Roadrunner, Roadrunner.... Treasury asks for responses to Payment System Review by 31 December 2020

Australia's Commonwealth Treasury has released its Issues Paper for the recently-announced Payments System Review, chaired by Scott Farrell and has provided industry and stakeholders a bit over a month to respond. It will be a proverbial race to the finish line of what has been a truly extraordinary year.

The slim issues paper provides an overview of the current regulators for payments in Australia, in particular the role played by the Reserve Bank of Australia, as well that played by AusPayNet as the main self-regulatory body. The paper also identifies regulation as needing to respond to an increasingly challenging and complex set of issues including:

• fast payments

• "buy now, pay later"

• stablecoins / cryptocurrency

• cross border payments

• digital wallets

• open banking

The Review is primarily exploring the robustness of the existing regulatory architecture. In particular, the Review appears to be probing the ability for regulation to adapt and for regulators to coordinate, so as to both streamline regulatory processes for new entrants and to deliver lower transaction costs and enhanced service deliver for end-users.

Interestingly, the paper concludes with a brief discussion on relevant overseas developments, notably the creation of the Payment Systems Regulator in the UK as well as enhanced mandates for the promoting innovation by Singapore's Monetary Authority and promotion of non-bank access by Payments New Zealand, hinting at some possible recommendations.

The paper is structured around 11 consultation questions. These include:

1. Does the regulatory architecture appropriately facilitate the development of an overall vision, strategy and principles for the Australian payments system?

2. How should our regulatory architecture be designed in order to balance the management of risk and efficiency in the payment system with the need for effectiveness for end-users?

3. What is the appropriate balance between self-regulation, formal regulation and government policy to ensure the payment system continues to work in the best interests of end-users?

4. Are there gaps (or duplication) in the current architecture that need addressing to ensure the system continues to work in the best interests of end-users?

5. How should the regulatory architecture be designed to best facilitate the coordination of participants and regulators to meet the requirements of end-users?

6. What are the required features of a future regulatory architecture to ensure it is well-placed to meet the needs of end-users in relation to emerging innovations in the payments system such as those discussed above? Are changes needed to existing structures, roles and mandates involved in the governance of the system?

7. What regulatory architecture is needed to provide support and clarity for businesses – particularly new entrants – to invest and innovate in our payments system?

8. How can the regulatory architecture enable participants in the payments system to make better use of data to improve cross-border payments and other payments that benefit end-users?

9. Given rapid changes to the system, what need is there for education for end-users (including consumers and businesses) about payments and who should provide that education?

10. How does Australia’s regulatory architecture compare with that of other jurisdictions, particularly as it relates to the encouragement of innovation and competition?

11. Are there are lessons from international experiences that can improve Australia’s regulatory architecture to ensure it responds effectively to new developments in the future for the benefit of end-users?

Submissions to the Payments System Review are due 31 December 2020.

The RBA will be making a submission to the Treasury review and considers it timely as elements have been unchanged since the late 1990s. I think it is fair to guess the RBA may ask for enhanced powers, given its limited regulatory toolkit.

The bigger challenge is for the capacity of the industry to respond, dealing with the economic downturn as a result of Covid-19, with limited resources, multiple inquiries and a very tight time-frame.

Oh and I chose the song for three reasons 1) it captures the urgency of the review, 2) who doesn't love Jonathan Richman and 3) when pressed by a magazine to name one song he actually likes, this is the one John Lydon / Johnny Rotten actually offered up.