Speech
The Future of the Payments System
Brad Jones*
Assistant Governor (Financial System)
AusPayNet Summit 2024
Sydney - 12 December 2024
Thank you for the invitation to open the batting at this year's AusPayNet Summit. This forum is always a highlight
on the calendar - for industry and policymakers alike - and I am sure this year will be no different.
Not so long ago, opining on the future of the payments system may have been a somewhat mundane affair.
Not a great deal changed from one year to the next, and not too many folks, other than the true payment system
diehards, were interested.
Not so now.
For a start, our payments system is rapidly evolving. New innovations are springing up at a dizzying pace.
And the payments system has never been more critical to the functioning of the economy. Almost $300 billion in
payments now settle across the RBA's central infrastructure each day. This is equivalent to Australia's annual GDP
flowing through the payments system every 10 days.
Furthermore, debates over the future of money and payments now regularly feature in the public square - and as
I am discovering, the public square very much extends to summer barbeque conversations. In some sense,
money and technology have always been the subject of popular fascination, but this seems especially true today.
In short, to channel a former Prime Minister, it has never been a more exciting time to be in payments.
My remarks today will focus on the challenges and opportunities in front of all of us involved in payments.
There is no shortage of both. But before diving in, let me briefly set the scene by highlighting where our
payments system stands today, and the RBA's role in it.
The current state of Australia's payments system
Australia has a payments system that we can be proud of. By global standards, it is fast, efficient and reliable.
This is evident not only in the data, but from the discussions that I and my colleagues at the RBA and on the
Payments System Board regularly have with our international counterparts. It is also worth noting that for the
better part of a couple of decades, retail merchant card payment costs have trended lower in Australia in
response to increased transparency and competitive tension in the market for payments services (Graph 1).
Some of this competitive tension has arisen organically, and some of it has come about as a result of intervention
by the RBA.
Graph 1
This brings me to the mandate of the RBA and the Payments System Board.1 At the broadest level, this mandate
is to help shape the payments system so that it works in the best interests of Australian households and
businesses. Our north star is promoting the public interest. We strive to achieve this through a combination of
suasion, regulation and working with industry participants to help overcome the coordination issues that can
bedevil payment systems.
In seeking to promote efficiency, competition and safety in the payments system, we also recognise the
important role of innovation in serving the public interest. Australia's productivity growth challenges make this all
the more pertinent. One can think of the New Payments Platform (NPP) as a notable example of this focus
(Graph 2). More recently, this year the RBA materially raised the activity threshold beyond which securities
settlement facilities must comply with the Financial Stability Standards. It was assessed that the higher threshold
struck a more appropriate balance between the public interest in the management of financial stability risks,
and the public interest in avoiding excessive regulatory burden (particularly on small enterprises). And as I will
discuss later, we also recently launched a new project with industry to examine how central bank digital currency,
stablecoins and tokenised bank deposits could, along with new infrastructure arrangements, support innovation
and resilience in wholesale tokenised asset markets.
Graph 2
Where innovation promises to not only enhance efficiency but also resilience and safety in our financial system,
all the better. This recognises that we are entering a new era for operational risk - a result of rising geopolitical
tension and other sources of potential disruption that include third-party vendors. For these reasons,
strengthening resilience in our payment system and our financial market infrastructure is a key area of focus for
the RBA in its work with other member agencies on the Council of Financial Regulators.2
This aside, the RBA is also working with the government to make sure that Australia's regulatory architecture is fit
for purpose in the 21st century. This is a pressing issue given the foundational legislation setting out the RBA's
powers was drafted in another era - one prior to the emergence of the digital economy that will be essential to
Australia's future prosperity.
If there is one message to takeaway from my remarks today, it is this - while we should recognise that Australia
has a world class payments system today, it would be a mistake to assume the same will be true in five or
10 years' time without a concerted effort from everyone involved in payments. Of course, the RBA has a key role
here and we remain committed to working constructively with industry in promoting the public interest.
But ultimately, how industry responds to these challenges and opportunities will determine whether it will be
able to deliver the services that Australians will need and should expect in the future.
Account-to-account payments
In the spirit of facing into challenges, let me begin with account-to-account payments. In her speech to this
Summit last year,3 the Governor spoke about industry's decision to target the decommissioning of the BECS
framework by 2030. The setting of a target date by industry has helped to focus attention across the ecosystem.
