infrastructure – APCA Blog

Why Shared Ledger Technology won’t free us from human fallibility

Chris Hamilton — Tue, 12 Apr 2016 23:46:57 +0000

In my previous post, I discussed Bitcoin’s desire to remove trust from the payments process. I now want to look at the nature of financial trust: What does it mean to say we “trust” a third party? Is trust of…

Australia providing ideas to help bring digital payments to the poor

Brad Pragnell — Tue, 06 Oct 2015 23:23:01 +0000

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.

Apple Pay in Australia

Chris Hamilton — Mon, 10 Aug 2015 04:21:41 +0000

Here at APCA, one of our jobs is to ensure that the community is well informed about payments systems and their future evolution. We were therefore very interested in recent industry media commentary on the evolution of new payment technologies and, in particular, the progress of Apple Pay in Australia.

Australian payment institutions have been criticised by some in the local media for not getting together to make Apple Pay happen. I am not privy to any commercial discussions (of course), but that is a little surprising. There just might be legitimate pro-competitive reasons for that not happening – they are competitors and given Apple’s market weight, they will doubtless have a significant effect on competitive dynamics. This bears careful thought.

Why does it take up to a day to process my internet payment?

Chris Hamilton — Fri, 05 Jun 2015 02:21:31 +0000

The use of online banking websites and mobile banking apps has increased a lot in Australia. We have one of the fastest uptakes in the world of that sort of technology. One of the side effects of this is that people are now much more aware than they used to be of how quickly a payment they are expecting is going to hit their account. And that’s led to a lot of discussion and chatter about how quickly payments take place.

A strange brew – regulator releases its final policy statement on UK Payments

Brad Pragnell — Wed, 06 May 2015 06:32:42 +0000

The new UK Payment Systems Regulator (PSR) became operational on 1 April 2015 and as reported in the most recent edition of Payments Monitor (APCA's quarterly newsletter), released its first major policy statement, entitled “A new regulatory framework for the payment systems in the UK”.

The PSR has laid down a significant agenda. This includes the establishment of the “Payments Strategy Forum” to develop a collaborative industry strategy and effectively replace the UK Payments Council. The payment system is a network and a strong shared vision and collaborative strategy is critical for success. Collaborative bodies, such as Australia's own Australian Payments Council, recognise the need to have forums that bring industry together. However to be successful, the new Strategy Forum will need active industry participation. If industry is only there to assist in the implementation of public policy, then the new Forum will fall short of expectations.

Fast is no longer enough

Chris Hamilton — Thu, 19 Feb 2015 23:02:46 +0000

The goal-posts are shifting in new "real-time" payments systems. It is safe to assume that if anyone, anywhere builds a new payment system, it will be real-time. That particular bar has been well and truly set by the UK's faster payments system, followed up by the Paym P2P mobile solution that started there last year. All round the world, countries that don't have a real-time alternative are working on how to get one. In the US, The Clearing House has announced its intention to develop a new real-time system, and the Canadian Payments Association is beginning its own debate on payment system modernisation. But the Brits are not resting on their laurels either - they have begun speccing out a new "world class payments system" as the next generation.

The return of collaboration

Chris Hamilton — Wed, 14 Jan 2015 01:35:26 +0000

As I think about payments developments in 2014, what strikes me is that the payments world is now in a phase of collaborative systemic innovation, the like of which we have not seen in 20 years.

I have written about the cyclical nature of network evolution before. It’s all about network effects - ie the reality that, in payments as in other network industries, the net value of a service is proportional to the number of other people using the service. Wherever there are large network effects, an evolutionary balance must be struck continuously between service innovation based on the existing network, and systemic innovation to enhance the network itself. The former uses new technology and/or new business thinking to improve services to end users without trying to change the network itself - because this is expensive and hard to do. Service innovation tends to be competitive in nature. A good example is Square, which innovates in the merchant/customer interaction by riding the rails of the existing card schemes.

The latter - systemic innovation - seeks to upgrade the underlying network so that new and better services can ultimately be delivered to end users. The current global enthusiasm for real-time payments is largely in this category - building new networks to (eventually) deliver better services. Because this needs a large number of existing participants to coordinate in upgrading their technology and operations at the same time, it is typically collaborative more than competitive, and government often has an important role to play.

Tough medicine for the UK payments system – but how sick is the patient?

Brad Pragnell — Tue, 18 Nov 2014 03:47:45 +0000

On 13 November 2014, the UK Payments System Regulator (PSR) released “A new regulatory framework for payment systems in the UK”. This document outlines, and seeks feedback on, the PSR’s thinking on its regulatory approach in the lead-up to becoming operational in April 2015.

The PSR is a new economic regulator that sits within the Financial Conduct Authority and has broad powers to designate payment systems and impose standards. While on paper, the PSR’s powers are not too dissimilar to those of Australia’s own Payments System Board, at first glance, the 13 November consultation paper suggests a much more invasive, and it could be argued ill-conceived, regulatory stance.

Payments World USA

Chris Hamilton — Tue, 15 Apr 2014 23:31:38 +0000

In April, I took a quick trip to Disney World...well, kind of. The annual conference of NACHA, APCA's equivalent body in the USA, was held at Disney World's home: Orlando, Florida. Around 2,200 bankers turned up to hear three days of presentations on the state of US payments - and possibly catch a few rides. I hope they had some fun amongst the work, because these are stressful times for US payment providers. Having weathered the GFC with tightened budgets, US bankers are acutely conscious of new payments system developments in other countries and pressure from the US Federal Reserve to follow suit or be left behind; but they are a long way from agreeing amongst themselves what is to be done, and who will pay. My small contribution was to outline the policy logic behind Australia's New Payments Platform (NPP) proposal as a comparative example. There was much interest.

Fast payments – the difference a year makes

Chris Hamilton — Wed, 22 Jan 2014 15:11:40 +0000

This time last year, I reported on the lodgement of an industry proposal to develop new real-time payments architecture for Australia. Rashly, I suggested that:

- The Payments System Board would back the industry proposal (they did);
- APCA would publish the proposal in full, so everyone knew what we were on about (we did); and
- Industry collaboration on the new architecture would need to get going quickly if we were to have a shot at meeting the challenging timeframes set by RBA (and that happened too!)