Chequeing out: Chalmers to phase out BSB and cheque payments, give RBA more regulatory power
Jim Chalmers is set to announce the phasing out of cheques and BSB payments, as well as push for more RBA regulation of digital wallets.
Payment systems are set to get a big overhaul in Australia, with BSB and account number payments, as well as cheques, being phased out.
Treasurer Jim Chalmers is set to make the announcement at an Australian Banking Association event on Wednesday, saying that the current system is “clunky, inefficient and cumbersome to maintain”.
“Payments are the tracks on which our economy runs, which means that improvements here make everything move more efficiently, reducing costs for households and businesses, freeing up resources that can be used to grow the economy,” Chalmers will say in his speech.
According to Chalmers, cheques will be phased out by 2030, with the government ceasing to use them in 2028. Australia’s Bulk Electronic Clearing System, which allows electronic transfers via BSB and account numbers, will also be phased out.
First introduced in 1994, this will be replaced by the New Payments Platform (NPP) PayID system. This was launched in 2018 and allows payments to be automatically sent through an email address, phone number or ABN.
“Our vision is to create a modern, world-class and efficient payments system that is safe, trusted, and accessible, and enables greater competition, innovation and productivity across the economy,” Chalmers’ speech reads.
FinTech Australia has welcomed the news of these changes, while also hoping that the Australian fintech community will be involved and considered in the future of payments in Australia.
“Although this announcement will be made to a room full of banks, at a banking conference, we hope the crucial role of fintech companies in shaping the future payments system will be recognised as these important reforms progress,” Rehan D’Almeida, general manager of FinTech Australia, said in an email to SmartCompany.
According to the latest FinTech census, payment providers make up 38% of all Australian fintech companies.
“While the focus may be on the removal of colloquial, but outdated, forms of payments, this framework also paves the way for further innovation in fintech, which will be passed on in the form of further benefits to consumers.”
Despite these sweeping changes, Chalmers did reiterate the government’s continued commitment to cash, as well as banking at Australia Post. This is certainly good news for SMEs that still rely on physical money.
According to the government, it will be responding to a senate inquiry regarding bank closures in December.
Increased digital payment regulation
Chalmers will also be announcing legislative changes that will allow the Reserve Bank of Australia (RBA) to have more regulatory power over digital payments. This comes just two weeks after it was announced that Buy Now Pay Later (BNPL) products will finally be regulated as credit products.
This has been a sticking point in Australia for a while now. Just last month The Commonwealth Bank (CBA) called for urgent regulation of Apple Pay, as well as other tech companies entering the local payments sector.
The key change proposed is allowing the RBA to be able to regulate digital wallet providers, such as Apple and Google, as well as ministerial designation power to regulate in the nation’s interest.
A ‘Licensing of payment service providers — payment functions’ consultation paper into the matter launched today and will run until July 19.
“All this means that a more modern payments system also means more innovation, more productivity and more growth. And with the plan I’m releasing today, our policy settings will now reflect that opportunity,” Chalmers will say in his speech.
“The breadth of what we’re doing with your sector reflects an understanding that our efforts to grow the economy rely heavily on our ability to realise our vision for a modern, world-class and efficient payments system.”
According to FinTech Australia’s Rehan D’Almeida, it is crucial for future regulation of Australian payment systems to allow for competition.
“Historically these regulations were not fit-for-purpose as they rigidly restrict access to payment systems, meaning competition is slowed and innovation is frozen out,” D’Almeida said in an email to SmartCompany.
“This latest framework rectifies this, giving a clear direction to the sector’s regulators, RBA, APRA and ASIC, to allow for fair and equitable access to payment systems for compliant fintech companies.”
