security, effectivity and competitors within the
funds system, we plan to undertake a assessment of end-user prices of account-to-account funds via
BECS and the NPP to supply larger transparency.

Monetary establishments will even want to make sure that their NPP providers can reliably deal with the
full vary of funds which can be at present processed by BECS.
An essential milestone has been
the launch of NPP’s PayTo service as a contemporary different to direct debits. Most NPP members
have now enabled PayTo for retail (payer) prospects, however there’s extra work to do to make the service
broadly obtainable to enterprise (payee) prospects wanting to make use of PayTo as a substitute for direct debits.

One other essential BECS use case is bulk funds, comparable to salaries and welfare funds, that are
at present processed as batch information via BECS. The trade might want to discover a method to effectively
course of bulk funds via the NPP, which operates on a line-by-line slightly than batch foundation. Many
companies and authorities companies have bulk cost capabilities, and it’ll take effort and time to
allow these funds to be processed by way of the NPP.

Given the frequent problem right here, there could also be worth in growing a standardised trade strategy to
processing bulk funds via the NPP. This might promote interoperability, effectivity and competitors
in processing bulk funds and provides companies and authorities entities extra time to transition their

Monetary establishments will even must uplift their processing capability to make sure that BECS
cost volumes might be reliably processed via the NPP.
Australian Funds Plus has
constructed capability uplift into their roadmap. Additional capability upgrades are prone to be required in later

One other problem is the reliability of NPP providers supplied by monetary establishments.
We gather information from monetary establishments on the reliability of the assorted retail cost providers
they supply. These information present a considerable rise within the quantity and complete length of operational outages
lately, with NPP providers being the least dependable (Graph 4).

Graph 4

Graph 4: Downtime per Service Provider

As extra quantity shifts from BECS to the NPP, it can be crucial that suppliers enhance the reliability of
their NPP providers. Decommissioning BECS ought to cut back the prices and complexity concerned in working two
account-to-account cost techniques in parallel. However it will additionally imply that BECS just isn’t obtainable as a
backup possibility when NPP providers are down. There will likely be even much less tolerance from the group for
outages to NPP providers when most wages and profit funds begin going via the NPP. Enhancing the
reliability of NPP providers throughout the trade will likely be a significant focus of the RBA over the approaching years.

However the assorted challenges I’ve outlined, it’s acceptable that the trade has set a
goal finish date for the BECS framework. This can assist focus trade consideration and energy on the
migration course of. Given the numerous alternatives and challenges related to the BECS migration,
we will likely be intently monitoring trade efforts on this space.


The funds panorama is altering quickly, and we’ve got a whole lot of work to do to proceed modernising the
funds system. The Authorities’s reforms will allow us to advertise security, effectivity and
competitiveness throughout the funds ecosystem. On the identical time, trade, authorities and the RBA will
must work collectively on sustaining entry to money and transitioning from BECS to extra fashionable cost

I look ahead to persevering with the cooperation between AusPayNet and the RBA as we navigate these challenges
within the pursuits of the Australian public.

Thanks for listening and I’m joyful to reply some questions.