MAKING PAYMENTS THRIVE ANNUAL REVIEW 2017 ANNUAL REVIEW 2017

CONTENTS

OVERVIEW 01 Australian Payments Network Limited CHAIR AND CEO MESSAGE 02 (previously APCA) ABN 12 055 136 519 HIGHLIGHTS 03 SNAPSHOT 04 Level 23, Tower 3 International Towers THE PAYMENTS ENVIRONMENT 06 300 Barangaroo Avenue Sydney NSW 2000 Telephone +61 2 9216 4888 Email [email protected] PAYMENTS INNOVATION 09 www.auspaynet.com.au

EFFECTIVE SELF-REGULATION 12 SHAPING THE FUTURE OF PAYMENTS REGULATION 13 COORDINATING CORE PAYMENTS SYSTEMS 14 FRAUD PREVENTION 15

LEADERSHIP IN COLLABORATION 16 LEADING THE WAY 17 BOARD OF DIRECTORS 20 GOVERNANCE 23 MEMBERSHIP 24 GLOSSARY 25

This Annual Review is designed to provide our members and stakeholders with a summary of what was achieved in financial year 2016-2017. References in this report to a year are to financial year ended 30 June 2017 unless otherwise stated.

AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2017 OVERVIEW

AUSTRALIAN PAYMENTS NETWORK CHAMPIONS THE PAYMENTS SYSTEM

We encourage competition and innovation, and safeguard the security of the payments system to deliver improvements for all Australians. As the home for collaboration, we bring together a diverse set of organisations including financial institutions, major retailers, systems operators, and technology and service providers. In our role as the self-regulatory body for payments, we take an inquisitive, front-footed approach to shaping the emerging payments landscape. Our vibrant network includes some 120 members and participants and we welcome involvement from all organisations with a significant interest in helping payments thrive.

In April 2017, we changed our name from Australian Payments Association Limited to Australian Payments Network Limited. The name change was unanimously supported by our members at a general meeting in April 2017. Our new name reflects our evolution and growth, and was inspired by the importance of the network – both in terms of the payments network, and the network of people and organisations – in helping payments thrive.

AUSTRALIAN PAYMENTS NETWORK 1 ANNUAL REVIEW 2017 OVERVIEW

CHAIR AND CEO MESSAGE

The payments industry is experiencing unprecedented transformation and it’s no surprise that this change is reflected in AusPayNet’s operating environment.

The pace and scale of technology evolution As payments move online, so too does fraud, Cybersecurity is an increasingly is shaping a digital-first mindset and and the industry is working collaboratively in important agenda item for Australia, consumers are increasingly expecting a the fight against online card fraud. and through the Council we are facilitating more integrated, intuitive and frictionless industry collaboration and liaison with We are shaping the future of payments, payment experience. Payments is caught in government to help safeguard Australia and ensuring secure innovation through the wake of a rising wave of regulatory and against cyberattacks. representation and leadership roles on policy reform, leveraging data and digital a range of local and global standards Cheque use is plummeting as the digital identity in a drive to encourage competition committees and working groups. These economy takes hold, and industry is working and responsible innovation. We are proud include working with PCI on innovations at proactively to manage Australia’s increasingly that AusPayNet is at the forefront of much point-of-sale, the ISO group on emerging digital payments mix. of this change. technology, and Standards Australia’s Looking ahead, we have identified three This year, we rebranded and moved foundational work on blockchain. strategic themes to enable us to deliver on premises. Our new name and identity In addition to this, a dedicated delivery AusPayNet’s constitutional mandate: better reflect what we’re involved in today team supports the Australian Payments and what we will continue to do. AusPayNet • Payments innovation Council. We are coordinating a number of has become the home for collaboration strategic initiatives to ensure the payments • Efective self-regulation and cross-industry innovation. It has an system continues to meet the needs of important role in enabling the network • Leadership in collaboration all Australians. efect that is so crucial to payments by We invite you to read more about what bringing together members and a growing The Council’s work covers four key areas. we are doing in these areas in the detail number of new stakeholders. As champion Digital identity plays an important role in of this report. of the payments system, we enable the future of payments innovation – it is the We would like to acknowledge our staf for industry collaboration – in defending and gateway to a secure and seamless customer their commitment and hard work in what promoting the payments system – to help experience. Following the development of has been an enormous year of change and payments thrive. principles for digital identity and the R3 delivery. We are deeply grateful to our Board Over the course of the year, AusPayNet has Blockchain pilot last year, we have been and our Members for their contribution delivered on a wide transformation agenda. supporting the Council’s work in exploring a and support, and recognise our close Afer delivering the initial phases of the potential industry approach to digital identity. engagement with the Reserve . (NPP) project, we Data sharing remains a critical issue and helped equip NPP Australia as a separate we are guiding industry work in developing legal entity able to deliver on its mandate a secure and appropriate approach to data later this year. Bringing industry together, sharing to address government and regulatory we developed the framework for NSW requirements. In supporting the Council’s work, Transport’s contactless payments trial and we helped deliver data sharing principles and Leila Fourie, CEO are now actively working with other states ran a successful hackathon in August 2017. Robert Craig, Chair to create a national framework.

