Fireside Chat Fireside Chat at the AFIA Conference

There’s a lot going on. I’ve got a lot of questions here, so I’m going to try to get through them. There are a few topics of interest, I’m sure.

Look, we’ve got a world-class payment system, but there’s been a lot of reviews. So what do you see for the future of payments in Australia? What are you wanting to see?

Thank you very much, Diane, and great pleasure to be here for the first time at the AFIA conference.

Our mandate at the Reserve Bank of Australia in the payments space, obviously, there are some other mandates as well, our mandate in the payments space is to promote a competitive, efficient, and financially safe payment system, and also to control risk to the financial system that could emanate from the payment system.

So at the moment, we have three strategic priorities that we’re focusing on in our approach to the payment system. The first is to promote a resilient payment system. We all recognise the more geopolitically complex world that we live in. So it’s more important than ever that we have a resilient payment system. It’s a big focus for us in our oversight of critical financial market infrastructure, and we’re also working closely with industry on initiatives to help to improve resilience in scenarios where there may be outages or other challenges.

The second strategic priority I would highlight is promoting a competitive, accessible, and innovative payment system, and this has been the focus of our regulatory reviews that we’ve been conducting under our mandate. I’d also mention there we’ve been involved with a lot of work with industry on the future of our account-to-account payment system, which hopefully we get to come back to later as well. That’s an area where we really can help to boost productivity in our economy in particular.

And the third area we’re very much focused on is helping to shape the future of money so it continues to serve the needs of our community. This is a broad topic. So at one end of the spectrum, we’re doing a lot of research with industry on, say, the role of tokenisation in making our financial markets more efficient and productive, and what role there is for the RBA in providing and supporting the forms of money that can help to support efficient settlement in tokenised asset markets. And we’re thinking now, we’ve got a consultation in the field at the moment on how do our settlement systems RITS need to evolve if we’re heading towards a tokenised financial system.

And at the other end of the spectrum, there are many Australians who are reliant on cash as a means of payment, and we want to make sure that cash remains accessible for as long as Australians want or need to use it. So we worked closely with the government in supporting the passage of the Cash Distribution Framework Act, which passed a couple of months ago, and that gives the RBA powers to help manage a crisis scenario in cash distribution if one were to occur.

So a lot going on that we’re focusing on, but it’s about resilience, it’s about competition, and it’s about the future of money.

So recently, the Reserve Bank published the Financial Stability Review, which you do fairly regularly, and it called on industry to really focus on operational resilience. In a payments world, what does that mean then?

It’s critical for us. It’s no coincidence that it’s our top priority, and it’s great that it’s been highlighted also in our Financial Stability Review as one of those significant risks to our financial system. If our payment system goes down, that naturally undermines the trust of the community in payments, but also in our financial system more broadly. So it’s critical that we’re working on this.

Some of the risks highlighted in the Financial Stability Review are also very much on our radar in our supervision and oversight of financial market infrastructures, which include the ASX clearing and settlement systems. They also include the real-time gross settlement system that the RBA runs, and we oversee the NPP as well. We’ve been focusing on making sure that there is good risk management, particularly around operational risk.

More than ever, as our economy digitises, we’re increasingly reliant on third-party providers of key infrastructure. And quite often, there could be concentration risks there, where various different payment service providers end up using the same sorts of providers as third-party service providers. And if their systems go down, then we have a problem because it can really spread across the economy. So we’re very much emphasising in our supervision and oversight that payment systems and financial market infrastructures are aware of and managing these risks, and we’re working with industry about how we can deal with potential outages to infrastructure. What are the other ways we can make sure that in the end, payments can get from, say, the consumer to the merchant, or they can get from the employer to the employee, so the economy can keep humming? That is critically important to maintaining confidence in our financial system.

We’ve just seen in France, I think it was France, wasn’t it? Fridges going down, hacks from other countries and that kind of thing. Is the thing that really worries you the most is something happening to our system in Australia?

With the increase in geopolitical risk, with the broadening in attack surfaces for cyber, it’s something we have to be very mindful of. And these are the sorts of examples you can see going on in other industries where we have to be mindful of these risks to our payment system and be making sure that across the economy, we’re investing appropriately in controlling our cyber risk. But a key element of this is everyone can try and control their own cyber risk, but we’re increasingly networked, so you can have situations where you can end up being as exposed as the weakest point in the network. So we have to work together. We have to identify ecosystem risks. We need to be sharing intelligence across industry with government so that we are on top of these risks. And obviously with the advent of AI, the time we have to address, say, the patching, is now dramatically shorter than it was historically. So we need to work together on this one.

