Annual Review 2019

DELIVERING THE BEST CUSTOMER OUTCOMES Australian Payments Network Limited ABN 12 055 136 519 Level 23, Tower 3 International Towers 300 Barangaroo Avenue Sydney NSW 2000 Telephone +61 2 9216 4888 Email [email protected] www.auspaynet.com.au

This Annual Review is designed to provide our members and stakeholders with a summary of what was achieved in financial year 2018-2019. References in this report to a year are to financial year ended 30 June 2019 unless otherwise stated. CONTENTS

4 About Us

6 Chair and CEO Message

7 Highlights

8 Consumer Payment Trends

12 Promoting Innovation

15 Effective Self-Regulation

21 Leadership in Collaboration

24 Board of Directors

26 Governance

27 Our Team

29 Membership

30 Glossary ANNUAL REVIEW 2019

Australian Payments Network champions the payments system.

We enable competition and innovation, promote efficiency, and control and manage risk to deliver improvements for all users of the payments system.

As the industry association, we bring together a diverse range of organisations including financial institutions, major retailers, payment systems operators and technology providers. Our network includes more than 130 members and participants, and we welcome involvement from all organisations with a significant interest in payments.

In our role as self-regulatory body for payments, we take an inquisitive, front-footed approach to help deliver the best customer outcomes. Our vision is convenient and secure payments for all.

4 ANNUAL REVIEW 2019

CONVENIENT AND SECURE PAYMENTS FOR ALL

Three strategic pillars underpin our work to deliver on this vision.

Promoting Effective Leadership in Innovation Self-Regulation Collaboration Supporting secure Managing risk and fraud Growing our network innovation and membership Modernising the Ensuring accessibility payments rails Delivering improvements for all in payments Shaping policy to deliver Creating confidence better outcomes Bringing the right in payments expertise together

5 AUSTRALIAN PAYMENTS NETWORK

CHAIR AND CEO MESSAGE

General Chidlaw’s 1954 analysis of US national card fraud, the Framework is also designed to to payments, an important part of ensuring security – “If you want security, you must build consumer trust and support continued that policy and regulatory settings support be prepared for inconvenience” – may still growth in e-commerce. convenient and secure payments for all, with resonate 65 years later when considering the the year seeing seven major policy submissions. Our latest fraud statistics suggest that industry same subject. It does not, however, resonate work on the Framework over the last 18 months In FY20, we will continue to input to the in the sphere of payments. Consumers expect has helped create awareness of protecting regulatory settings for Australian payments. convenience and security in payments and against CNP fraud. The data shows a decline in Over the coming year, ASIC will consult on the modern technology delivers both, without the rate of fraud on Australian cards for the first ePayments Code and the Reserve of a trade-off between the two. Reflecting time since reporting became public in 2006. The (RBA) will conduct its latest holistic this consumer pull and technology push, statistics also show that in the card present review of card payment regulation. We will AusPayNet’s vision is convenient and secure space – at point-of-sale and ATM – Australians also develop a standard set of operational payments for all. can rely on the security of these convenient performance statistics, which is an important In this context, one of this year’s highlights payment channels: counterfeit/skimming fraud metric of payment system resilience, in work has been supporting the Australian Payments is at the lowest level ever recorded. that will involve our members, the RBA and APRA. Council’s (APC) delivery of the TrustID This year also saw us continue to develop our Two pieces of strategic work will be key framework. This meta-framework will support framework for open-loop payments in transport, priorities in FY20. We will: the creation of digital identity services that with the trial in NSW continuing to expand, extend beyond payments and beyond financial • support the APC’s sectoral assessment and development work underway in two other services. Crucially, identity services under which underpins its new strategic agenda states. We also continued to modernise our own the framework will be interoperable between, focussing on systemic resilience, combatting technology, including developing BECS Connect, for example, government and private sector financial crime, and financial inclusion and a system which automates the previously services, enhancing convenience. They will also accessibility. manual transaction negotiation authorities reduce the quantity of personally identifiable between financial institutions to process direct • consult the industry on the future state of information (PII) that is shared online, entry payments. Australia’s payment clearing systems and the enhancing security. steps and the enhancements necessary for We welcomed eight new members to our As well as creating new opportunities for digital that future state to be realised. network this year – including for example service delivery, such services will help mitigate , Google, Union Pay International and Simultaneously, we will maintain our focus the risks of online payment fraud, which has the Royal Australian Mint – bringing our total on ensuring that as payments become more been another key focus this year. Our card-not- membership to 132. We also continued to shape convenient for all, no users are left behind. present (CNP) fraud mitigation framework went the policy agenda, with a key focus on access In particular, we will continue to manage the live on 1 July 2019. In addition to reducing online consumer-led decline in cheques, to ensure that before cheques cease to be a viable option for consumers, all current cheque users have effective digital alternatives. And we will continue the work initiated this year to develop guidelines to ensure payment channels, notably at point-of-sale, remain accessible for people with disability. We thank our fellow directors, members, the RBA and other regulators, and all of our stakeholders for their support of and input to AusPayNet. We also thank AusPayNet’s staff for their hard work, engagement and skill in all that they do for the company and for Australian payments.

