Australia's Payments roadmap - taking the customer on the journey

For those in the know, few would disagree with the inevitability of the payments modernisation roadmap. More seamless digital banking can help facilitate genuine economic and social advantages, and reduce the risk of exploitation by bad actors. 

But this process of modernisation – where money travels faster and through more digital enablement – exposes banks and customers (particularly those who are vulnerable), in the short term, to increased  scams and fraud vulnerabilities, largely due to system and customer behavioural changes required to adapt to the changes driven by modernisation. 

For financial institutions, this is about more than regulatory compliance. It’s really a mass migration exercise where customers need to be safely guided into the new environment. Key to this will be identifying gaps that bad actors may seek to exploit and any adoption challenges that customers and or organisations may experience – and proactively closing these.

As banks are considering the migration from Bulk Electronic Clearing System (BECS) to New Payments Platform (NPP), the broader roll-out of PayTo and the potential for crypto-enabled transactions (e.g. via AUD stablecoins or a CBDC), here are some pertinent questions to consider:

• How much friction are we willing to add to the customer experience, in order to make customers safer?

• How digitally enabled are our customers within impacted segments or products (e.g. government pension recipients)?

• How might we mitigate security risks by putting the bank (instead of the customer) at the centre of transaction decision-making and detection mechanisms? 

• What are the appropriate ethical boundaries to be enforced on the use of money when that money is more traceable, and potentially even programmable?

• Without knowing how extensive the government education campaign will be, – what can we, as a bank, do to educate customers and ensure they migrate safely?

• How can we partner with others in the payments system to harness their security measures (e.g. Apple’s inbuilt biometric fraud detection solutions)?

• Are we applying best practice financial safety design and change management principles to drive sustainable change?

Some of these issues actually go right to the heart of the social purpose of financial institutions. One of the biggest sources of the BECS is government payments to vulnerable Australians (e.g. Centrelink). As people transition to a new system, scammers and fraudsters will seek to exploit any gaps in customer knowledge of the new process. So, it’s incumbent on the government, banks and others in the payments ecosystem to ensure vulnerable people transition safely.

Along with fraud and scam risks, banks need to consider financial abuse in the design and operation of any new products too. For example, after the NPP was introduced, there were instances of payments in one cent increments being sent with abusive messages. Monitoring has now been introduced and banks can apply the learnings from that to ensure there is continual improvement in guarding against financial abuse.

The upcoming changes in the payments system are not only an opportunity to better detect financial abuse, but to actually design with inclusion and accessibility at the forefront. The risks of financial abuse, such as theft and coercion, can be better mitigated with products like PayTo which requires a real time, multi-factor authorisation for a payment to be made. A bad actor would need access to the victim’s phone and banking password in order to authorise a payment. 

Ultimately, as the Supporting Women’s Financial Safety guide issued by the Department of Premier and Cabinet, points out, “Interactions with your systems are not equal for everyone. People’s background, systems knowledge, technological literacy, knowledge of rights, emotional capacity, access to services and community support vary for each individual.” This guide provides an excellent basis for designing new payments products for financial safety.

The next few years will be transformational for Australia’s payments system, and can be for those who use it. The opportunity is to harness the additional functionality and features in the products and payment rails to the benefit of all Australians. The risk is that existing payment products and experiences are replicated in the new world, or worse, that vulnerable cohorts of consumers are disadvantaged through the improved technical capability.