Transcript of Question & Answer Session An Efficient, Competitive and Safe Payments System

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—

There’s 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 it’s no surprise that I haven’t been offered it yet? That should be working; yes?

Well, if you haven’t been offered it, go and ask them why, and go and switch banks to someone who will offer you the service because it’s a much better way to make payments. You can be sure you’re 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 it’s a pain, isn’t it? So, if you use a PayID, it’s not going to happen.

All right. The first question from one of our questioners—it’s actually from Andy. Well, I’ll let you get in first, Andy White, who’s the CEO: should the surcharging of debt card transactions continue?

Well, it’s 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 don’t want a surcharge, they don’t have to. But if they think it’s in their advantage and they can lower their costs in doing it, then they should have the right to do that.

Okay. But there’s nothing that riles consumers more than that, is there?

I know. As I said, consumers don’t 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 don’t see it, so it’s 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.

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.

Well, that’s kind of a surprise to me that that would be the case. All the banks tell us they’re enabled, so perhaps, again, it would be good to go to their bank and ask them why and—

Could they be smaller credit unions and—

They could be; I don’t know. Most institutions in Australia can now make and receive NPP payments. So I don’t know what the specifics of this case are, but it’s a problem.

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?

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; they’re being used as a store of value: 18 one hundred dollar bills on issue for every single person in the country and yet—

Haven’t the ‘crooks’ got most of those?

No. People are using them as a store of value, at home. We know this partly because when there are floods or bushfires that people’s 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 we’ll 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 …

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What we know is if there’s competition, then fees come down. And so the regulators around the world are looking at this issue and whether there’s a possibility of multiple digital wallets sitting on the iPhones and, if you want to encourage competition, there’s a lot to be said for that, isn’t there?

Yeah. But it is interesting. A lot of us have iPhones—I do—and you feel like you cannot escape. They’re the only ones offering you that, and it feels very insidious that they’re saying, ‘Well, you have to use our wallet.’ Well, ‘How do I know whether it’s safe?’—et cetera—and it’s maybe a cost as well.

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—

But I know you’ve talked a lot about the big tech players coming into this space. How do you force them to allow competition?

Well, we’ve 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 we’ll be looking at very carefully because, as you say, more and more of us are using our mobile phones to make payments; and that’s the way of the future, and we need to have the regulatory regime to deal with that, but it’s on our radar screen, definitely.

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 couldn’t 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?

Well, at some point down the road, I think that will happen, but the question is how quickly we get there. We’ve 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 you’d go to the doctor?

Yes.

Well, that’s either ending or has ended; I’m not sure. The government has been a big user of cheques, so we’re trying to get the government to use less cheques, and there’s 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 can’t live without cheques: we’ve got to offer them another solution. In some countries, people don’t use cheques, don’t have cheques, and charities still get money. So there are other solutions and—

I know. It’s just educating people, isn’t it?

Yeah, well, it’s educating, but we’ve 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.

Yeah; because, at the other end, younger people don’t necessarily know what cheques are. So, if they’re working in the banks and they receive a cheque—

One of my kids got a cheque from his grandmother recently for a birthday and couldn’t 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 didn’t she just PayID me?’

‘What’s 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.

Well, I mean, some consumers do pay for payments, and merchants pay for payments as well. There’s 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 there’s substantial charges levied on both consumers and merchants, and that’s financing investment. And you’ve 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 that’s the market at work, and the number of people in this room suggest it’s a very vibrant market, doesn’t it? No lack of innovation in payments.

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, you’ll be back here next year at the conference, talking to us.

Well, I don’t know. That’s a matter for the government. My term finishes in September next year. I’ve 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 we’ll see.

But you’ll be there for the next several months.

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; it’s a responsible job and I intend to do it. We’ve got to get inflation down and that’s my focus, and I will keep doing that at least until mid-September next year.

Would you please thank Governor Philip Lowe for his keynote. Thank you so much.