Rob Craig, Chair Andy White, CEO

6 HIGHLIGHTS This year’s key outcomes Conveniently, Sydney commuters can use their payment cards and linked devices to A CNP Fraud Mitigation pay for travel on all Framework to help the modes of transport e-commerce community protect their customers and businesses

A trust framework to improve customer convenience, privacy and security in our digital world New awareness programs to help those individuals and sectors that still use cheques transition to digital payments

New standards enable merchants to offer card payments to customers more New guidelines cost-effectively and underway to improve efficiently accessibility for people with disability

7 CONSUMER PAYMENT TRENDS Consumers are increasingly choosing faster and more mobile payment methods.

7 in every 10 people aged 14+ use digital payment solutions

Source: Roy Morgan 2018

OVER 1 MILLION contactless card payments on Sydney transport each month

Source: Transport for NSW

More than 27 million card transactions every day

Source: Reserve Bank of Australia

8 About 1 contactless POS terminal for every 25 Australians

Source: ABS; AusPayNet

12% of people aged 14+ make mobile payments

Source: Roy Morgan 2018 More than 3.6 MILLION PAYID registrations for fast 9 in every 10 people payments via the NPP

own a smartphone Source: NPP Australia Almost half of them use biometrics to authorise payments – 53% this year

Source: Deloitte Mobile Consumer Survey 2018

Spending at Australian online merchants up 27% in value this year

Source: Reserve Bank of Australia

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Customers prefer convenient and secure payment methods.

Cards Cash Cards are the most popular payment The consumer-led shift to digital payments method, and contactless payments are can be seen in the steady decline of ubiquitous. Consumers and businesses ATM withdrawals. The number of times made more than 9.9 billion card people use an ATM has dropped 4.0% for transactions this year – up 11.5% on FY the second consecutive year, down to 2018. Debit cards continue to dominate, 576.6 Million withdrawals. The value of ATM representing 70.3% of all card transactions. withdrawals dropped to under $130 Billion, Debit card use increased by 14.6% to 6.9 down 2.1% compared to a minimal 0.3% Billion transactions and by 9.3% in value to drop in 2018. The slight increase in the $333.4 Billion. Credit card use grew by 4.6% rate of decline suggests that Australians to 2.9 Billion and by 2.0% in value to have adjusted to the removal of ATM direct $336.1 Billion. charges to non-customers.

NUMBER OF CARD PAYMENTS NUMBER OF CASH WITHDRAWALS NUMBER OF CARD PAYMENTS (Billions) (Billions) NUMBER(Millions) OF CASH WITHDRAWALS (MILLIONS)

Debit Cards Credit Cards

723.5 2.2 4.0 2015 2015

4.6 2.4 675.8 2016 2016

625.4 5.2 2.6 2017 2017

600.1 6.0 2.8 2018 2018

6.9 2.9 576.6 2019 2019 0 2 4 6 8 10 0 100 200 300 400 500 600 700 800

VALUE OF CARD PAYMENTS VALUE OF CASH WITHDRAWALS VALUE OF CARD PAYMENTS (Billions) ($ Billions) VALUE ($OF CASH Billions WITHDRAWALS) ($ BILLIONS)

Debit Cards Credit Cards

142.1 235.5 295.0 2015 2015

138.7 256.4 307.9 2016 2016

133.1 277.2 319.7 2017 2017

132.7 305.1 329.7 2018 2018

129.8 333.4 336.2 2019 2019 0 100 200 300 400 500 600 700 0 30 60 90 120 150

Source: Reserve Bank of Australia Source: Reserve Bank of Australia 10 ANNUAL REVIEW 2019

2017 2017 3 2016 201 2015

PAY Cheques PAY Direct Entry Access Cheque use plummeted by a record 25.0% Direct entry transactions account for Consumers’ strong preference for digital to a low 60.2 million, following a 19.6% the bulk of non-cash retail payments payments is enabled by a high number drop in 2018 and 21.0% drop in 2017. value, exceeding $10 Trillion this year. of point-of-sale (POS) devices. Globally, Cheque values dropped by a staggering Measurement of annual growth was Australia has among the most POS 35.0%, to $654 Billion. The rate of decline, impacted by a break in the data series terminals per million inhabitants. Since both in number and value, is the strongest due to changes in the RBA’s method of 2015, the number of POS devices has ever as businesses and consumers statistical collection. The Payments increased by 10.1%; by comparison the continue to choose digital alternatives. System Board’s annual report has adjusted number of ATMs has dropped by 9.5%. the data, showing an actual decrease of 4.2% in volume. The migration of some transactions to the NPP has likely contributed to this decline.

NUMBER OF CHEQUE PAYMENTS NUMBER OF DIRECT ENTRY PAYMENTS NUMBER OF POINT-OF-SALE DEVICES NUMBER(Millions OF CHEQUE) PAYMENTS (MILLIONS) NUMBER(Billions OF DIRECT ENTRY) PAYMENTS (BILLIONS) NUMBER OF POINT-OF-SALE DEVICES

Direct Debits Direct Credits 0.9

152.6 2.2 891,412 2015 2015 2015

126.4 1.0

2.4 934,001 2016 2016 2016

99.9 1.1

2.6 931,771 2017 2017 2017

80.4 1.2 2.7 961,247 2018 2018 2018

60.2 0.9 2.3 981,244 2019 2019 2019 0 50 100 150 200 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0 200000 400000 600000 800000 1000000

VALUE OF CHEQUE PAYMENTS VALUE OF DIRECT ENTRY PAYMENTS NUMBER OF ATMS ($ Trillions) VALUE OF($ CHEQUE Trillions PAYMENTS) ($ TRILLIONS) VALUE OF DIRECT ENTRY PAYMENTS ($ TRILLIONS) NUMBER OF ATMS

