Review of Payments System Regulation Summary of Submissions to the Review of Payments System Regulation Issues Paper

4. Account-to-account Payments

4.1 Future of A2A payments

Many stakeholders raised issues with the current A2A system, and in some cases stated that the RBA should intervene to address them. Issues raised included that:

  • Payment system access arrangements limit competition and innovation. A range of non-bank PSPs and fintechs highlighted that current arrangements for directly participating in A2A payments systems such as the New Payments Platform (NPP) are generally aligned with ADI status. Furthermore, direct participation can involve technical requirements and onboarding processes that are, in some cases, costly and opaque. Given the barriers involved, many smaller institutions are reliant on larger sponsors to clear and settle payments on their behalf. This can constrain these institutions’ ability to innovate and compete, as product functionality is dependent on sponsoring institutions. While upcoming payment licensing reforms could improve non-bank PSP’s ability to directly participate in A2A payment systems, some submissions stated that the RBA should separately assess the suitability of current access arrangements.

    On the other hand, some stakeholders cautioned that direct participation carries material obligations and requirements. They stated that current access models provide appropriate pathways for smaller participants, and that operational and risk obligations should remain consistent for direct participants.

  • Sponsorship arrangements may raise competition and transparency concerns. Submissions stated that sponsored institutions in A2A payments have limited ability to negotiate key commercial terms with actual or prospective sponsors, including pricing and service availability, and that access may be withdrawn at short notice with limited pathways for appeal. Some stakeholders stated that switching sponsors can be difficult: there are a limited number of potential sponsors and opaque sponsorship terms can make it challenging to evaluate them. Another concern raised was that sponsors can compete in the same market as sponsored institutions while also controlling the functionality available to those institutions. Stakeholders suggested that the RBA should promote greater transparency of sponsorship arrangements and standardise some sponsorship conditions such as minimum service levels and appeal pathways.

    Conversely, sponsors outlined that the requirements to monitor and enforce compliance of indirect participants involves significant operational, compliance and risk-management costs, reducing the commercial attractiveness of sponsorship.

  • Insufficient account reach for NPP payments limits take up of modern payment capabilities and adversely affects efficiency in A2A payments. Submissions noted that a range of use cases (such as payroll, superannuation, tax and supplier payments) depend on universal account reach, but this is not currently present for the NPP. Account reach gaps can require manual workarounds to be implemented and/or constrain the adoption of NPP-based payment capabilities such as PayTo.
  • The current lack of interoperability and technical standardisation reduces the efficiency and resilience of the A2A payments system. Submissions noted that differences in data, messaging and functionality for A2A payments requires service providers to manage multiple technical integrations and increases their costs. A lack of interoperability also makes it difficult to deliver consistent experiences to providers and end-users across multiple rails. Views differed on the level of standardisation that was optimal. Some suggested that many aspects of the payment experience should be standardised, including messaging, authorisation, portability and end-user functionality. Others considered that standardisation should be limited to the underlying technical infrastructure such as payment initiation and messaging to allow competitive differentiation in products, features and services.
  • Fragmented and inconsistent implementation of PayTo limits greater uptake. Stakeholders reported that consumer and merchant demand for using PayTo remains limited due to inconsistent enablement across institutions, variable approaches to authorisation, restrictive or inconsistent transaction limits, and gaps in accounts that are enabled for PayTo, particularly business accounts. These issues can necessitate additional processing and operational workarounds, and result in inconsistent user experiences. Some stakeholders contended that the slow adoption of modern A2A payments capabilities like PayTo limits efficiency in the payment system.
  • Gaps in refunds, disputes and liability arrangements may weaken trust in A2A payments. Many stakeholders observed that, unlike for card transactions, there are no industry-wide refund, chargeback and disputed transaction mechanisms for A2A payments. This can create inconsistency in how consent and authority are created and managed across institutions and payment rails. Stakeholders stated that customer protection gaps can weaken trust, reduce adoption and create uncertainty around loss allocation. Submissions expressed differing views on how liability should be allocated for A2A payment transactions. Many stakeholders supported risk-aligned liability models, stating that liability should sit with the party that is best able to prevent and control potential risks. Some submissions cautioned that liability models should not place disproportionate costs on smaller providers, and should account for each participant’s size and ability to manage risks.
  • Existing governance of A2A payments may not consistently deliver public interest outcomes. Some stakeholders identified governance challenges, including uncertainty around decision-making authority for industry-wide issues, unclear enforcement of industry standards, and overlapping arrangements within industry forums and within scheme-level governance. One submission noted that some industry-led processes operate on a consensus basis, which may not deliver decisions in a timely manner. Some stakeholders stated that scheme governance and the A2A Payments Roundtable should include broader industry and end-user representation, noting that decisions should not be determined by entities with ownership interests alone. Other submissions stated that institutions that fund infrastructure and carry operational risk should have a proportionate role in shaping decisions. Stakeholders suggested that the RBA promote more transparent and representative governance arrangements.
  • The transition of A2A payments from the Bulk Electronic Clearing System (BECS) to the NPP involves coordination challenges and risks to competition, efficiency and resilience. Stakeholders noted that uncertainty about the timing, governance and sequencing of the transition away from BECS may lead to duplicated investment and inhibit development of modern A2A payments capabilities. Stakeholders emphasised that modern payment capabilities must maintain or improve on current capabilities. Submissions suggested that the RBA publish information on current NPP adoption and A2A capability availability.