Yeah, and that’s something that’s broader than engagement between industry and the Reserve. That’s something that should be whole-of-government. Certainly, something AFIA’s been advocating for a while is far more real-time sharing. Criminals don’t care about certain privacy or competition laws, so sometimes we feel like we might be punching with two hands behind our back.

That’s right. That’s very important in the cyber space. It’s also important, say, in the fraud and scam space as well that we are working together.

Yeah. Now, you’ve been up late reading lots of submissions that you’ve just received, including AFIA’s submission on the payment system. How do you, and how will you, prioritise the reforms or initiatives that you think are most important to pursue?

Thank you very much for your submission first, and thank you also to our many AFIA members who also made submissions. We really appreciate that. Critically important to our processes. This is one of the key ways we get information to help to assess where the problems are and whether or not it’s necessary for there to be regulatory solutions.

So what we’re talking about here, for those who may not have made submissions, is our review of payment system regulation. It started in June with an issues paper, and the context of that was that the legislation under which the RBA operates here, the Payment System Regulation Act, was broadened by the Parliament a couple of years ago. So the concept of what a payment system is and what a participant in the payment system is, is now broader than it historically was. Historically, the definition looked a lot like four-party card schemes. It’s a broader definition now.

So we’ve gone to industry and to all stakeholders, it was a public consultation, saying, "With this broader mandate, what are the issues that you think we should be prioritising for potential regulatory action?" So we put the issues paper out in June. We’ve received about 70 submissions. We’ve published as many of those as we can, the ones that aren’t confidential, and we’ve also published a summary of those submissions as well to try and make this process as transparent as we can.

So what’s the prioritisation process from here? I think you’ll find it makes a lot of sense. We have the information from the submissions. We have additional information that we have from our regulatory work, and we look at that and we go, "Are there public interest issues here?" And that really goes back to our mandate. Are they within our mandate? Is it about the competition or efficiency of the payment system, financial safety, or are there issues about controlling risk to the financial system in there that potentially we need to address? We ask, is it overlapping with what other regulators are doing? I think that’s an important point. If other regulators are taking action in this space, then maybe that reduces the case for the RBA to need to take action in a particular space.

What is the private sector doing about this issue if it’s an issue? And that’s something we’re very much engaging with participants at the moment. If issues are raised, we go to the participants where the issues may be raised and say, "What’s your view on these? How are you approaching these issues?" And get that feedback in as well.

Our preference is for industry-led or private sector-led solutions where possible to these sorts of public interest problems. Where that’s not possible, then we can end up needing to set regulation, and so the question there is: are the RBA’s powers, which is to set standards or access regimes, going to achieve a better outcome? So that’s another factor we have to take into account in prioritisation. So all those questions, all that evidence goes into the mix.

The RBA will consider that. The plan is by the end of this year to have publicised what the areas of priority are, and then we’ll get to work on those and think about, are there potential regulatory options here? And the plan for mid-next year would be to consult on those regulatory options. We absolutely have to consult on any regulatory options before they can be put in place. So that would be the next step from here.

I’ve got two questions just coming out of what you’ve said before we get to the S word. Regulation can change the commercial incentives and the landscape. The payments ecosystem is an ecosystem whether you’re a payments provider or whether you’re a non-bank lender or in the finance sector, cash flow finance provider, a small business, a consumer, it’s all interconnected. So decisions that the Reserve Bank makes about what might be seen as trade-offs in terms of trying to get the system and the balance right in your mandate are going to have far more ripple effects than they used to. Innovation, competition, financial stability, consumer protection, they’re all admirable objectives. Often they are trade-offs or sometimes, use the adage from before, everyone wants the magic pudding. How do we make sure you balance financial stability, competition, innovation, and user outcome? I want to say users, not just being Aussie customers and tap and goers. I’m talking about small business as well.

Absolutely. When we think about end users, we’re thinking about consumers, we’re thinking about small businesses. Governments are end users as well. We’re thinking about all those end users.

So this is where it’s really important that we gather a broad range of evidence to inform any decisions, because you’re right, sometimes when you look across our mandate, competition, efficiency, financial safety, there can be areas where there’s trade-offs, quite often in that competition space. There can be trade-offs between some of these objectives.

What we have to do, and what we do, is consult broadly, gather all the evidence, and use that to help weigh up the scenarios where there are trade-offs. Those can be difficult decisions, but the best way to deal with them is to ensure they are evidence-based.

The good news is, I’d say potentially more often than not, there are actually not trade-offs in our mandate. There are actually complementarities there.