Direct Debits Direct Credits

1.2 5.7 8.4 31,829 2015 2015 2015

1.2 5.9 8.7 32,156 2016 2016 2016

1.1 6.1 9.2 32,095 2017 2017 2017

1.0 5.5 9.1 30,940 2018 2018 2018

0.6 2.7 7.4 28,797 2019 2019 2019 0.0 0.2 0.4 0.6 0.8 1.0 1.2 0 4 8 12 16 0 5000 10000 15000 20000 25000 30000 35000

Source: Reserve Bank of Australia Source: Reserve Bank of Australia Source: Australian Payments Network 11 PROMOTING INNOVATION

Changes in technology continue to accelerate and impact consumer behaviour. Secure payments innovation is critical to delivering the best outcomes for all payments system users.

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SECURE INNOVATION

Access to secure payments Better merchant experiences Australia stands out with the highest New point-of-sale (POS) solutions are enabling penetration of point-of-sale (POS) terminals. smaller merchants to accept card payments At 30 June 2019, cardholders had access to using off-the-shelf devices, such as a 981,244 POS devices – around 1 POS terminal smartphone or tablet, rather than terminals. for every 25 Australians – and 28,797 ATMs. To ensure the security of these solutions, we contributed to the development of PCI’s Prior to use, POS terminals, ATMs and other Software PIN on Commercial Off-the Shelf card-accepting solutions must undergo (COTS) (SPoC) standard and the soon to be AusPayNet’s device approval process to ensure released Contactless on COTS (CPOC) standard. the security of cardholders’ sensitive data. Effective 1 January 2019, acquirers are able The vast majority of new devices are assessed to support SPoC solutions that accept EMV through our standard device approval payments, approved by AusPayNet’s evaluation process, however, in some areas, technology process. is evolving very fast. To support secure innovation, we introduced a certification program for non-standard technologies in Enabling innovation 2018. This program ensures minimum security We assess the likely impact of emerging requirements are met, prior to the availability technologies at an industry-wide level through of finalised international standards. This year, our Emerging Technologies Experts Group we assessed more than 100 terminals and (ETEG). A broad set of members contribute solutions. to the evaluation of technology, with the goal of proactively supporting scalable and sustainable innovation. Current topics under Consumers expect convenience discussion include authentication, privacy in payments, bring-your-own-device and and security and modern artificial intelligence (AI). technology delivers both. AI offers great opportunities to streamline customer experiences and tailor service offerings. Alongside this, it is important to ensure automated decision-making is Fair access for all users appropriately transparent and explainable. Touchscreen technology has the potential to The opportunities and challenges for create challenges for a growing number of payments were highlighted in our submission Australians living with disability. In January to Data61’s Discussion Paper, Artificial 2019, we initiated work to develop best Intelligence, Australia’s Ethics Framework, in practice industry guidelines that balance May 2019, and in our response to Standards security and privacy requirements with an Australia’s Discussion Paper, Developing accessible solution for entering PINs on Standards for Artificial intelligence: Hearing touchscreen devices. We have consulted Australia’s Voice in August 2019. Going widely with individuals with lived experience forward, AusPayNet will participate in of disability as well as peak industry Standards Australia’s work on AI to ensure its advocacy bodies for people with disability to ethical adoption. better understand their views. This involved workshops, direct interviews and an online survey with over 250 stakeholders taking part. The accessibility guidelines will be released in December 2019.

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Payment choice on transport Consumer Data Right We continued to support Transport for NSW In August 2019, we saw the introduction and in the roll-out of open loop contactless passage of the Treasury Laws Amendment payments. This gives customers the option of (Consumer Data Right) 2019 Act, providing using their debit card, credit card, or linked the legal basis for the Consumer Data Right device such as a smartphone or wearable (CDR). The CDR will first be implemented in the to tap on and off public transport in the Opal banking sector, with a start date of February network. Contactless payment cards can now 2020 for Australia’s four largest (ANZ, be used across all modes of public transport CBA, NAB and ) to begin sharing in Sydney, the Blue Mountains, the Central consumer data. Open banking presents new Coast, the Hunter and the Illawarra regions. opportunities for consumer driven innovation. Our CEO, Andy White, has contributed to the In collaboration with transport authorities, we development of open banking as a member further updated the Open Loop Contactless of the Advisory Committee helping the Data Transport Framework initially developed with Standards Body design and develop technical Transport for NSW in 2017, releasing Version standards. 3.5 in July 2019. The scope of the Framework has also been expanded to include , Discover/Diners Club and UnionPay scheme rules. We are now preparing Version 4, which is scheduled for release at the end of 2019, and will include additional topics including Mobility as a Service.

14 EFFECTIVE SELF-REGULATION

Confidence and trust in the payments system is delivered through effective self-regulation. This includes fraud prevention, standards development, managing the payments rails and shaping policy.