But there is much to do here.
BECS is the workhorse of the account-to-account payments system. While the share of account-to-account
transfers made through the NPP has increased notably (Graph 3), BECS is still used to process the majority of
account-to-account payments. This includes payroll, pension and support payments that are critical
to Australians.
Graph 3
Given the importance of BECS to our financial system, this year the Payments System Board asked RBA staff to
undertake a risk assessment of the intended decommissioning. The risk assessment, which will be reported to the
Board in March 2025, is drawing attention to some issues that will need to be addressed to facilitate an
orderly decommissioning.
In the course of engaging with a wide range of stakeholders - banks, payment service providers, payment
schemes, end users and government agencies - RBA staff have heard plenty of support for the migration to more
modern payment rails such as the NPP. There are features of the NPP that many stakeholders find beneficial,
including 24/7 operation, real-time settlement, richer data and enhanced data exchange capabilities.
At the same time, some stakeholders have raised concerns about aspects of the migration. I will set these out in a
moment, but my colleagues at the RBA and on the Payments System Board see the central challenge as this -
industry is yet to arrive at a shared vision of the desired features of account-to-account payments in Australia.
This is a foundational issue. While the point of departure has been announced by industry - transitioning from
BECS as we know it - establishing a common vision of the features underpinning a desired end state will be
essential if a program of this scale is to succeed. Once a consensus has emerged here, a roadmap with milestones
can guide industry progress toward the ultimate objective.
Now let me share with you some of the feedback we have heard so far:
1. There has been insufficient industry coordination, planning and certainty regarding the transition.
This in turn has had made it difficult for industry participants to press on with their individual plans, including
those who will have a key role in ensuring the ongoing competitiveness and safety of the system.
2. There is scope for the needs of end users to be given more prominence in industry discussions on the
future of account-to-account payments. BECS is the payment rail used to make the majority of essential
payments to millions of Australians, so any replacement must be capable of reliably meeting end user needs.
3. A solution for the processing of bulk payments will be important.4 Key end users need confidence that
bulk payments will be supported into the future, recognising that many have integrated systems that
manage the initiation and reconciliation of payment instructions. The NPP and the fast settlement service
(FSS) will need to have capacity to handle a much higher volume of payments.
4. The cost of the transition and per transaction costs in the future system are a concern for some
stakeholders. End users, including those who do not have advanced functionality requirements,
understandably want options that represent value for money. The RBA is working to better understand the
pricing of account-to-account payments.
5. Many stakeholders have expressed a desire for resilience to feature prominently in future
account-to-account system arrangements. BECS outages have typically been low (Graph 4). Contingency
arrangements in the future system will need to ensure that end user needs can continue to be met even
when operational issues are experienced.5 This suggests resilience will need to be built into the solution from
the outset. As mentioned earlier, the RBA and the Australian Prudential Regulation Authority (APRA) are
stepping up their focus on operational resilience in the financial system, including payments.6
6. End users will be unable to move payments from BECS until all customers can receive payments via
an alternative channel. Some banks using BECS are yet to connect to the NPP, and even for those that have
done so, some of their BECS-reachable accounts are not currently reachable via the NPP. It might be that not
all of these unreachable accounts will need transactional capabilities in the future, but this is something
institutions need to examine.
Graph 4
Let me offer a positive take on this feedback. It has surfaced some issues that, if addressed appropriately, can give
industry a solid basis on which to move forward. The focus on resilience, functionality and end user needs is
particularly relevant here. The announcement by industry of a target date of 2030 for BECS decommissioning has
already sparked some useful dialogue. But all stakeholders need a voice, and a broad consensus on some key
issues is now essential if Australia's account-to-account payment system arrangements are going to be
fit-for-purpose in the next decade. Time is now of the essence.
Review of Retail Payments Regulation
As many of you will be aware, the RBA recently launched a Review of Retail Payments Regulation.7 While we
hoped to conduct a broad review, including of issues arising from new types of players and technologies in
digital payments, proposed amendments to the Payment Systems (Regulation) Act 1998 (PSRA) that would bring
relevant participants into the RBA's regulatory remit currently remain before the Australian Parliament. Given the
limitations of our remit under the current PSRA and the significance of the issues, it is important that these
reforms are passed as soon as possible.
