Govt to overhaul Australia’s payments system, phase out bulk clearing system

Jim Chalmers Payments Reforms Treasury

Federal Treasurer Jim Chalmers has revealed the Government’s plan to overhaul and modernise Australia’s payments system, including the phasing out of Australia’s decades-old Bulk Electronic Clearing System (BECS) and the ending cheque payments by 2030.

Speaking at the Australian Banking Association’s (ABA’s) annual conference today, Chalmers unveiled the Government’s five-point Strategic Plan to reform Australia’s Payments System, including new powers for the Reserve Bank of Australia (RBA) to oversee payments service providers (PSPs) and digital wallets, and an effective elevation of its role as a critical infrastructure regulator.

The Government wrote in its Strategic Plan: “The RBA, in its role as supervisor of systemically important payment systems, promotes the safety and resilience of financial market infrastructures and payment systems. As part of this work, the intention is that the RBA will also fulfil its role as regulator of payments systems that are critical infrastructure assets under the risk management program obligation of the Security of Critical Infrastructure Act 2018.”

The Treasurer also revealed the Government’s intention to introduce a new “tiered, risk-based” payments licensing framework that would cover new payments innovations, including stablecoins.

This reform aims to create common access requirements for Australia’s payments system, effectively facilitating the entry of new innovators into the local payments network.

On the infrastructure side, Chalmers said the Government plans to transition away from the “clunky, inefficient and cumbersome” BECS, which is now “decades old”, to the New Payment Platform’s (NPP’s) fast payments rails.

Last updated in 2013 to enable same-day settlements, the bulk settlements system supports bank-to-bank payment transfers, including electronic direct debit, direct credit and one-off bank transfers to merchants.

Transfers made through BECS are settled and exchanged in bulk, six times each day at set times. In some cases, payments receivers may only receive confirmation three days after the initiation of a direct debit payment.

BECS currently carries an average yearly value of more than $15 trillion.

Chalmers said the Government also plans to fully phase out cheque payments by 2030.

“Our policies and regulations predate the development of mobile payments,” Chalmers said in his speech, noting that “costly means of exchange”, such as cheques, are no longer viable.

However, the Government confirmed that it has no plans to phase out cash, noting that it remains “an important method of payment that is widely accepted by merchants”.

Chalmers added that the transition away from cheques “will be gradual, co-ordinated and inclusive”.

Cheque use has fallen 90 per cent over the past 10 years, according to the Treasurer, representing just 0.2 per cent of all payments, as consumers increasingly opt for electronic payments.

“All this means is that leaving cheques in the system is an increasingly costly way of servicing a declining fraction of payments,” Chalmers said.

As part of its five-point plan, the Government said it will also move to bolster Australia’s payments system’s resilience to scams and cybersecurity threats (highlighting security and resilience as “objectives for payments policy”), including the mandating of ASIC’s recently updated ePayments code.

The Government will also “explore the policy rationale” for an Australian central bank digital currency (CBDC), following recent CBDC pilots by the RBA.

Further, the Government also revealed plans to implement priority aspects of the G20 Roadmap that would facilitate cross-border payments and ensure the NPP and other domestic payment systems are interoperable with major payment systems worldwide.

“Our vision is for a modern, world‑class and efficient payments system that is safe, trusted and accessible, enabling greater competition, innovation and productivity,” Chalmers said.

“New digital products are changing the way we make payments and the way businesses provide payments services.

“The Government is acting to ensure Australia’s payments system remains fit‑for‑purpose now and into the future.”

Payments reform consultations

Treasury, as part of today’s payments system reforms announcement, released a consultation paper on proposed amendments to Australia’s Payments Systems Act that would boost the RBA’s regulatory powers over PSPs.

The proposed changes under consultation would give the Reserve Bank of Australia (RBA) additional powers to regulate new and emerging payments systems, including digital wallets, as well as add new ministerial powers to increase regulatory oversight of payments services or platforms that “present risks of national significance”.

A second consultation paper has called for feedback on a proposed list of payments functions that would be regulated under the new licensing framework.

Australian Banking Association (ABA) chief executive Anna Bligh welcomed the Government’s proposed updates to Australia’s payments system, noting that Australia’s payments ecosystem has become increasingly complex, with the rapid rise of online and digital commerce transactions alongside the entry of large foreign tech firms.

“Australia is currently operating under payments legislation that was created in 1988,” Bligh said.

“A productive world-class economy needs a modern and efficient payments system – today’s announcement is a long overdue overhaul of the payment arteries that drive the Australian economy.”

She added: “The proposed changes announced today will help ensure clear consumer protections apply no matter who is processing your payment, and that the security of customers’ personal and financial information is maintained.”

“By giving the RBA greater oversight and standard-making powers over digital wallets and other forms of payments infrastructure, these regulatory changes can also help to maintain the security and efficiency of our payments system.”

Correction: a previous version of this article incorrectly referred to AusPayNet as a subsidiary of AP+. AusPayNet oversees BECS; AP+ separately oversees the New Payments Platform (NPP).