The Assistant Governor (Financial Systems) of the Reserve Bank of Australia (RBA), Malcolm Edey,  has outlined progress to date of the bank’s review of innovation in payment systems, identifying some of the key issues that business operators and consumers have identified in improving the uptake of online payments.

 

The RBA launched its strategic review of payments innovation in July last year.  Mr Edey said the main focus of the review was on system-wide innovation, rather than proprietary innovations, as it is on the larger scale that inefficiencies or underinvestment are more likely. 

 

The review is drawing on the results of the RBA’s latest Payments Use Study, the full analysis of which is expected to be released later in the year.  Sumarising its findings, Mr Edey said that while cash is most widely used for low-value payments, credit and debit cards are used for payments between $50 and $500, while BPAY and internet banking were frequently used for bill payments and high-value transactions. Over the past three years, use of cash has declined relative to debit cards, with scheme debit and EFTPOS transactions both gaining share. Fewer than 40% of consumers reported paying by cheque in the past year. On the other hand, around90% of respondents had access to the internet, and of those around 80% had made an online purchase, and 60% had made an online transfer of funds. 60% of people with internet access paid most of their bills online.

 

The biggest factor preventing people from making more use of online bill payments or online purchasing was the risk of fraud.

 

The other two new waves of payments technology – contactless payments and mobile payments – are still at a low level of take-up, with 3% of respondents using contactless payment in the last month, and less than 10% ever having made a mobile payment, and this was mostly for phone related purchases.

 

Issues for the future identified in consultations for the review included:

  • transfer of sufficient information with the payment to allow proper reconciliation;
  • speed of payments (for example, government emergency payments), and ease of addressing payments;
  • Electronic alternatives to cheques;
  • The future of mobile payments and impediments, for example, in relation to standards;
  • Adoption of internationally compatible messaging, device and security standards;
  • Impediments in Australia to the use of electronic purse systems – i.e. general purpose, prepaid and contactless cards like Oyster in London and Octopus in Hong Kong;
  • Need for increased co-ordination and cooperation on fraud issues.

 

The review will be seeking views on these issues and the role that the RBA should play in future payment innovation.

 

Mr Edey’s address to Cards & Payments Australasia 2011 is available at http://www.rba.gov.au/