AUSTRALIAN PAYMENTS NETWORK 2 ANNUAL REVIEW 2017 OVERVIEW

HIGHLIGHTS

The payments system continued to evolve with key milestones this year.

Our new name, logo and premises are an important part of wider repositioning strategy to better meet the need of the changing payments landscape. The rebrand builds on our purpose and reinforces our role in driving collaboration and cross-industry innovation.

New guidelines for issuers The Reserve Bank of Australia is and acquirers outline best issuing new bank notes. Following practice for online card release of the new $5 banknote The NSW Government launched its fraud detection, customer in September 2016, we continued trial using cards authentication, and to work with financial institutions on public transport. We developed data security. to prepare for the $10 banknote’s a framework to support the use of release in September 2017. debit and credit cards and connected our network of organisations with Transport for NSW.

We lodged submissions to help shape the future of payments regulation on Data Availability and Use, Open Banking, Dual Network Cards and Mobile Wallet Technology, Competition in the Australian Financial System and the Black Economy.

Our Issuers and Acquirers The Australian Payments Community is using new Council held the first research to help better cross-industry hackathon. target preventative We coordinated the event measures and generate bringing together 120 greater merchant participants from financial awareness about institutions and the fintech card-not-present fraud. community to improve the lives of Australians with transactional data.

AUSTRALIAN PAYMENTS NETWORK 3 ANNUAL REVIEW 2017 OVERVIEW

This has been another landmark year for Australia’s digital SNAPSHOT economy. For the first time, cards have overtaken cash as the top payment method, more consumers are shopping online, and support for Fintech organisations continues to grow.

AUSTRALIA IS ONE OF THE MOST DIGITALLYAUSTRALIAAUSTRALIAAUSTRALIAAUSTRALIAAUSTRALIA IS ONEACTIVE IS ISIS OF ONE ONE ONETHE IS NATIONS OFMOSTONE OFOF THE THEDIGITALLYOFTHE MOSTTHE IN MOSTMOST THEMOST ACTIVE DIGITALLY DIGITALLY DIGITALLYWORLD DIGITALLYNATIONS ACTIVE IN ACTIVETHEACTIVE ACTIVE WORLDNATIONS NATIONSNATIONSNATIONS IN THE IN ININ WORLDTHE THETHE WORLD WORLDWORLD

UP 12.4%AUSTRALIA IS ONE OF THE MOST DIGITALLY ACTIVE NATIONS IN THE WORLD 2 Use SpendUse Spend Use Spend 5.8% Use Spend 3 Use Spend Use Spend Australians are using their Two-thirds of all card cards more than ever before. payments at point-of-sale are contactlessUse Spend. Source Reserve Bank of Australia 2016 UP ConsumerPayments Survey – www.rba.gov.au

13% Debits CreditsDebits Credits UP UP Debits Credits Debits Credits Debits Credits 6.1% Debits Credits 13.1% The number of direct debit and direct Growth of online spending Debits Credits credit payments continue to grow strongly. is estimated at 13.1%.

Source Reserve Bank of Australia Monthly Statistics – www.rba.gov.au Source NAB Online Retail Sales Index AUSTRALIAAUSTRALIA IS ONE IS OFONE THE OF MOSTTHE MOST DIGITALLY DIGITALLY ACTIVE ACTIVE NATIONS NATIONS IN THE IN WORLDTHE WORLD AUSTRALIA IS ONE OF THE MOST DIGITALLYCARDSAUSTRALIAAUSTRALIA HAVE OVERTAKEN ACTIVE ISIS ONEONE NATIONSCASH OFOF AS THETHE THE IN MOSTMOST THE FREQUENTLY DIGITALLY DIGITALLYWORLD USED ACTIVEACTIVE PAYMENT NATIONSNATIONS METHOD ININ THETHE WORLDWORLD AUSTRALIA IS ONE OF THE MOST DIGITALLY ACTIVE NATIONS IN THE WORLD

