RBA frustrated with banks over slow PayTo adoption

The Reserve Bank of Australia’s powerful Payment Systems Board has expressed frustration with local banks over their slowness to turn on the new payments platform (NPP), again cajoling the sector into doing more with a platform that was recently bounced offline by a major outage.

In a sign that there is increasing scepticism among major institutions over what value the NPP will provide to their shareholders, the Payment Systems Board’s annual report says take-up of the much-vaunted PayTo service is being impeded by the slow rollout at retail institutions.

“While the PayTo service did go live in June 2022 as scheduled, it was disappointing that many NPP participants, including several of the major banks, were not ready to begin offering PayTo services to their customers by this date,” the PSB annual report said.

“These delays will limit the adoption of the service and the realisation of benefits for end users. Accordingly, the Bank has obtained assurances from the relevant banks that they will be ready to enable customer accounts to authorise PayTo agreements and respond to payment initiation requests as mandated in the NPP roadmap, by April 2023.”

The shot across the bow from the payments regulators comes as many institutions privately wince at the consumers’ misery unfolding in the UK, where authorised push payments that are that nation’s equivalent to PayTo have caused fraud and scam rates to spiral on the back of a new criminal industry in fake payment requests that people can’t distinguish from real ones.

Banks are known to be wary of the reputational damage they would incur if the British horror show was avoidably repeated here, especially around the potential erosion of trust from far more cost-effective digital channels.

A major problem in the UK with authorised push payments is that the liability for fraud losses is sheeted back to the consumer as opposed to card payments where the consumer is largely indemnified.

A key safeguard in the UK system for vulnerable people uncomfortable who are with digital transactions is a so-called ‘right to cash’, so that the vulnerable are not force-marched onto digital platforms, a remedy Australia does not appear to be ready to entertain.

The RBA is currently undertaking a review of banknote distribution arrangements on the back of declining cash use amid the rapid removal of automatic teller machines and bank branches by institutions.

“While access to cash services overall remains reasonable, the declining use of cash for retail payments has been placing pressure on the wholesale cash distribution system,” the PSB report said.

According to the Australian Prudential Regulatory Authority, more than 300 bank branches were closed in the past financial year, with just more than 4,000 now remaining, as opposed to 5694 in 2017.

More than 1,000 ATMs were shuttered over the past financial year to land at 6,412, down from 13,814 in 2017.

This article was first published by The Mandarin.