Does Australia’s New Payments Platform hold some lessons for developing countries looking to design their own digital payments system? The Level One Project Guide, released earlier this year by the Bill and Melinda Gates Foundation, would suggest so.
The Bill and Melinda Gates Foundation is one of the world’s most influential NGOs. It supports numerous initiatives, primarily aimed at health and economic development in developing countries. An area of interest for the Foundation has been financial inclusion, with a particular focus on how new digital technologies, such as mobile phones, can be used to provide low cost and accessible payment services to the poor.
The benefits of extending low cost digital payments to the poor would be significant. In its research paper “Fighting Poverty Profitably”, the Foundation identified savings of up to 90 per cent of costs associated with making payments if digital technologies are properly deployed. For the two billion people living on $2 a day or less, this would place efficient and effective payment offerings well within reach, displacing the current reliance on cash.
To further guide this work, the Foundation has developed its Level One Project Guide. This sets down principles and high-level design features for policymakers and industry participants looking at developing an “ideal” digital payments system. In other words, if you were designing a payments system with the proverbial blank piece of paper, how would you do it? The lack of legacy payments systems and the high use of mobile phones means that this is a realistic starting point for some developing countries.
The Level One Guide sets out some of those features, including:
- Open loop as opposed to close loop
- Reliance on regulated accounts as opposed to unregulated stores of value
- Infrastructure owned and operated by industry on not-for-profit or cost recovery basis
- Same-day or real time settlement
- Provision of irrevocable push payments
- Reliance on international standards
For an Australian observer, this list should ring a few bells, echoing many of the features that underpin the New Payments Platform. Indeed, Australia is referenced in the Guide, alongside Peru, where the banking association has brought together the banks to provide an industry-wide mobile payments offering.
The benefits of the approach outlined in the Guide are multi-fold. Obviously there are benefits for the poor – in gaining access to efficient digital payments. There are also benefits for governments – achieving economic and social connections, reducing opportunities for corruption, harnessing the GDP “stuffed under the mattress” and providing greater control and visibility for the whole financial system. And for payment providers, there is the opportunity to reach under-serviced consumers and untapped markets – bringing them into the financial system and providing greater economic opportunities.
So while New Payments Platform will deliver faster, flexible. data-rich payments for Australians by 2017, the industry supporting this all-important initiative can also be proud that it is helping shape international debates on how to extend digital financial services to the poorest people on the planet.