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FRAUD PREVENTION

CNP Fraud Mitigation Framework risk transactions. The Framework was implemented on 1 July 2019 and is enforced Consumers and merchants are embracing through AusPayNet’s Issuers and Acquirers online payments. RBA statistics show that in Code Set (rules). 2018 the total value of domestic ecommerce transactions increased by 27%. With Identity fraud and scams e-commerce transactions growing strongly, and chip technology providing protection for As our world becomes increasingly digital, in-person transactions, fraud continues to identity theft and scams are a growing global migrate online. The rate of increase, however, challenge for the community, industry and is slowing. Card-not-present (CNP) increased government. In June 2018, AusPayNet’s Fraud by 2.4% in 2018, compared to 13.9% in 2017, in Banking Forum established a working and still accounts for 85% of all fraud on group to focus on customer education about Australian cards. These trends and industry these types of frauds and protecting victims. fraud prevention methods are further This year, the working group agreed on a explained in AusPayNet’s 2019 Australian consistent response to effectively support Payment Card Fraud Report. victims, based on new guidelines.

Trust online The Framework is designed to With the goal of improving the security and convenience of online transactions for build consumer trust and support individuals and businesses, the Australian Payments Council brought together a continued growth in e-commerce. diverse set of participants to create a trust framework. Representatives from the , retail, telecommunications and Throughout the year, we worked closely with public sector created the TrustID framework, the e-commerce community to finalise the designed to enable interoperability between a CNP Mitigation Framework drafted last year. wide range of competing service providers. The Framework clearly outlines actions and CONSUMER ONLINEresponsibilities across the e-commerce community for reducing CNP fraud and sets SPENDINGfraud thresholds that define acceptable levels 2015 2016 2017of risk for both issuers and merchants. Issuers 2015 2016 2017 up up and merchants operating with fraud201 3rates 2017 27%above the set fraud thresholds will be required 14% to perform Strong Customer Authentication Consumer Online 2017 2018(SCA), subject to exemptions for lower Spending

up BUY 27% up 14% BUY 2017 2018

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STANDARDS DEVELOPMENT

Shaping global standards Supporting the shift AusPayNet is at the frontline of standards to software solutions development as a participant on global Drawing on the expertise of a range of standards bodies, ISO, PCI EMVCo, Fast vendors, issuers and acquirers, and other IDentity Online Alliance (FIDO), World Wide services providers, we reviewed the AusPayNet Web Consortium (W3C) as well as Standards Security Control Module (SCM) specification Australia to ensure the security of card to future-proof card security. This work payments. In January 2019, AusPayNet was leveraged our ISO knowledge, referencing ISO selected as one of 29 board members to 20038 as the relevant standard. The upgraded join the Board of Advisors of the PCI SSC and specification includes encryption algorithms was in attendance at the March and June and security functions that support POS 2019 meetings held in Geneva and Boston solutions running on COTS devices like respectively. Representing our members, this smartphones and tablets (see page 13). year we also participated in global standard We expect to release the revised SCM development meetings held in Berlin, Toronto, specification in early 2020. Los Angeles and Chicago. The standards committees and bodies we participate on are listed below.

We represent industry on domestic and global standards bodies. ISO/TC68 Financial Services ISO/TC68/SC2 Financial Services Security ISO/TC68 Financial Services/Working Group 7 – ISO 20022 ISO/TC68 Financial Services/Technical Group 1 – ISO 20022 ISO/ TC68/SC2/Working Group 11 ISO/TC68/SC2/Working Group 13 ISO/TC307 Blockchain and Distributed Ledger Technologies ISO20022 Registration Management Group Standards Australia Committee IT/5 SWIFT Australian National Member Group SWIFT Australian User Group Payments Card Industry Security Standards Council (PCI SSC) (Affiliate member) PCI SSC Mobile Working Group PCI SSC PIN Assessment Working Group PCI SSC PIN Transaction Security Working Group PCI SSC Software Security Working Group

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MANAGING THE PAYMENTS RAILS

AusPayNet manages frameworks that Payment Cards underpin the billions of payments made by Issuers and Acquirers consumers and businesses each day. We do Community this through management committees of member representatives, sub-committees In preparation for implementation, the IAC and working groups; more than 200 meetings focused on finalising the CNP Fraud Mitigation were held during the year to progress their Framework and integrating the Framework work. Following is a summary of the key into the IAC Code Set (rules). The Framework focus areas. took effect on 1 July 2019. Other priorities this year included reviewing the IAC Code Set Cheques and overseeing development of accessibility guidelines. Australian Paper Clearing System High Value Cheque use is declining at record rates $$$ as customers continue to choose digital High Value Clearing System payment methods. The industry is working Industry is firming up plans for to ensure that those consumers and sectors the migration of SWIFT cross border payments that still use cheques can transition to to ISO 20022, and the RBA’s planned migration digital alternatives. Financial institutions are to ISO 20022 of the RTGS system (RITS), which actively promoting awareness of alternative will be a key focus in future years. During payment options, and AusPayNet has initiated the year, working closely with members and an advocacy program to promote payment the RBA, we reviewed the HVCS contingency method neutrality in legislation, and other 7 arrangements to improve resilience. 201 2017 3 2016 201 2015rules and guidelines. Cash Direct Entry Australian Cash and Distribution Exchange PAY Bulk Electronic PAY Clearing System System Automation of interbank processes to Supporting the RBA’s increase operational efficiency has continued introduction of new bank notes continues this year. It is likely that further significant to be a focus area for the industry, with four enhancements to BECS will now be limited as denominations in circulation ($5, $10, $20 the industry considers the long-term future of and $50) as of October 2019. This project will the direct entry system. Over time, some direct conclude during 2020 with the issuance of the entry traffic is expected to migrate to other new $100 note. The new series of banknotes channels. will ensure that we continue to have among the most secure currencies in the world.

