RBA tells banks to get on with it

The banking industry has some work to do to strengthen competition in payments if Australia is to maintain a world-class payments system, a senior Reserve Bank officer said yesterday.

RBA assistant governor Philip Lowe told delegates at the Card & Payments Conference in Sydney that if the industry wanted the central bank to withdraw from the regulation of payments, which the industry argues is stifling innovation, it still had work to do.

Lowe said steps the industry could take included changes to the governance of the Eftpos system to improve its ability to compete with international (Visa and MasterCard) debit schemes.

The industry also needed to look at the development of alternative online payment methods.

Lowe said: "I think it is fair to say that some progress has been made but there is still a considerable way to go before we can see the finish line."

The industry is keen to have the central bank withdraw from its role as regulator of the payments system, which it took up in 2002 after reaching the view that the sector was inefficient and costly.

Lowe said the RBA would only do this when the industry was able to show that it was prepared to develop competitive payment infrastructure.

Lowe noted that the Australian Payments Clearing Authority had done some work on governance arrangements and a formal structure to oversee the Eftpos system.

Speaking on a conference panel after Lowe's speech, APCA chief executive Chris Hamilton said the plan was for the Eftpos system, which is currently a loose aggregation of bilateral arrangements, to have a corporate structure with a board and CEO.

Hamilton said: "Eftpos is doing very good business. Volumes are not a problem. But there is a new contestability with scheme debit.

"In the past we did not think about payment systems as competitive things. We do now."

But APCA first mooted an organisational structure for Eftpos in August 2007. Progress has been slow.

Other speakers on the panel, including the Australian Bankers Association's David Bell did not have anything specific to say about the proposed organisation, apart from giving a general commitment to competition.

Lowe showed his impatience with the pace of development in payments when he said the discontinuation of a BPay project to develop a new online payment method was "less positive".

Lowe said: "Without wanting to offer a comment on the merits of the particular proposal, this experience is an example of how difficult it can be to make progress when all the main stakeholders need to be on board at the same time."