'There has been insufficient industry coordination, planning and certainty regarding the BECS transition.' RBA assistant governor Brad Jones
Alarm bells are going off at the Payments System Board: the time for yabbering about decommissioning BECS is over, and the time to figure everything out, and study all the costs and comprehend all the risks is, well … now.
The industry is giving itself five and a half years to meet a deadline of mid 2030 to transition away from and then retire the most systemic and sensitive of Australia’s legacy payments rails, the one that was set up in the 1970s to handle (and consolidate) low value payments.
BECS - the Bulk Electronic Clearing System - and plans for its eventual replacement, provided one centrepiece of yesterday’s packed AusPayNet annual conference in Sydney yesterday.
In his keynote, Brad Jones, the assistant governor, financial system at the Reserve Bank took the opportunity the opportunity to shower the payments industry with tough love. And share an agitated wake-up call.
Jones speech catered to many agendas, but he left the payments sector’s chief artisans in no doubt of the depth of RBA unease at the progress and the lacklustre preparations for the decommissioning of BECS.
“BECS is the workhorse of the account-to-account payments system” Jones reminded the AusPayNet crowd.
“While the share of account-to-account transfers made through the New Payments Platform has increased notably, BECS is still used to process the majority of account-to-account payments. This includes payroll, pensions and support payments that are critical to Australians.”
Given the importance of BECS to Australia’s financial system, this year the Payments System Board tasked RBA staff to undertake a risk assessment of the intended decommissioning, Jones explained.
The risk assessment will be reported to the Board in March 2025.
This work, he said “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.”
Jones then warmed to his theme: “The Payments System Board see the central challenge as this – the 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.”
Brad Jones then spelled it out, and perhaps he should weld what followed to the front doors of all the HQs of the payments industry’s most prominent and most noisy members.
“There has been insufficient industry coordination, planning and certainty regarding the transition” Jones declared.
Let’s read that sentence again: There has been insufficient industry coordination, planning and certainty regarding the BECS transition.
Jones had many more, almost equally cranky points to hammer home.
“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” Jones said.
Such as Services Australia and Centrelink.
“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.
“A solution for the processing of bulk payments will be important.
“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 RBA’s Fast Settlement Service will need to have capacity to handle a much higher volume of payments, he pointed out.
“The cost of the transition and per transaction costs in the future system are a concern for some stakeholders.
“Many stakeholders have expressed a desire for resilience to feature prominently in future account-to-account system arrangements.
“BECS outages have typically been low.
“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.
“This suggests resilience will need to be built into the solution from the outset.
“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” Jones reminded AusPayNet.
“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” Jones said.