For now, we are focused on whether there are further actions the RBA could take to put downward pressure on
merchant card payment costs and whether the surcharging framework remains fit for purpose. These issues can
be dealt with under the PSRA in its current form and are inextricably linked: merchants are less likely to surcharge
if their payment costs are low. Given the shift towards electronic payments, card payment costs are an ongoing
concern for merchants, as they are for consumers. Keeping downward pressure on merchant fees for card
payments, particularly for smaller merchants that tend to be charged higher fees, will keep consumer costs
down, and so is an important priority for the RBA.
The Issues Paper for the Review outlines a broad suite of issues and possible policy responses for stakeholders to
consider. We have asked for feedback on the following:
• the current level of interchange fee benchmarks and caps, and whether there is a case for more structural
changes to interchange regulation8
• whether further regulatory action could increase competitive pressure on scheme fees and whether further
action is required to promote least-cost routing for in-person transactions
• options to reduce complexity and improve transparency to facilitate merchants shopping around to get the
best value, as this would boost competition in the acquiring market.
As the payments landscape has evolved significantly since the surcharging framework was introduced in 2003,
it is timely to review whether the current rules are still achieving their intended purpose. There are arguments on
both sides of this debate, and we recognise that some views are strongly held. We are open to exploring all
possible options to find a position that will best serve the public interest, consistent with our legislative mandate.
Some of the arguments for retaining the current surcharging framework include:
• it provides a price signal to consumers to use a lower cost payment option - where consumers vote with
their feet, this puts competitive pressure on card networks to lower their wholesale fees
• merchants value the ability to surcharge to recover the cost of payment choices made by customers
• surcharging rules have made a significant contribution to the long-run decline in average fees that merchants
pay for card transactions (recall Graph 1).
However, the decline in cash usage, increased prevalence of surcharging and changes in the way merchants are
charged for card payments have led to reasonable concerns about the current framework. In particular:
• Fewer consumers transact with cash today and are therefore unable to avoid card surcharges at
the point-of-sale.
• Many small merchants are now on blended or single-rate payment plans that charge the same fee to
merchants for accepting all types of cards. This dulls the price signal to consumers, and can mean users of
cheaper card payments cross-subsidise users of more expensive cards.
• Consumers are sometimes unaware of the surcharge amount before paying and/or surcharged for amounts
in excess of merchants' cost of acceptance.9
We received over 70 submissions to our Issues Paper, many from institutions represented here today. Thank you
to those who took the time to set out their views. We plan to publish submissions on our website in January,
and to take a summary of the feedback you have provided to the Payments System Board in March. Following
this, we aim to release a consultation paper with potential policy actions around mid- 2025. Thereafter a
conclusions paper would set out the Board's final decisions, likely by the end of the year.
Cross-border payments
I'll now turn to the topic of cross-border payments.
Australian businesses and households that undertake international activities need efficient and safe ways to send
and receive money. But cross-border payments services are still more expensive, more opaque and slower than
their domestic counterparts. Enhancing cross-border payments is therefore one of the Payments System Board's
strategic priorities and an international commitment for Australia under the G20 Roadmap.
A recent review by the Financial Stability Board indicated that much more progress is needed to move toward
the G20 Roadmap cost targets.10 Lowering the cost of cross-border payment services has proven challenging
almost everywhere. In Australia, we estimate that the average cost of sending A$1,000 to other countries still
significantly exceeds the relevant G20 targets (Graph 5).11
Graph 5
International Money Transfer Costs*
As a proportion of a A$1000 transfer from Australian accounts
% %
Advanced Advanced economies economies Developing Developing economies economies
5 5
4 4
3 3
2 2
1 1
0 0
Average** Banks Non-banks Average** Banks Non-banks
Retail average cost target Remittance average cost target
* Estimates based on quotes from online calculators at September
2024; sample includes 22 currencies, 4 major banks and 10
non-banks.
** Weighted by market share.
Sources: ACCC; Online Calculators; RBA.
However, the cost of sending money overseas from Australia can vary significantly across providers. Banks are
generally more expensive than non-bank providers, reflecting the size of the mark-ups they typically apply to the
wholesale foreign exchange rate. By contrast, there are some non-bank digital providers offering prices that are
around, or a bit below, the G20 target levels. These differences highlight the importance of transparency over
prices and of customers shopping around.12
The speed of cross-border payments is another area where more progress is required. Bank-intermediated
cross-border transactions often take a day or more to reach the recipient. Slow processing reflects a range of
factors including differing operating hours, inconsistent payments messaging practices, and complex
compliance checks.