So when you think about competition, what we’re really trying to achieve from an end-user perspective is choice for customers and merchants: choice in the payment methods that you use and the payment methods that you accept. If you have a vibrant payments ecosystem, which is what we want, where there are various methods that you can use as a consumer and accept as a merchant, then this also helps to build the resilience of our payment system. If any one of those methods happens to go down for a particular reason, it’s then easy for the customer to turn to another method or for the merchant to ask for another method. So this is where there are complementarities between more competition in the system and greater resilience in the system, which is good for maintaining the financial stability of our broader financial system. So it’s not all about trade-offs. There can be complementarities.

The other thing I would note, particularly more for that trade-off scenario, is we do regular monitoring of how things are going. We’ve been a regulator now for at least 25 years, and we’ve had a rhythm of every five years doing comprehensive reviews of our regulation to see whether they’re still achieving their objectives, whether there have been developments in the market that have changed things. And you can see over time that we have made incremental adjustments to our regulations. So that is another way of dealing with trade-offs when they occur. But I want to emphasise there’s a lot of complementarities as well.

And regulation should ideally only be used if there’s a market failure. Do you get worried that we can jump in too soon? We kind of go, "Oh, market failure," and then suddenly we’ve stifled innovation. Does that sort of thing worry you?

The good thing about the process that we undertake is that it’s very evidence-based. It takes time. So, for the previous review that we finished, we had the conclusions paper come out in March 2026. The issues paper was released in October 2024. So there’s a lot of deliberation and evidence-gathering that goes into any payments policy decision by the RBA. It’s a process that can take 18 months to two years from one end to the other. So there’s a lot of consideration, including whether regulation needs to be used. Can the private sector deal with this? Is there a potential industry-led solution?

And there are many cases where we have encouraged industry-led solutions. We’re involved in some of those at the moment with the future of account-to-account payments, where we’re working with industry. Another good example is how industry is going to deal with the threat from quantum, where we think industry-led solutions are appropriate. And AI is right in front of us now. It’s a classic example of something that is moving so fast that it would be pretty hard to catch up with it through a regulatory process that takes 18 months to two years. So it’s a classic space where industry can come together around sensible frameworks, protocols and standards to help address public interest issues, which is probably a preferable way forward.

So in terms of the evidence-gathering in an environment where, as you say, a process can take a while, things can change, people’s attitudes can change. You talked about choice. How does the Reserve make sure that you understand that David wants to use his smartphone to make a payment rather than using cash? How do you get consumer attitudes?

We run a comprehensive consumer survey every three years, and it’s a very helpful source of information that we’ve run since 2008. We get very rich data on the different payment methods that consumers are using. So you can see, for instance, there the tremendous growth in the use of digital payments, the use of mobile wallets, and it’s the key indicator that we’ve used to see the decline in the use of cash over that period. It’s very important to use those sorts of surveys, particularly for cash, where there’s not a digital way of collecting that information.

On the digital side, actually, you can get a lot of data out of digital payments, which can help to tell you about consumer preferences. So you can see that consumers are using digital wallets more and more, so that they are receiving benefits from the use of, say, mobile wallets in payments. So I would say it’s a combination of surveys. We also engage broadly with stakeholders, and there’s a lot of information you can gain from looking at the data that comes out of the payment system.

So if you think about smartphones and agentic commerce, do you have any concerns around what we’re seeing at the moment to where we want to be, say, access to devices? Is there further work that needs to be done there? Particularly when we think about what’s happened in Europe and certain action taken to make sure that smartphones are as open as possible so that different providers and apps can be added to them.

Mobile wallets and agentic commerce were both issues that we identified as being potentially within the scope of the review that we’re currently undertaking. So we highlighted those in the issues paper as areas on which we really wanted feedback. Taking mobile wallets first, we did receive a lot of feedback on that topic. I think it’s important first to note that mobile wallets have brought a lot of benefits. It’s no coincidence that consumers are using them. In our data, nearly 50% of card payments are going through mobile wallets. People find them very convenient to use. You just tap and go with your phone. You don’t even need to carry a wallet around. They also have some security benefits because the payment is tokenised and biometrics are built in. So there are a lot of positives associated with mobile wallet payments.

However, what we can see from stakeholders, there’s a lot of concern on the competition and efficiency side, concern around access to NFC technology. There’s also concern around the fees associated with mobile wallet payments and the commercial terms. So a lot of stakeholders have argued that it should be prioritised by the RBA. So all that information is going into the prioritisation process that I outlined earlier.

On agentic commerce, this is an interesting one. Earlier in the year when we were drafting the issues paper, we were internally debating, should agentic commerce go in there yet or not? We decided to put it in just as well. I’d say in terms of the feedback we received, probably the biggest surprise is just how much concern there is in the stakeholder community around agentic commerce. A lot of it is around the trust issues that arise with agentic commerce.

