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OpEd: How RBA is helping Australia lead in the payments space 

Over the past decade, the global payments landscape has been through a complete digital transformation, from the emergence of digital wallets to functions like Apple and Google Pay becoming consumer standards for everyday payments. 

But as consumers become to expect the latest and greatest technology at their fingertips, it is the next decade that we must look to as we  prepare ourselves for new technologies, many of which may not even exist yet.

As we look to the future, the Reserve Bank of Australia (RBA) will continue to play a crucial role in ensuring that we are ready and able to grab hold of these innovations, as they are responsible for ensuring the stability, efficiency and competitiveness of the payments system overall.

The RBA, alongside a range of government bodies, successfully enabled modern payments solutions to flourish, supported by the work of the financial services industry in bringing products to market that accelerate this transition.

A key example of this is card payments, which continue to increase according to the 2023 Australian Payments Network’s annual review, which noted card payments were up 14 per cent from 2022, nationwide. Australians have come to expect both a physical and digital card that is linked to their accounts, whether that be a traditional credit or debit card, or modern applications like an employee card that is used for work expenses. This has led to a large number of product providers across the industry, from the big banks to fintechs, creating new ways to pay using cards, whether physically or digitally. 

The RBA and the Federal Government more broadly have created policy settings that have allowed this natural transition to take place, whilst balancing the needs of protecting consumers. We look forward to the RBA’s focus on payments continuing as the industry progresses rapidly and demand for clever payments options continue to grow. 

In the 2023 McKinsey Global Payments, the company has expressed their view that  future revenue growth in the payments space will be stimulated most notably by instant-payments and the rise of digital wallets. The RBA has already provided strong policy frameworks, but product providers are playing catch-up. This is particularly evident in areas such as the use of digital wallets for transport payments and the gap in product offerings amongst smaller banks and fintechs. For digital wallet adoption to grow in Australia, product providers need to provide access to a broader range of people, including those who bank with smaller banks and use fintech services.,.

The New Zealand market is a strong example of where this gap in payments capabilities between larger financial institutions and smaller banks and fintechs is quite prominent. Until recently, it was near impossible for those using smaller providers to access card programs alongside their accounts. This was a gap in the market that companies like Change Financial identified over the last 18 months and by using their technology, they are able to help meet this demand and enable the smaller providers to offer card programs by outsourcing the back end capability.  According to 2022 Payments NZ Consumer Research in New Zealand a staggering 84 percent of large purchases are paid using cards and 77 per cent of everyday purchases.  

Future areas of expected growth

At Change Financial, we are seeing high demand from clients looking to offer contactless payments and mobile wallets for debit and prepaid cards. While the major banks and financial institutions have longstanding product offerings in these areas, smaller banks and fintechs are continuing to play catch-up, with many still unable to offer digital solutions to customers due to the prohibitive costs associated with the offering. But, with the help of providers like us, these businesses can now outsource that capability. As these features continue to rollout across the industry over time, card programs will continue to cement their place as the dominant means of payment for Australians, a trend we expect to continue in years to come.

The pandemic also accelerated the growth of online payments, with RBA data showing that in 2022, 18 per cent of payments were made online, up from 12 per cent in 2019. While increasing, this proportion is still relatively small when compared to card and other in-person payments and we expect this figure to continue increasing substantially over the coming years. This seamless transition to online payments during the pandemic also showcases the ability of Australia’s policy and regulatory settings to broadly cater for future opportunities and threats as they arise.

Another projected area of growth is the use of cryptocurrency (crypto) for everyday payments. While it is a nascent industry, adoption is increasing as further use cases are developed including crypto payment gateways and crypto-backed cards. 

The RBA has undertaken preliminary research and discussions around creating a central bank digital currency (CBDC) and these should continue, as key global economies like the US seek to do the same. This will not only set our nation up for future opportunities, but ensure we are creating a payments ecosystem that encourages healthy competition.

Overall, the RBA must continue to be future focused to prepare for these advances and product providers of all sizes must do the same, to enable a national payments network that accommodates everyone. For this to occur, we must continue to be preparing for these advancements from a product and policy perspective, so that Australia can remain a global leader in the payments space.

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