Making use of the new NPP International Payments Service, which allows the final Australian dollar leg of
inbound cross-border payments to be processed on a near real-time 24/7 basis, will help. There are also a range
of ISO 20022 messaging initiatives where more progress is needed.13 Achieving international consistency in the
data carried in payments messages will reduce the need for manual intervention by providers in the processing
of cross-border payments, and therefore increase the speed and lower the costs of transactions.
Finally, the RBA continues to participate in initiatives like Project Mandala, a collaboration with the Bank of
International Settlements (BIS) Innovation Hub and the central banks of South Korea, Malaysia and Singapore.
This project examines a common technical model for automating regulatory compliance processes in
cross-border payments, including sanctions and AML/CTF requirements, with a view to increasing the speed of
compliance procedures and reducing failed transactions.14
The future of digital money
This leads me to another focus area for the RBA and the Payments System Board - shaping the future of money in
Australia. A central element of this program is determining whether there is a public policy case to introduce a
central bank digital currency (CBDC) in Australia, and if so, in what form. We recently published a report with
Treasury that provided an updated assessment of the case for a CBDC in Australia, and outlined, for the first time,
a three-year roadmap for future work.15
Our current assessment is that a public interest case to issue a retail CBDC has yet to emerge in Australia. At the
present time, we see the potential benefits of a retail CBDC as modest or uncertain, relative to the challenges it
would likely introduce. However, as these trade-offs could evolve over time, and as more international experience
comes to light, the RBA and the Treasury will continue to examine the issues.
Like a number of central banks in advanced economies, we see the potential case for a wholesale CBDC as more
promising, though not definitive at this point. A wholesale CBDC could have a key role in facilitating the
settlement of transactions in tokenised asset markets, and in enhancing cross-border payments. This recognises
the key role of central bank money in serving as the ultimate safe settlement asset, particularly in systemically
important markets - a point emphasised in international standards. Implementing a wholesale CBDC is also likely
to be less disruptive and pose fewer policy challenges than issuing a retail CBDC. It would represent a more
incremental change to existing arrangements where digital central bank money is already issued to eligible
financial institutions in the form of Exchange Settlement Account balances. But there are still issues that require
closer scrutiny here.
In that respect, we have made a strategic commitment to prioritise our applied research agenda on innovations
in wholesale digital money - namely, wholesale CBDC, tokenised bank deposits and stablecoins. Our most
immediate priority is to launch a new research project with the Digital Finance Cooperative Research Centre
(DFCRC), known as Project Acacia. Our focus here is on opportunities to uplift the efficiency, transparency and
resilience of wholesale markets through tokenised money, assets and new settlement infrastructure. We recently
published a consultation paper seeking industry feedback and inviting expressions of interest to collaborate with
the RBA and the DFCRC as part of this project.16 I encourage anyone who is interested to reach out to our
project team.
In addition to Project Acacia, we have a number of other CBDC initiatives in line over the next year. We are
currently exploring options for engaging with the public to better understand their needs, preferences and
concerns relating to CBDC. We are also planning to convene industry and academic forums to provide more
systematic engagement with external experts on retail and wholesale CBDC issues.
In short, we have an ambitious agenda on the future of money. But all our efforts are directed to ensuring that
our future monetary arrangements are fit for purpose in the digital age.
The future of cash
While cash use has declined in recent decades, it remains an important means of payment for many folks in our
community (Graph 6). A significant number of Australians still primarily rely on cash to participate in the
economy, including our more vulnerable members of society. Cash remains an important store of value,
particularly during periods of economic uncertainty. And in serving as a backup means of payment when
electronic payment methods are unavailable, including during system outages or natural disasters, cash helps to
promote a more resilient payment system overall. For these reasons, the government and the RBA remain
committed to supporting access to cash.
Graph 6
However, as cash use has declined, the cost of moving it around the country has increased. A significant effort to
put cash-in-transit services on a more solid financial footing is now underway across industry. But there is still
considerable work to be done to develop a sustainable long-term model for cash distribution. The challenge now
for industry is to deliver more efficient cash distribution services, while meeting the public interest in ensuring
cash remains an affordable and viable means of payment for Australians.