COIN Infrastructure As resilience receives renewed focus, we are reviewing the architecture and services for the industry Community of Interest Network (COIN) to ensure that they remain fit for purpose. This work will continue in the coming year.

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One of our core roles is ensuring that A blueprint for the future We are developing a roadmap for the future the payments rails continue to meet the state of Australia’s payments system. The roadmap will build on the Australian Payments existing and future needs of all. Council’s (APC) work, outlined in Payments in a Global, Digital World, and be informed by the RBA and APC joint consultation on migration of RTGS to ISO 20022. Among other things, we will Modernising our Frameworks consider Australia’s changing payments mix, Adaptability is an important feature of a relevant developments overseas, for example modern payments system. This year, we in the UK and Europe, and the strategic undertook a governance review of our largest roadmaps of payment systems operators. We and newest framework, the IAC Regulations envisage consulting on the roadmap before and Code Set (rules) for payment cards. the end of 2019. Our review highlighted that the existing strengths, including the fact that the Code Set operates under overarching principles, enable flexibility in a rapidly changing landscape. Additionally, the following changes to governance are to be applied: • Move IAC committees to principles-based decision making • Streamline the Code Set amendment process • Employ technology solutions to increase efficiency These initiatives are being progressed through IAC committees and are expected to be effective early 2020.

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POLICY

We have also highlighted the need for A self-regulatory approach is firmly clarity regarding liability and timeframes embedded in the way we work and helps for unauthorised transactions, as well as the requirement to ensure a shared deliver better outcomes for all payments understanding with respect to mistaken internet payments. system users. Stored Value Facilities Through the consultation on Stored Value Over the last 12 months, we have provided Facilities (SVFs), the Council of Financial input to Government on its reform agenda in Regulators (CFR) is seeking to identify financial services. Following the conclusion opportunities to simplify the regulatory of a range of inquiries in 2018, including the framework for SVFs while maintaining Productivity Commission’s report Competition appropriate levels of consumer protection and in the Australian Financial System, the system-wide safety. Pointing to international focus is now on implementing a number examples, we have highlighted the value of of the recommendations. In some cases, exploring a graduated framework that offers this has led to more detailed reviews and temporary relaxation of requirements for consultations. new entrants within a restricted environment, for testing purposes. Such a model would be These ongoing inquiries touch on a number consistent with APRA’s restricted ADI licensing of themes within the payments industry – framework and ASIC’s Regulatory Sandbox. including ensuring access for new entrants, encouraging innovation and ensuring appropriate protections for vulnerable Assisting new entrants customers and the community. In late 2018, we finalised a significant piece of research looking at the views and attitudes Key initiatives of new entrants to the payments system. This involved a market survey and workshops with ePayments Code regulators and fintechs. AusPayNet is working with a wide range of Our findings identified that a clear and members to provide input to ASIC’s review practical guide would help new entrants of the ePayments Code, which outlines and those looking to offer payment services protections for consumers. The voluntary Code better navigate the interdependencies within was most recently substantively reviewed the payments system. This guide is being in 2011, and is being updated to ensure it developed by AusPayNet. continues to be effective and relevant.

We support changes to the Code to bring it in line with developments in technology, operating models and changes in the way customers pay.

20 LEADERSHIP IN COLLABORATION

We bring participants together to unpick what’s at the core of delivering the best outcomes for all users, and to identify areas for collaboration. Building on this, participants tailor highly competitive offerings to meet customer needs.

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PROMOTING COLLABORATION

Working closely with regulators coming year. Members highlighted their alignment with our strategic focus on Close liaison with regulators and government managing the payments mix, cyber security bodies is critical to delivering better & emerging technology, and proposed customer outcomes. We have an ongoing improvements to support faster decision- relationship with the RBA, which includes making. formal liaison arrangements with their Policy department, and also liaise with The Collaboration to combat fraud Treasury, the Digital Transformation Agency (DTA) and the Productivity Commission on The implementation of the CNP Fraud issues of payments policy. Public regulators Mitigation Framework on 1 July 2019 (see we work with include the Australian Prudential page 16) is the culmination of 18 months Regulatory Authority (APRA), the Australian of collaboration across the e-commerce Securities and Investment Commission (ASIC) community. This initiative brought together and the Australian Competition and Consumer a wide range of stakeholders including Commission (ACCC). merchants and merchant advocacy groups, payment gateways, issuers and acquirers, card schemes, payment service providers, Bringing all stakeholders along consumer advocacy groups and regulators. The consultation process involved numerous is critical to delivering payments member sessions and workshops, and options to provide written feedback. More improvements. than 300 comments were received to our formal consultation in September 2018. We continue to work closely with the e-commerce Member Engagement community and with peak retail bodies such as the Australian Retailers Association and NORA. Our member engagement strategy provides ongoing initiatives to strengthen bonds, share Fighting financial crime knowledge and collectively develop a broader understanding of the opportunities and Through AusPayNet’s Fraud in Banking Forum, challenges facing the Australian payments financial institutions, law enforcement and landscape. The diverse and dynamic nature the Australian Financial Crime Exchange of the industry is reflected in our growing collaborate to fight financial related crimes. membership. This year, we were delighted to In October 2018, members welcomed the welcome eight new members: Australia’s new Financial Coalition Against Child Pornography digital bank Xinja Bank, and the Northern Trust Australian Working Group as a subgroup of Company as Participant members; Google the FBF. This group works collaboratively with Payment Australia, Royal Australian Mint and national and international organisations and UnionPay International as Operator members; law enforcement to disrupt the economics Pin Payments and Rambus Global as Affiliate of child sexual abuse. Three meetings were members; and Fuji Xerox Business Force as a held this year and we look forward to further COIN member. supporting the group in the coming year. Member satisfaction survey Payments in a Global Digital World Our annual member survey is an important As secretariat to the Australian Payments tool for gaining feedback and for informing Council, we facilitated a public consultation our work. This year’s overall satisfaction with the goal of identifying key strategic rating was 90.7% (slightly up from 89.4%in issues that will ensure that as the payments 2018), setting a high benchmark for the system evolves it continues to meet key

