Transcript of Question & Answer Session An Update on Australia's New Payments Platform

… I have one question and then I'll open it to the audience. The one question I wanted to ask was about the non-bank participation or access to this capability. How has the Australian model dealt with that?

Well, access is something that is under review, but the NPP envisages a number of different access arrangements. So there can be direct participants, FIs, or indirect participants that do either indirect clearing or indirect settlement. Then we've got these entities called identified institutions [note correction made here], which are probably smaller FIs who come in through a participant, but they can also be non-bank, non-financial corporates, using a participant and submitting payment instructions.

There's also an additional type of entity, that we don't have any examples of, but it's called a connected institutions (note correction), an institution that would be able to submit non-value messages to the NPP. So that is payment instructions, payment initiation messages, but it wouldn't, for example, be able to send clearing or settlement messages.

The other thing is, we actually think that most fintechs and non-financial corporates, may not necessarily need a connection to the NPP. They just might need good services from their FI. But, up till now, banks have been focusing on their internal builds and getting their services to consumers ready. We expect the services to corporates, to non-financials, to be built out, but there's a number of different models that we envisage and when and if they prove to be inadequate, we can look to work on that.

Let me open it up, I'm going to take a couple of, two or three questions, for Dr Richards and then we'll move on to Europe.

I'm going to ask a compound question. You had a bullet up there that said no one questions the case for real time. Part A is, when you say, "no one," is that strictly financial services providers? People who are in the network? Or does that extend to consumers of payments, whether it's consumers or businesses/ And then on the same question, I'm going to make a proposition that that's not the same in the United States, that there's still a lot of questions as to the value of faster payments, not within this room, but with the people we're trying to sell to. So, why is it that you think that there is this universal agreement that faster is better?

Okay, so several questions there. When I said that no one questions the case for real-time payments now, that was my assessment. When we did the Strategic Review of Innovation in the Payments System, that's now six to eight years ago, I think we saw that consumers and businesses were demanding immediacy in many aspects of their lives. So it seemed odd that they wouldn't also demand it for their financial lives as well. So our sense, five or six years ago, was that the demand for real-time payments was there from households and businesses. And it was banks that were dragging the chain. They probably accepted that they would have to do this but wanted to do it at their own pace because they've got complex systems and it was going to take them time to do it. But I don't think that any of the participants in the NPP, even those who were a bit reluctant to sign up, four, five years ago, I think they all accept that it's the right thing to do.

Basically, five years ago, if you were a financial institution and you were saying that you weren't going to provide your customers with real-time payments, you were basically saying: I'm happy to let my customers become customers of somebody else who will provide real-time payments for them because they will demand it.

On the question of was there a business case, you know, what's the business case, I think, clearly real-time payments are going to cannibalise some other payment systems, but it's better that the banks cannibalise their own payment systems than have someone else come in and just take their customers from them. So, I think the plan is that opening up this new set of payment rails will allow the banks to close down some existing payment rails and so there will be cost savings for them. So, banks are moving their Direct Entry payments over to the NPP faster than we expected. Five years ago people would say Direct Entry is fit for purpose, leave it there forever. And now, I think they're saying: we've got these new payment rails that's got new functionalities, why not use it? So I think that's largely answered.

So, since Peter asked six questions, we give one more.

Alright. Thank you for the wonderful presentation.

Use the microphone please.

Thank you for the presentation. It was very helpful from an international perspective. One quick question, and you'll maybe answer quick. Who carries settlement risk?

I'm not quite sure how to answer that. But, I could take you through the payment flows, but every payment is settled in real time.

So does that mean there's credit push?

Yeah, initially they are all push payments, we haven't done pull payments yet, but we've taken away the settlement risk, so FIs have got no reason not to provide immediate funds availability to their customers because they know that they've got the funds in their Exchange settlement account immediately.

Thank you.

Take one more.

So, Tony you talked about how …

Use the microphone please.

Sorry. Tony you talked about the importance of displaying full name associated with alias, what other types of consumer protection education mechanisms have you put in place?

I'd say that's something mostly for financial institutions and their customers. One thing that the industry did was to ensure that you can only register for a PayID through your online banking app. So a fraudster can't just go and register a PayID, can't link a PayID to an account without having access to, without having their online details for, that account. The other thing I'd say is that the liability rules put a harsh penalty on banks that register a PayID that they shouldn't have. So, if an FI registers a PayID in a way that doesn't meet the industry requirements, it would be liable for the fraud that occurs for any payments with that PayID.