RBA payments system overhaul delayed by a year

The Reserve Bank of Australia has officially hit pause on its massive payments systems review, conceding banks, regulators payments schemes and the broader digital payments ecosystem would struggle to absorb the root and branch regulatory overhaul.

The RBA late Thursday confirmed to stakeholders the highly anticipated review was being put on ice due to the COVID-19 pandemic, the latest regulator to announce a reform and penalties holiday in specific areas.

The move pulls back hard deadline across a raft of consultations in the rapidly digitising payments landscape, the biggest moving piece of which is the future of the BSB-number based direct entry system that is the underpinning architecture for bank account access.

“In light of the current extraordinary circumstances associated with the impact of COVID-19, the Reserve Bank is putting on hold the Review of Retail Payments Regulation that was announced on 29 November 2019,” the RBA said in a statement.

“Whereas the Bank had previously expected that the Review would be completed by late 2020, we now expect that it will be completed in 2021.

“This decision is intended to reduce the demands on industry stakeholders at a time when they are focused on dealing with the impact of COVID-19. Bank staff will continue to do background work on the Review as resources permit and remain available to speak with stakeholders as required.”

The RBA in December flagged that it wanted banks and the financial services sector to start contemplating what a consolidation of the current legacy direct entry architecture might look like down the track.

Aside from bank shuffling money between each others’ accounts, key customer facing infrastructure that pipes into the direct entry system includes longstanding stalwarts eftpos and BPAY.

Both platforms are essentially mutually owned by banks and deposit taking institutions and run as lower cost services as an alternative to handing over an effective monopoly to credit card schemes Mastercard and Visa that have now embedded themselves into the debit market.

The RBA in December had talked-up the prospect of some core infrastructure rationalistion by raising questions over the long-term future of the direct entry system.

The challenge for both the central bank and retail banks is that there are now three different common infrastructure plays in the market – BPAY, eftpos and the New Payments Platform – at a time when the likes of Apple and other global technology platforms are also putting product into market.

The situation many banks and payments stakeholders are facing is how much the financial landscape will have changed irrevocably over the next six months, especially as many cash-flow poor and venture capital dependent start-ups in the fintech sector are wiped out.

The question the RBA and policy makers are likely to face in the next six months may really be one of be what remains, around unsecured credit, as the retail sector and consumers go into shutdown.