22 ANNUAL REVIEW 2019 / LEADERSHIP IN COLLABORATION

requirements of resilience, stability, Our Summit adaptability and accessibility. As a result of this consultation, the APC published its Building on the success of the 2017 and 2018 strategic agenda, Payments in a Global Digital summits, this year we are holding our summit World in June 2019. The agenda identifies on 10 December 2019 in Sydney. The Summit’s five key areas that will form the basis of the theme Payments – the Key to the Best APC’s focus: systemic resilience; combatting Customer Outcomes – captures what’s front of financial crime; financial inclusion and mind for industry, regulators and innovators, accessibility; interoperability; and sustainable and what’s at the heart of everything we do. innovation. We are delighted to have the RBA Governor, Philip Lowe, as our keynote speaker and Events and forums other market experts to lead discussions, host roundtables and participate in ‘The Big Our member events provide a collaborative Debate’. The success of our summits is directly forum for us to consider important trends and attributable to the continued support of our their impact. This year, we held sessions on members, regulators, and the wider payments Open Data in September 2018, Blockchain and community. We thank them and invite all with Distributed Ledger Technologies in October an interest in payments to join us for our 2019 2018 and Combatting Financial Fraud in Summit. March 2019. With SIBOS, the world’s premier financial Communicating with stakeholders services event, held in Sydney in October 2018, Bringing all stakeholders along and we took the opportunity to bring members creating support for industry work is critical and international payments experts together to delivering payments improvements. to discuss the impact global digital platforms Our communications and stakeholder are having on the payments landscape. This engagement strategy outlines our approach topic was further explored at our 2018 Summit to building connections with an increasingly held on 26-27 November in cooperation with diverse range of stakeholders. Activities Currency Research, which brought together include fortnightly blogs, e-newsletters, more than 250 participants. In exploring regular publications and market insights “Payments in the Platform Economy”, common covering topics that have local and international themes to emerge included improving the relevance. We have increased our use of social customer experience, open banking, trust, and media, and the number of visitors to our website competition and innovation. continues to grow steadily.

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BOARD OF DIRECTORS

Under the leadership of an independent chair, the Board has 13 members comprising independent directors, the CEO, and non-executive directors appointed or elected by AusPayNet members.

The independent directors have substantial voting rights to ensure public interest and broader community Robert Craig, Chair benefits are effectively represented. BSC (HONS), BCA, MAICD There were two changes to the Board during the year. Andy White was appointed to the roles of CEO Chief Operating Officer, icare and executive director in March 2019, following the Appointed in January 2014 as an resignation of Leila Fourie in February 2019. Long- independent director and AusPayNet Chair. serving director David Jay stepped down from the Board Mr Craig also serves as Chairman and in April 2019 after serving nine years and was replaced member of the Remuneration Committee. by Mark Tibbles. The names of the directors in office as at 30 September 2019 follow.

Paul Franklin, Deputy Chair Andy White, CEO BSC, MCOM, EMBA, FFINSIA, GAICD BA [HONS], MA [OXON), GAICD General Manager Payments, NAB CEO, AusPayNet

Appointed as a non-executive director by Appointed as CEO and an executive director NAB in October 2017 and as Deputy Chair by of AusPayNet in March 2019. the Board in May 2018. Mr White serves as Member of the Mr Franklin serves as Chairman of the Audit, Risk and Finance Committee, APCS Management Committee and the the Remuneration Committee and the Nomination Committee. Australian Payments Council.

Chris Campbell Jennifer Clark BSC (HONS), BCA, MAICD FAICD Head of Payments Policy and Strategy, Deputy Chair of the Australian Westpac Group Maritime Safety Authority Appointed as a non-executive director by Westpac in April 2003. Appointed as an independent director in Mr Campbell serves as Chairman of the June 2014. COIN Management Committee, and member Ms Clark serves as Chair of the Policy of the Audit, Risk and Finance Committee, Experts Group, and member of the Audit, the Remuneration Committee and the Risk and Finance Committee and the Policy Experts Group. Remuneration Committee.

24 ANNUAL REVIEW 2019

Jackie Kallman Kees Kwakernaak BPSYCHSC (HONS) MSC, MAICD Head of Payments Industry, ANZ Managing Director, First Data Network Australia Appointed as a as a non- executive director by ANZ in April 2018. Appointed as a non-executive director by Ms Kallman serves as Chair of the HVCS Electing Members in October 2016. Management Committee, and member of Mr Kwakernaak serves as Chairman of the the Policy Experts Group. ACDES Management Committee, the Next Generation Banknotes Support Steering Committee, and member of the Nomination Committee.

