Transcript of Question & Answer Session An Efficient, Competitive and Safe Payments System
Moderator
Governor Lowe, thank you so much. That was very meaty. I think we could do with another round of applause for the Governor, please.
Applause—
Moderator
Theres so much in that for a normal consumer like myself. I know the room is much more knowledgeable about all these things, so I will certainly not fill it with my questions. But I do look forward to being offered PayTo by my bank. So its no surprise that I havent been offered it yet? That should be working; yes?
Philip Lowe
Well, if you havent been offered it, go and ask them why, and go and switch banks to someone who will offer you the service because its a much better way to make payments. You can be sure youre not going to make a payment to the wrong person by typing in a wrong account number or BSB, which we all do every now and then, and its a pain, isnt it? So, if you use a PayID, its not going to happen.
Moderator
All right. The first question from one of our questioners—its actually from Andy. Well, Ill let you get in first, Andy White, whos the CEO: should the surcharging of debt card transactions continue?
Philip Lowe
Well, its really a choice of the merchants. The whole idea is to allow the merchants to make a choice about whether they surcharge their customers, and, by having that right, it affects how they then negotiate with the banks and the card schemes, so it puts pressure on payment costs. If the merchants dont want a surcharge, they dont have to. But if they think its in their advantage and they can lower their costs in doing it, then they should have the right to do that.
Moderator
Okay. But theres nothing that riles consumers more than that, is there?
Philip Lowe
I know. As I said, consumers dont like surcharging, so the merchant has to take that into account. But we know that the ability to surcharge puts downward pressure on the fees that the banks and the card schemes charge, and consumers in the end benefit from that. They dont see it, so its hard to acknowledge that, but—what they see is the surcharge, and we know that this does put downward pressure on costs, so we want merchants to have that choice.
Moderator
Sandra has asked: when will NPP be a mandated payment channel? We have a payroll of over 180,000 staff and cannot use NPP, as the recipient banks are not all enabled.
Philip Lowe
Well, thats kind of a surprise to me that that would be the case. All the banks tell us theyre enabled, so perhaps, again, it would be good to go to their bank and ask them why and—
Moderator
Could they be smaller credit unions and—
Philip Lowe
They could be; I dont know. Most institutions in Australia can now make and receive NPP payments. So I dont know what the specifics of this case are, but its a problem.
Moderator
All right, Sandy; you have to go back to all those banks that you send out your payroll to. David asks: how might industry assist with influencing Australians to relinquish their physical cash held in cupboards and under mattresses? And is that a real thing? I know you said it is, but is it a very big portion of the cash?
Philip Lowe
It is. I think, as best we can tell, perhaps three-quarters of the bank notes on issue are not being used for day-to-day transactions; theyre being used as a store of value: 18 one hundred dollar bills on issue for every single person in the country and yet—
Moderator
Havent the crooks got most of those?
Philip Lowe
No. People are using them as a store of value, at home. We know this partly because when there are floods or bushfires that peoples notes either get burnt or soiled in the water; and you can bring your burnt notes into the Reserve Bank. Our scientists can tell you what value is there and well give you value for it. So we know, after the bushfires, that people come in with blobs of molten polymer and it was under their bed or …
(audio missing).
Philip Lowe
What we know is if theres competition, then fees come down. And so the regulators around the world are looking at this issue and whether theres a possibility of multiple digital wallets sitting on the iPhones and, if you want to encourage competition, theres a lot to be said for that, isnt there?
Moderator
Yeah. But it is interesting. A lot of us have iPhones—I do—and you feel like you cannot escape. Theyre the only ones offering you that, and it feels very insidious that theyre saying, Well, you have to use our wallet. Well, How do I know whether its safe?—et cetera—and its maybe a cost as well.
Philip Lowe
It is. Well, there is a cost. There are costs to the banks when their customers use the Apple Wallet. So what we would like to see over time, and what regulators in other countries are pushing for, is competition and—
Moderator
But I know youve talked a lot about the big tech players coming into this space. How do you force them to allow competition?
Philip Lowe
Well, weve been asking the government for some time—and the Farrell review recommended this—that the underlying legislation the Reserve Bank operates under be modified to allow us to regulate a wider range of participants in the payments ecosystem. And this is—obviously, if we get these powers, this will be one issue that well be looking at very carefully because, as you say, more and more of us are using our mobile phones to make payments; and thats the way of the future, and we need to have the regulatory regime to deal with that, but its on our radar screen, definitely.
Moderator
Trevor asks: do you have views on how we can remove all cheques from the payments system? Well, Trevor, I know people who still write cheques, and they couldnt support their charities and that sort of thing without writing a cheque, as old-fashioned as that seems. But, here, Trevor wants to get rid of them all, so what are your views on that?
Philip Lowe
Well, at some point down the road, I think that will happen, but the question is how quickly we get there. Weve got two focus areas at the moment. The first is working with the government for the government to reduce its own use of cheques. Remember how you always used to get these Medicare cheques when youd go to the doctor?
Moderator
Yes.
Philip Lowe
Well, thats either ending or has ended; Im not sure. The government has been a big user of cheques, so were trying to get the government to use less cheques, and theres a lot of progress there. The other strategy is to use the NPP and other payment solutions to offer alternatives to people. So the people that you are talking about who currently say they cant live without cheques: weve got to offer them another solution. In some countries, people dont use cheques, dont have cheques, and charities still get money. So there are other solutions and—
Moderator
I know. Its just educating people, isnt it?
Philip Lowe
Yeah, well, its educating, but weve got to have the solutions as well, and I would hope that perhaps some of the people in this room are thinking of innovative ways of replacing cheques for people who currently think they need them to live.
Moderator
Yeah; because, at the other end, younger people dont necessarily know what cheques are. So, if theyre working in the banks and they receive a cheque—
Philip Lowe
One of my kids got a cheque from his grandmother recently for a birthday and couldnt believe that this was money. I had to explain to him that he had to go to the bank and put it in: Why would you want to do it; why didnt she just PayID me?
Moderator
Whats that? she said! One final question perhaps from Rajit: with consumers generally unwilling to pay for payments, how can providers keep investing in payments initiatives and get viable return on investment? Your view on that.
Philip Lowe
Well, I mean, some consumers do pay for payments, and merchants pay for payments as well. Theres the graph that I showed: at the moment, merchants are paying 0.7 per cent of the value of their turnover, if a Visa or Mastercard is presented. So people are paying, and that generates a substantial stream of revenue to finance innovation. No one likes to pay for anything, do we, but we know we have to pay and theres substantial charges levied on both consumers and merchants, and thats financing investment. And youve got institutions who have to keep investing to be competitive because look at how many people are in this room, and I hope everyone here is thinking of new innovations to get consumers to offer better services and more secure services. So thats the market at work, and the number of people in this room suggest its a very vibrant market, doesnt it? No lack of innovation in payments.
Moderator
Governor, there is a question that has been swirling around outside this room and I wondered if you wanted to make a comment. This is the only place really where you get to comment on your future and, hopefully, youll be back here next year at the conference, talking to us.
Philip Lowe
Well, I dont know. Thats a matter for the government. My term finishes in September next year. Ive got an important job to do, at least up until then, and I intend to do it. Whether I can join you for a seventh time is not in my control; I hope so, but well see.
Moderator
But youll be there for the next several months.
Philip Lowe
Certainly, I know there have been calls for me to resign. As I said before, I have no intention of resigning. I have an important job to do; its a responsible job and I intend to do it. Weve got to get inflation down and thats my focus, and I will keep doing that at least until mid-September next year.
Moderator
Would you please thank Governor Philip Lowe for his keynote. Thank you so much.