How can I be sure that the customer has actually authorised this payment that the agent is putting through? How can I keep the payment safe, given that there have been many quite scary examples of agents acting autonomously? And who’s going to be responsible when things go wrong? There’s a lot of concern around those sorts of questions.

At the same time, there’s a lot of work going on in industry around the world with some big players involved, the card schemes, the AI companies, big techs, coming up with potential frameworks and protocols for dealing with some of these safety and trust issues, and that’s a good thing that industry’s leading, particularly since it’s such an evolving space.

What we would add to that is it’d be really helpful if industry also thinks about the competition and efficiency issues that could be associated with agentic commerce. We do want to maintain that choice, that when a customer is making an agentic commerce payment, that they still have choice of the payment methods that they want to use, and that the merchants still have choice about the payment methods that they accept.

We think it’d be very helpful if industry is also thinking about maintaining that competition in the system at the same time as worrying about the safety elements. So we would encourage that. We think it’s an area where industry really can lead because it is moving so quickly, and it is a complex space as well. So we would encourage industry to keep working on these issues, keep us in the loop. As a regulator, there are payments public interest issues that we need to be aware of, and we can work together on this one, ideally. There is always the option of regulation as well, but I would note the challenge of regulating in a very fast-moving space.

I’m very excited you’re excited by agentic AI, and I have to say, you’re more excited by that than the NFC, which for those who don’t know what that is, it’s like the little My Favourite Martian things that come out of a smartphone that let people access a smartphone. Is that the way we should describe it?

I think you do it. You can really provide tutorials on how to use smartphones.

All right. Surcharging. Probably one of the biggest changes in a while in terms of payments. After implementation, what are you expecting to see?

So there were a range of things we’re looking for that we’re obviously monitoring how this is being implemented. On the consumer side, the focus here is on how do we ensure that there’s payments transparency, there’s pricing transparency for consumers? The most common method that consumers use for payment now is cards. Debit or credit cards. Historically, it was cash, but now 75% of payments, coming out of that survey, are with cards. So we want to get to a world where the price that consumers see advertised is the price they’ll end up paying when they tap their phone or they tap their card. So that’s what we’re looking for there, some price transparency for consumers.

For merchants, we’re really trying to put downward pressure on merchants’ payment costs, and the key change we’ve made there is by reducing the interchange rates. These are payments that go from essentially the payment service provider of the merchant to the payment service provider that issues the card. Reductions to interchange rates, particularly on credit cards, but also on debit cards and on international cards as well. So those interchange reductions have come into force in the domestic economy on the 1st of October, and the international card adjustments will happen on the 1st of April. What we’re looking for there is pass-through of those reductions in interchange to the merchant service fees that small businesses are having to pay.

And the third thing we’re very focused on is providing more transparency in the payment system, in the card payment system here. So we’re requiring the large acquirers, basically the payment service providers of the merchants, and the card schemes to publish more data about the fees they’re charging. And this information should be useful for merchants to be able to work out are they getting a reasonable deal from their payment service provider, or is it time to look around for a better deal? And hopefully that information can help to indicate where some of those better deals are. So that’s really what we’re focusing on. We want to see that price transparency for consumers, lower costs for merchants, and also more transparency so merchants can more easily shop around.

So I’m getting the wind-up here. There’s pages of questions, technical questions I could have asked you. But I’m curious, taking your comment just then, thinking about the future of payments in Australia, in the next decade, getting it right would look like what to you? From an industry perspective, we’re very keen to make sure costs go down, but the reality is the infrastructure costs to build. There is a need to incentivise investment in payments because if we disincentivise, then we’ll end up with a non-world-class Australian payment system, and we are world-class at the moment. So how do we keep being leaders and not become followers? How do we get the cost pressures right? How do we incentivise investment? What’s your answer to that?

We need to strike a balance there. So end users want and need their payments to be affordable. At the same time, we need incentives for payment service providers to invest in safety and innovation. So, when we’re approaching our work on the future of account-to-account payments, those principles are both embedded in the work, and we have to strike that balance. It’s not easy, but that’s what we have to aim for.

And that’s why you’d like to continue talking to industry, is that right?

It’s essential. In everything we do, we are engaging with industry, and before any regulatory action is taken, you will see a consultation.

Thank you. Look, we are going to have to wrap it up. There is a lot going on in payments. As I said, these are not just technical payments issues. They affect the economy and the finance sector more broadly. We’re seeing payments, credit and finance all starting to converge. We’re seeing what we would have thought of as basic payments technology combined with value-added features that aren’t necessarily payments; they create value for customers or merchants. So I think this is going to be a case of ‘watch this space’. I don’t envy your job. There’s a lot of change going on. Thank you.