Olivia McArdle Lynda McMillan BCOMM (ACCOUNTING & LAW), MBA, CA, MAICD MBUS, GAICD Head of Deposits and Payment Products, Head of Payments Representation, Retail Macquarie Bank Limited Banking Services, CBA

Appointed as a non-executive director by Appointed as a non-executive director by Electing Members in November 2017. the CBA in April 2018. Ms McArdle serves as Member of the Audit, Ms McMillan serves as Chair of the Fraud in Risk and Finance Committee and the Banking Forum. Remuneration Committee.

Michelle McPhee Kate Mulligan BBUS (HONS), GAICD BA, LLB(HONS), MAICD Head of Banking, RBA Managing Director, King Irving

Appointed as a non-executive director by Appointed as an independent director in the RBA in February 2017. June 2014. Ms McPhee serves as Chair of the Audit, Ms Mulligan serves as Chair of the Issuers Risk and Finance Committee, and member and Acquirers Forum. of the Nomination Committee and the Remuneration Committee.

Mark Tibbles Derek Weatherley Acting Chief Executive Officer, BCOMM, MACC, GAICD Australian Settlements Limited Chief Executive Officer, Indue Limited Appointed as a non-executive director by Members in April 2019. Elected as a non-executive director by Members in April 2018. Mr Weatherley serves as Chairman of the BECS Management Committee.

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GOVERNANCE FRAMEWORK

The AusPayNet Board is responsible for Board Charter, Code of Conduct and Induction setting the company’s strategic direction The Board carries out its functions and exercises its powers in accordance with the and corporate governance. Board charter, which sets out its role and responsibilities. The charter is supplemented by various board policies including a conflicts Chair and CEO management policy, a competition protocol and a Code of Conduct, which all directors The current Chair, Robert Craig, was appointed and management committee members must in January 2014 and is an independent comply with, and which is designed to ensure voting director. The CEO is charged with high standards of ethical and professional implementing Board endorsed strategy conduct and compliance. and managing the day to day affairs of the company. The CEO is a board-appointed, non- The Board reviews the charter and other voting, executive director. policies regularly. An induction program for newly appointed board members provides Board Committees an overview of AusPayNet’s governance and policy framework and operations, as The Board has established a management well as an understanding of their role and committee for each AusPayNet framework responsibilities. including its clearing systems, Issuers and Acquirers Community, and infrastructure Reserve Bank of Australia system (COIN). Acting under delegated authority from the Board, management As a participant in payment systems, the committees are responsible for the efficient RBA has been a member of AusPayNet operation and management of each since its inception in 1992. The RBA has framework. Specialised sub-committees are appointed a director to the AusPayNet Board, also established under certain frameworks in accordance with its rights under the to address technical and operational issues AusPayNet Constitution. Additionally, since requiring subject matter expertise. May 2007, the RBA and AusPayNet have been liaising on payments policy issues under an The Board has also established the following agreed set of procedures which have been set committees to assist in managing the out in a Memorandum of Understanding, which company’s affairs: includes senior staff of the RBA consulting • Audit, Risk and Finance Committee: reviews with AusPayNet on a regular basis on issues the company’s internal financial practices, of common interest. This ensures continued budget and external and internal audit close cooperation between the RBA and results and monitors the effectiveness of the AusPayNet. company’s financial controls, administrative policies and risk management practices. Risk Management • Nomination Committee: supports the AusPayNet has put in place a risk management Board on matters relating to the eligibility, framework which the Board oversees. Key appointment and election of directors. risks and risk appetite are regularly reviewed, and the risk framework is submitted to both • Remuneration Committee: establishes internal and external review. remuneration policies and practices for the company generally and recommends remuneration levels and contractual arrangements for the CEO, independent chair and independent directors. 26 ANNUAL REVIEW 2019

OUR TEAM

Our Executive Committee is responsible for leading the AusPayNet team in delivering on strategic objectives.

ANDY WHITE, CEO

Nancy Bryla Lynette Hickey Victoria Richardson Luke Wilson General Counsel Chief Financial Officer Chief Strategy Officer Chief Operating Officer

Corporate Governance Financial Management, Payments Innovation and Member Services and Forecasting and Reporting Emerging Technology Engagement Framework and Core Systems Governance Strategic Financial Industry Policy and Strategy Compliance, including Planning Standards Legal Advice and Communications and Guidance External Audit, Taxation Marketing Project Management and Compliance Regulatory Compliance Australian Payments Technology and Engagement Risk Management, Council Secretariat and Internal audit

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OUR TEAM CONT.

Engaging our people Balancing priorities A connected, aligned and engaged staff To promote workplace flexibility and support is critical to delivering on our corporate our staff, we reviewed our flexible work strategy. Our people are our most valuable arrangements and parental leave guidelines, resource, and we are continuously working making them more inclusive and accessible towards creating a culture where they can for all employees. This year, we supported thrive. We measure our progress via an annual flexible working arrangements for 82% of engagement survey covering the key areas our staff. We also proudly supported our first of employee satisfaction, commitment and father to take primary carer’s leave. As our advocacy. This year’s survey showed increases employee demographics and needs shift in all key metrics: engagement, alignment we will continue to look for opportunities and leadership. to create an inclusive workplace for all our employees. We also introduced a Fulfilling our potential psychological wellbeing and mindfulness program in March 2019, which, 74% of This year, we implemented a new performance employees have participated in. and development program that aligns individual goals to our corporate strategy. This Our values has provided an enhanced forum for ongoing conversations around performance, career In March 2019, we started work on developing goals and personal development. core values which involved working closely with employees and key stakeholders to better understand their perspective. Our new core values have been introduced internally, and we look forward to embedding them in the coming year.

