Transcript of Question & Answer Session The Way We Pay: Now and in the Future

Hi Sean Drummond from the Financial Review. I think in the UK they're sort of pretty much ending cheques in 2018 or something. Is there any plans to do something like that here in Australia?

This is something the industry has been working on, led by APCA. And the industry is working on ways to reduce the use of cheques to ensure that there are good alternatives for the current users of cheques. What we know is that at the moment cheques are still used in the business sector in some specific areas such as superannuation and real estate transactions, and there is work underway to reduce that reliance already. We expect that the new payments platform will provide some new payment instruments that may well further reduce the use of cheques. So it's likely that we will see a continuing decline in the use of cheques and that they will be phased out at some point in the future, but that there are no immediate plans by the industry to do that. One factor here is that cheques are becoming an increasingly expensive means of payment, given a certain amount of infrastructure spending is being allocated to it, to a decreasing volume of cheques. So cheques are becoming very expensive and we can expect financial institutions to probably begin charging – charging more for them accordingly.

Maybe a question from me Tony so in terms of the two components of your presentations there, you dealt with the payment study first and then the real time payments topic second. In terms of the prior – consumer priorities that you uncovered in the diary, where do you think speed of transaction sits in terms of the other priorities: convenience, security et cetera?

We did ask questions such as that. I think the answer was that there were a wide range of attributes that people valued, and it's very hard to say what the dominant attribute is. So I think that tells you that consumers are looking for different things in different payment instruments and that we can expect a range of payment instruments to continue to meet their different needs. And at the moment, for the time being certainly, cash is valued by users for a number of attributes. People like it for its ease of use. They like it to help with budgeting, in that they're not spending money that they don't have, and cards are clearly very useful for many purposes, electronic transactions also. So there's a wide range of attributes that are valued by consumers and that's why we see a wide range of payment instruments out there.

John Cavanagh from Banking Day. Both Visa and Mastercard have complained that the powers that you've given them to limit excessive surcharging don't work and then they're not able to do it. And they and a number of others have argued that some regulator needs to monitor and police that part of the system. Do you accept that the measures you've put in place haven't worked and need to be fixed?

What the Bank has done has enabled the schemes to be put in place to cap surcharges to the reasonable cost of card acceptance. They have, to varying extents, attempted to implement those. I think it's too soon to say that they haven't been successful. We haven't necessarily seen the full effect of their implementations to that. What the survey shows us is that a relatively small proportion of card transactions are actually surcharged and what we see is the merchants that do surcharge are those that tend to have higher payment costs. We see that when they surcharge they more likely to surcharge a more expensive payment instrument and they are also more likely to surcharge more expensive payment instruments at higher rates. So, in many ways, the surcharging regime, the surcharging framework is working as we would expect. Now I'm not going to defend the surcharging practices all merchants. I think we can all point to a few industries or merchants where surcharges look on the high side. There, the schemes have got some procedures in place and it will be important to see if they are able to implement those. The PSB has said that it will continue to be looking at this area to see if further action by ourselves, ACCC or ASIC is needed. What we need to ensure is that surcharges are very transparent 25 and also that there is also a non-surcharge means of payment available to consumers at all times.

Sorry, just following on from that. Obviously yeah the card companies have called for some other regulator to be involved apart from yourself in enforcing those guidelines. Can you already do that yourself or can you do it in coordination with the ACCC or ASIC to actually enforce them as a regulator?

At the moment I think it's up to the schemes. Providing surcharges meet the various requirements of Australian consumer law, consumers have got the right to go to a different provider if they don't like the surcharge or use a different means of payment. But this is something that I imagine will be considered in the Financial System Inquiry and, as we've said, the Payment System Board is continuing to look at it. The schemes were quite effective at policing no-surcharging rules so I suspect that they could be more effective at policing a reasonable cost of card acceptance cap if they were to implement this rigorously.

A little bit lighter note Tony. You spoke about the hub enabling innovation in the future et cetera. Is there any consideration for alternative things like Bitcoin and things like that and how they would be settled? Is any of that sort of stuff on the horizon or the agenda?

Bitcoin gets a lot of coverage in the media but it's very much a bit player at the moment when it comes to use as an actual payment instrument, I'm not aware of any industry wide initiatives on Bitcoin and I'd be surprised if there were any under way.