Some stakeholders considered that intervention by the RBA is not currently warranted. They stated that identified issues are better addressed through existing industry-led processes, or that the cost of addressing them through regulatory action would outweigh the benefits. These stakeholders stated that:

  • The RBA should steward the A2A Payments Roadmap and assess the outcomes from this process before considering the need for regulatory intervention. Stakeholders noted that most of the issues affecting A2A payments are currently being assessed in the development of the Roadmap. Some stakeholders considered that the A2A Payments Roundtable and associated forums are the most appropriate mechanisms for coordinating industry-wide reforms and balancing competing priorities. Regulatory intervention by the RBA prior to the completion of the Roadmap could risk duplicating existing workstreams and disrupt industry processes.
  • It may also be premature for the RBA to intervene in A2A payments given other regulatory processes are ongoing. Submissions noted that the new payments licensing framework may alter the obligations applied to direct and indirect participants, including the allocation of responsibility between sponsors and sponsored PSPs and access models. Submissions also identified the broader development of the Scams Prevention Framework and ePayments code, which are progressing through other regulatory processes. Stakeholders were concerned that intervention in parallel to other regulatory reforms could duplicate reforms and participant obligations.
  • The scale and materiality of the issues do not meet the PSRA threshold for intervention. Some stakeholders acknowledged that issues existed in A2A payments but stated that there was not a demonstrated market failure or financial stability concern that would warrant formal intervention under the PSRA.
  • Industry bodies and payment system participants are better positioned than the RBA to resolve issues that may require implementing and enforcing technical standards or operational requirements. Stakeholders holding this view generally consider the RBA should focus on convening, oversight and public-interest monitoring rather than direct intervention.

4.2 Competition between cards and A2A payments

The availability of A2A payments for consumers at physical points of sale and e-commerce transactions remains limited relative to cards. Submissions identified several factors limiting further uptake of A2A payments in retail settings:

  • A2A payments cannot match the convenient and seamless experience offered by cards. Stakeholders identified several factors negatively affecting the consumer experience for A2A payments including complicated and inconsistent user experiences, low consumer familiarity with A2A payments options, fragmented payer bank hand-off experiences and limitations with PayTo. In contrast, cardholders can make payments through a single tap in person or, in some cases, a few clicks online. Some stakeholders suggested that uptake of A2A payments for in-person retail settings would remain limited unless consumers were able to ‘tap’ to make these payments including via their mobile device. Stakeholders identified several infrastructure constraints faced by A2A payments at the point of sale, including immature in-person acceptance infrastructure such as QR codes.
  • Consumer confidence and financial safety arrangements were widely regarded as less mature for A2A than for cards. Stakeholders cited fewer or less familiar protections from fraud and scams, including less developed refund, chargeback and disputed transaction mechanisms.
  • There may be limited commercial incentives for providers to invest in A2A payment capabilities for retail transactions. Developing online and in-person A2A payment services requires sustained investment in infrastructure, merchant acceptance and fraud controls. Some consider that for A2A payments to compete with cards, fees may need to increase to fund the required investment, reducing the current cost advantage of A2A payments for merchants. One submission outlined that determining the costs of using the NPP in a retail setting can be complex and time-consuming, potentially deterring investment in the ecosystem. It also stated that using the NPP for smaller-value transactions may not be viable under current pricing arrangements. Some submissions suggested that the RBA should regulate wholesale A2A payments fees to ensure transparency.

Submissions proposed some measures to address these barriers, though views differed on the appropriate role and response of the RBA to enable competition between cards and A2A. Submissions outlined that:

  • The RBA could consider some measures that would reduce structural differences between A2A payments and card payments including:
    • addressing PayTo issues, including account reach, inconsistent user experiences and business account functionality
    • improving consumer protections for A2A payments including return mechanisms, and liability and dispute frameworks
    • requiring fair access to NFC, wallets and other payment-initiation interfaces
    • considering measures to improve the checkout experience for A2A payments such as common APIs, bank-agnostic hand-offs, deep links, pre-populated payment details and standardised QR acceptance.
  • The A2A Payments Roadmap may be the appropriate forum to pursue some of these actions, with scheme operators and infrastructure providers best placed to then develop the necessary technical and product solutions. Several mobile wallet providers noted that their wallet technology could support A2A payments, and already supported multiple payment models around the world.
  • Other submissions stated that cards and A2A payments serve different use cases and cautioned against mandates or standardisation aimed at addressing perceived deficiencies in A2A payments. These submissions noted that cards and A2A payments have different architectures, risks, protections and use cases, and stated that competition at the point of sale should occur on merit. Submissions cautioned against mandates that would impose significant cost or operational complexity without a clear operational or end-user benefit. Stakeholders stated that lower payment costs alone may not be sufficient to drive consumer or merchant adoption of A2A payments, given the convenience, reliability, rewards, refund arrangements and dispute rights associated with card schemes.
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