Conclusion
Let me wrap up. Australians expect their payments to be convenient, reliable and represent value for money.
At the RBA, we share these expectations. We want to see a payments system that is a hotbed of innovation and
competitive tension, driving efficiency up and costs down. And we want to see a payments system that is safe
and resilient - one that Australians can rely on.
As we contemplate what shape the payments system of the future might take, my colleagues and I at the RBA
and on the Payments System Board are committed to working constructively with AusPayNet and the wider
industry. We are in this together. There is much to celebrate in the Australian payments system, but as I've made
clear today, also much to do.
On that note, I look forward to taking your questions.
Thank you.
Endnotes
* I would like to thank my colleagues in Payments Policy Department for their valuable assistance in the preparation of these
remarks. All errors of omission and commission are my own.
1 More formally, the Payments System Board's responsibilities and powers are set out in four separate Acts. These are: Reserve Bank
Act 1959 ; Payment Systems (Regulation) Act 1998 ; Payment Systems and Netting Act 1998 ; and Cheques Act 1986. The Reserve Bank
Act, as amended, gives the Payments System Board responsibility for determining the RBA's payments system policy. It must
exercise this responsibility in a way that will best contribute to: controlling risk in the financial system; promoting the efficiency
of the payments system; and promoting competition in the market for payment services, consistent with the overall stability of
the financial system.
2 Council of Financial Regulators (2024), 'Quarterly Statement by the Council of Financial Regulators - December 2024',
Media Release No 2024-05.
3 Bullock M (2023), 'Modernising Australia's Payments System', Speech to the Australian Payments Network Summit, Sydney,
12 December.
4 Bulk payment functionality allows payment instructions to be grouped together and sent as a single payment file, supporting
efficient processing of large volumes of payments (compared with sending each payment individually). Bulk payments are
widely used by government departments and companies for regular payments such as welfare, salary and dividend payments
and the payment of bills.
5 BECS is a technologically simpler solution than modern payment rails. While this simplicity means that it is no longer fit for
purpose for many payment use cases, it does have some desirable features. In particular, end users do not expect instant
payments processing across BECS. When operational issues affect availability of the service, the payments can be delivered in a
subsequent batch settlement without much impact to the end user.
6 This includes through the geopolitical risk program under the Council of Financial Regulators, and in the case of APRA, through
CPS 230.
7 RBA (2024), 'Merchant Card Payment Costs and Surcharging - Issues Paper', October.
8 This could include having only interchange caps instead of both caps and benchmarks, removing ad valorem interchange caps
and benchmarks (so that they are solely cents-based), or limiting the number of interchange categories.
9 This includes the impact of other service costs being bundled into the surcharge that is passed onto consumers.
10 Financial Stability Board (2024), 'Annual Progress Report on Meeting the Targets for Cross-border Payments: 2024 Report on Key
Performance Indicators', 21 October.
11 The Financial Stability Board has, for the purposes of its targets, defined remittances as low value, high volume payments
primarily sent to recipients in emerging market and developing economies. Retail payments are all other payments under
US$100,000.
12 This task has been helped by recent updates to the guidance from the Australian Competition and Consumer Commission on
how international money providers can improve the transparency of these services. This included guidance around how
international money providers should display information to consumers, requiring standardised illustration of costs and other
service features, such as the time it will take for the recipient to receive the funds. See ACCC (2024), 'Best Practice Guidance for
Foreign Cash and International Money Transfer Services', October.
13 For instance, the RBA is working to ensure that the Australian industry adopts the globally harmonised ISO 20022 messaging
requirements for cross-border payments. Work is underway to plan the NPP's adoption of globally harmonised ISO
20022 messaging, and we expect industry to have adopted the globally harmonised ISO 20022 messaging requirements for
high-value and fast payments by the end of 2027.
14 See BIS Innovation Hub (2024), 'Project Mandala: Streamlining Cross-border Transaction Compliance'.
15 For the paper, see here: RBA and Treasury (2024), 'Central Bank Digital Currency and the Future of Digital Money in Australia',
September. See also Jones B (2024), 'Financial Innovation and the Future of CBDC in Australia', Speech at the Intersekt
Conference, Melbourne, 18 September.
16 RBA (2024), 'RBA and DFCRC Joint Consultation Paper Project Acacia - Exploring the Role of Digital Money in Wholesale
Tokenised Asset Markets', Media Release No 2024-25.