Key points
- The significant structural changes taking place across the payments landscape are being supercharged by technology – while also responding to consumer demand.
- The level of trust consumers place in payment products and providers makes it all the more important that the regulatory settings are up to the task – and that they’re able to evolve as the sector evolves.
- The payments licencing reforms are designed to bring different participants in the value chain under appropriate degrees of regulation – according to how much risk their activities present to consumers and the payments system more generally.
Introduction
Thank you, Kristy and Gulshan for your warm welcome. Thank you, Women in Payments for including ASIC in this event.
I would like to begin by acknowledging the traditional owners and custodians of the land on which we meet today, the Gadigal people of the Eora nation. I pay my respects to their elders past and present – and extend that respect to Aboriginal and Torres Strait Islander people here today.
Good evening, everyone. It’s lovely to be here and to provide some opening remarks ahead of the Women in Payments symposium.
I’m sure there will plenty of interesting discussions over the next two days – and insights you can bring to your own work.
I wanted to make a few observations about the payments landscape, the structural changes taking place and the licensing reforms on the horizon.
As many of you will know, once those reforms come into effect, payment service providers will need to be licenced by ASIC. For some, this will mean applying for a licence for the first time. For others it will mean updating an existing licence. So, I’ll talk a bit later about what that will involve.
The evolving payments landscape
But first, let’s start with the structural changes taking place across the payments landscape – and they’re pretty momentous. A lot of you will be living and breathing that in your day-to-day work, and you might have sensed the pace of that change really picking up in recent years.
I think what’s most interesting – and important – about what we’re seeing is the profound role of technology. Not just in terms of the products coming to market. But in how technology is shaping the market itself. As you will know, there’s been a surge in the number and diversity of participants across the value chain.
So, no doubt, an exciting time to be in payments, whatever part of the value chain you’re from – and, overall, more choice is a good thing for consumers. As long as those choices are delivering good outcomes, and that’s a core focus of ASIC’s work.
One thing we’ve observed is that Australians have tended to be quick to pick up and run with new payments technologies. That includes tap-and-go and digital wallets, which are pretty much ubiquitous these days.
More recently, we’ve also observed consumers and merchants exploring and embracing a range of other innovative services that further facilitate secure, convenient and low-cost digital payments, at speed.
To me, that openness suggests high levels of trust: trust in the market, trust in the providers and trust in the regulatory settings.
I think it also shows that regulation can – and does – support innovation. Because most people aren’t going to experiment with new ways to move their money, unless they’re confident it’s safe to do so.
That confidence doesn’t happen by accident. But when it’s there, it gives industry the scope to develop novel products and services, with a higher level of certainty in getting a return on their investment.
But if those products and services aren’t appropriately regulated – or if consumers aren’t getting the experience they expect – that confidence can quickly erode, especially where there’s consumer harm.
So, it’s in everyone’s interests that these products and services provide the necessary protections, while also meeting customers’ needs and wants.
Those two things – consumer protections and consumer demands – aren’t mutually exclusive. Even in the fast-paced world of payments – and even though those demands are often for ever faster experiences, with fewer frictions.
When it comes to innovation, ASIC sees something of a symbiotic relationship between regulators and industry, with regulators as enablers and industry as accelerators. We recently announced that we’ll be revamping the ASIC Innovation Hub, which we hope will support those efforts.
Then there’s the dual role of consumers. When they feel confident enough to embrace new products and services, they can be both enablers and accelerators.
In the end, everything rests on consumer confidence. That’s one reason why improving consumer outcomes is a strategic priority for ASIC – as I think it should be for all businesses.
But we know there are other things ASIC can be doing as enablers of innovation.
That includes making it easier for businesses to understand and comply with their regulatory obligations, so that they can direct more of their time and resources into those efforts.
That’s not about lowering standards or diminishing consumer protections. It’s about finding ways to make things simpler, where we can.
For example, being clearer in our regulatory guidance and information about how the law applies, so that businesses can innovate with more certainty.
That’s just one element of a multi-year regulatory simplification program we’re working on at the moment. It’s not as easy as it might sound. But it’s particularly important when there’s a change in legislation or when new participants are brought under existing regimes, as will be the case with the payments licensing reforms.
The role of regulation
Which brings me to those reforms, which I’ll touch on at a high level.
This is timely, as consultation on the Government’s exposure draft bill containing tranche 1(a) of its payments licensing reforms just closed, and consultation on tranche 1(b) is expected in the near future.
I think the most important thing to say is that, given the significant and evolving structural changes in the payments landscape, these reforms are very necessary.
You will know better than most that a typical payments value chain today looks very different to what we think of as the traditional model, and we can assume there will be more change to come over time.
Those changes are being supercharged by technology, but they’re also responding to consumer demand.
As consumers, we expect payment products to be abundant, accessible and affordable.
In contrast to other financial decisions, we generally don’t expect to have to think too much about this or that method of payment. Most of us will use whatever option is the most convenient in the circumstances, and we’ll take its safety almost for granted.
The fact that we place so much trust in these processes makes it all the more important that the regulatory settings are up to the task – and that they’re able to evolve as the sector evolves.
Because the speed and frequency of transactions – and money moving through multiple parts of the value chain – comes with risk.
But those risks aren’t all equal. These reforms are designed to bring different participants in that value chain under appropriate degrees of regulation – according to how much risk their activities present to consumers and the payments system more generally.
That last part is important. Because risk-based regulation can help achieve a fair playing field among industry participants – protecting consumers, without unduly stifling business and innovation.
We appreciate that these reforms will mean some businesses becoming ASIC-regulated entities for the first time. We will do what we can to make the transition a successful one, including through the necessary regulatory guidance and information. And we hope, when the time comes, we’ll have mastered the art of making those materials as simple and easy to understand as we can.
We’ve also recently updated the ASIC Regulatory Portal, which is where businesses go to apply for a licence, among other things. We hope that will make the experience smoother as well, especially for first-time applicants.
To be granted a licence, businesses must show they have the organisational competencies to carry on a payments business, have adequate financial resources and can comply with their obligations as a licensee. Those obligations include having dispute resolution procedures in place, having appropriate insurance and maintaining cyber resilience.
Once licensed, services must be provided efficiently, honestly and fairly – and we will set out how we expect payment service providers to meet that standard.
In coming to the end of my remarks, I want to reassure any businesses who might have, including in relation to new frameworks. ASIC has done this before. It’s a well-trodden path for us. One we recently traversed with the buy now pay later reforms.
I’d also encourage businesses to think about the potential benefits. In particular, how regulation can guide them in providing products and services that are appropriate to their customers’ needs – and in ways that minimise the risk of harm.
That, ultimately, is what sustains consumer confidence – and, in the end, is the key to long-term success.
Conclusion
Finally, I want to thank you for your time. It’s great to see a room filled with such energy and enthusiasm. I hope you enjoy the rest of your evening and the events over the next two days.