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MEMBERSHIP

AusPayNet has 132 member organisations including participant members, operator members, COIN members and affiliates.

We thank them all for their support and contributions.

PARTICIPANT MEMBERS First Data Network Australia (Co-Operative Centrale Raiffeisen- S.W.I.F.T. Services Australia Pty Limited Boerenleenbank B.A .) Limited Adyen Australia Pty Limited G&C Mutual Bank Railways Credit Union Limited UnionPay International Co., Ltd. Agricultural Limited Gateway Bank Ltd trading as MOVE Bank Visa AP (Australia) Pty Ltd AMP Bank Limited Limited Limited Arab Limited Limited Reserve Bank of Australia COIN MEMBERS Australia and New Zealand Banking Holiday Coast Credit Union Limited Royal Bank of Canada Group Limited Hong Kong and Shanghai Banking Southern Cross Credit Union Ltd A2B Australia Limited Australia Post Corporation Limited - Australian Standard Chartered Data Resources Australia Australian Military Bank Ltd Branch State Bank of India Limited Australian Settlements Limited HSBC Bank Australia Limited State Street Bank and Trust Fuji Xerox Businessforce Pty Ltd Australian Unity Bank Limited Limited Company Genpact Australia Pty Ltd Auswide Bank Ltd IMB Ltd Sumitomo Mitsui Banking Property Exchange Australia B&E Ltd trading as Bank of Us Indue Ltd Corporation, Sydney Branch Limited (PEXA) Bananacoast Community Credit Industrial and Commercial Bank of Summerland Credit Union Ltd Transaction Network Services Union Ltd China Limited Suncorp-Metway Limited Australia Pty Ltd Bank Australia Limited ING Bank (Australia) Limited Taiwan Business Bank, Sydney Bank of America, National (trading as ING) Branch Also a COIN member Association ING Bank NV (Sydney Branch) Limited Bank of China JPMorgan Chase Bank, National Limited AFFILIATES Bank of China (Australia) Limited Association UBS AG, Australia Branch Bank of Communications Co., Ltd LCH Clearnet Limited United Overseas Bank Limited Advam Pty Ltd Sydney Branch Macquarie Bank Limited Uniting Financial Services Cardtronics Australasia Pty Ltd Bank of Limited Maitland Mutual Limited Unity Bank Limited Diebold Nixdorf Australia Pty Bank of Sydney Ltd Mega International Commercial Victoria Teachers Limited, trading Limited Bendigo and Adelaide Bank Limited Bank Co, Ltd as Bank First Gemalto Limited Members Banking Group Limited Limited Giesecke & Devrient Australasia BNP Paribas trading as RACQ Bank Warwick Credit Union Ltd IBM Australia Limited BNP Paribas Securities Services Members Equity Bank Pty Limited Westpac Banking Corporation Ingenico International (Pacific) Capricornian Ltd Mizuho Bank, Ltd Windcave Pty. Limited Pty Ltd China Construction Bank MUFG Bank, Ltd Woolworths Group Limited NCR Australia Pty Ltd Corporation, Sydney Branch MyState Bank Limited Xinja Bank Limited Citibank N.A. Limited Quest Payment Systems Pty Ltd Citigroup Pty Limited Newcastle Permanent Building OPERATOR MEMBERS Rambus Global Inc CLS Bank International Society Ltd Southern Payment Systems Pty Ltd Coles Group Limited Northern Trust Company, The American Express Australia Limited (trading as Pin Payments) of Australia Oversea-Chinese Banking Austraclear Limited Thales Community First Credit Union Corporation Limited BPAY Group Limited Threatmetrix Pty Ltd Limited Police & Nurses Limited trading as Diners Club Australia Pty Ltd UL Transaction Security Credit Union Australia Limited p&n Bank eftpos Payments Australia Limited Verifone Pty Ltd Limited Police Bank Limited Google Payment Australia Pty Ltd Defence Bank Limited QPCU Limited Mastercard Asia/Pacific (Australia) Delphi Bank (a division of Bendigo Queensland Country Credit Union Pty Ltd Members as at 30 September 2019 and Adelaide Bank Ltd) Limited NPP Australia Limited Deutsche Bank AG Australia Limited PayPal Australia Pty Ltd EFTEX Pty Limited Rabobank, Australia Branch Royal Australian Mint Endeavour Mutual Bank Ltd 29 AUSTRALIAN PAYMENTS NETWORK

GLOSSARY

ACDES Australian Cash Distribution and Exchange System AI Artificial Intelligence APC Australian Payments Council APCS Australian Paper Clearing System APRA Australian Prudential Regulation Authority BECS Bulk Electronic Clearing System Blockchain A distributed ledger CNP Card-not-present COIN Community of Interest Network Digital ID Digital Identity Direct Entry Payments system for direct debits and direct credits EMV Europay, MasterCard, and Visa Fintech Collaboration between financial services companies and technology innovators HVCS High Value Clearing System IAC Issuers and Acquirers Community ISO International Organization for Standardization NPP OPAL NSW public transport ticketing system PCI Payment Card Industry PCI SSC PCI Security Standards Council POS Point-of-sale QR Codes Quick Response Codes RBA Reserve Bank of Australia SWIFT Society for Worldwide Interbank Financial Telecommunications

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