In his keynote address to the AusPayNet's annual summit, Reserve Bank of Australia governor Philip Lowe took a look at trends in the payments system.
Some of these trends have been evident for some time, notably the declining use of banknotes and the increasing use of electronic forms of payment, particularly in debit card transactions.
There has also been strong growth in account-to-account transactions, increasingly through the New Payments Platform. Lowe suggested the direct entry system might be wound down, with all transactions shifting to the more modern payments infrastructure of the NPP.
He also pointed out that an increasing share of electronic payments is being made through the digital wallets offered by the large technology companies, including Apple Pay, Samsung Pay and Google Pay.
Lowe also suggested that the ‘big tech’ firms are exploring how these digital wallets could be used for non-traditional payment methods. "So it is highly likely that we will continue to see new business models emerge," Lowe said.
It is also likely that these digital wallets will contain more than just digital representations of the cards that are in our physical wallets. They are likely to provide access to new token or account-based digital forms of money, he said.
One possibility is that the tokens are issued by, and backed by, the RBA in a similar way to Australian dollar banknotes – that is, a form of retail central bank digital currency, or an eAUD.
"To date, though, we have not seen a strong public policy case to move in this direction, especially given Australia's efficient, fast and convenient electronic payments system," Lowe said.
Another possibility is that payment tokens are issued and backed by an entity other than the central bank, though still denominated in Australian dollars. These could be a form of stablecoin.
A third type of potential digital token is a cryptocurrency, not linked directly to the AUD or backed by a particular entity or assets.
In relation to the last possibility, Lowe said he remained sceptical of the benefits cryptocurrency offered for general purpose payments. "It is likely that the asset used for the settlement of most transactions in the economy will remain some form of secure fiat currency with a stable value, rather than cryptocurrency with a volatile price."
At the same time, another trend is for smaller players to enter the market, focusing on specific elements of the payments value chain in areas such as online payments, point-of-sale acceptance technology, cross-border retail payments and buy now, pay later services.
Lowe then set out some specific areas where the RBA's Payments System Board would like to see further progress:
• the new PayTo service on the NPP, which is expected to serve as a replacement for the current system of direct debits, after it launches in July next year and which will allow households and businesses to authorise other entities to initiate payments out of their accounts;
• the ‘payment with document’ overlay on the NPP, which will “ aid reconciliation for recipients while payers will find they need to devote fewer resources to managing customer queries”;
• delivery of the benefits from open banking, as "banks are making progress with implementation, but some have not met the target dates … It is important that progress does not slip here, especially as the number of accredited data recipients continues to increase"; and
• the development of widely accepted digital identity services – two services have been developed, but there has not been a large-scale rollout.
Lowe also took a closer look at cross-border payments.
"It still often costs about 5 per cent of the payment (and sometimes more) to send money internationally from an Australian bank and it usually takes more than one day to reach the recipient.
We know from our discussions with the central banks of the South Pacific that too often it is disadvantaged people who pay the highest prices," he said.
"This is an area where the financial sector is not serving the community as well as it could, or should. This is very much the sentiment of the G20's Roadmap to make cross-border payments cheaper, faster, more transparent and more accessible."