9PPT 10 PPT

2013 2016 2013 2016 43% 52% 47% 37% Cards represent 52% of all payments, Cash accounts for 37% of all consumer payments, up from 43% in 2013. down from 47% in 2013. Source 2016 Consumer Payments Survey – www.rba.gov.au

AUSTRALIAN PAYMENTS NETWORK 4 ANNUAL REVIEW 2017 OVERVIEW

DEBIT CARD USE IS ON THE RISE

Australians under 30 make around 4 : payments for every 411 payment.

of Australians under the age of 30 don’t have 70% a credit card. Source 2016 Consumer Payments Survey – www.rba.gov.au

INVESTMENT IN FINTECH THE DECLINE IN CHEQUE AND CASH USE IS ACCELERATING CONTINUES TO GROW

The Fintech industry peak body – Fintech Australia has over Cheque use plummeted a record 21%, 100 members.

following a 17.2% drop last year. Fintech Australia

2015 2016 2017

209.3 Million Source Fintech Australia 2016 2017 Australia’s overall fintech 99.9 Million investment hit a record high of $656 million.

7.5 % 2013 2017 Cheque numbers dropped to The number of ATM under 100 million for the first time withdrawals dropped 7.5%, – more than halving since 2013. following a 6.6% drop in 2016. Source Reserve Bank of Australia Monthly Statistics – www.rba.gov.au Source KPMG International’s The Pulse of Fintech

AUSTRALIAN PAYMENTS NETWORK 5 ANNUAL REVIEW 2017 OVERVIEW

THE AUSTRALIAN PAYMENTS ENVIRONMENT

The payments mix is evolving at a rapid pace. As businesses and consumers make more card and electronic payments than ever before, the decline in cheque and cash use is accelerating.

Cards NUMBER OF CARD PAYMENTS BILLIONS VALUE OF CARD PAYMENTS $BILLIONS

Following almost a decade of double Debit Cards Credit Cards Debit Cards Credit Cards digit growth, this year cards overtook cash as the most frequently used 8 600 payment method in Australia. Debit card transactions grew by 14.1% to 5.2 billion for 6 the first time. More than two-thirds of all 400 card payments are now made with debit cards, a reflection of their growing use for 4 small value purchases. Spending on debit cards increased to $260.4 billion, up 9% 200 2 on the previous year. 1 The number of credit card transactions 0 0 grew by 9% to 2.6 billion, following a 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 9.9% increase in 2015/16. The value of credit card transactions, which are UP UP typically for larger amounts than debit card transactions, grew by 3.8% to 12.4% $32.6B $319.7 billion. Source Reserve Bank of Australia Monthly Statistics – www.rba.gov.au

85% of Australians hold a contactless ‘tap and go’ card. In 2016, contactless cards were used for 40% of in-person payments under $20.

Source Reserve Bank of Australia 2016 Consumer Payments Survey – www.rba.gov.au

1 Excludes POS cash-out numbers and values.

AUSTRALIAN PAYMENTS NETWORK 6 ANNUAL REVIEW 2017 OVERVIEW

Direct entry NUMBER OF VALUE OF DIRECT ENTRY PAYMENTS BILLIONS DIRECT ENTRY PAYMENTS $TRILLIONS The direct entry system is commonly used by businesses and consumers to Debits Credits Debits Credits make recurring, automated payments to and from everyday transaction accounts. 4 16 This system carries the lion’s share of retail payments by value in Australia. 3 12 Direct debit and direct credit transactions both continued to grow strongly this year. 2 8 Direct debits grew by 13% to 1.2 billion transactions and direct credits by 6% to 2.6 billion. By value, direct credits 1 4 increased by 5.5% to $9.2 trillion and direct debits by 3.4% to $6.1 trillion. 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 UP 8.1% UP $677.3B

Source Reserve Bank of Australia Monthly Statistics – www.rba.gov.au

Cheques NUMBER OF CHEQUE PAYMENTS MILLIONS VALUE OF CHEQUE PAYMENTS $TRILLIONS As digital payments continue their 250 1.6 strong growth, cheques are in terminal decline. This year, cheque use plummeted 200 by a record 21% with numbers dropping 1.2 under 100 million for the first time, down 150 to 99.9 million. Since 2012/13, cheque use 0.8 in Australia has dropped by 52.3%. 100 While cheque values have remained 0.4 steady in recent years, in 2016/17 50 the total value of cheques dropped by 4.2%, down to $1.1 trillion. 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

DOWN 21% DOWN $50.6B Source Reserve Bank of Australia Monthly Statistics – www.rba.gov.au

AUSTRALIAN PAYMENTS NETWORK 7 ANNUAL REVIEW 2017 OVERVIEW

Cash NUMBER OF CASH WITHDRAWALS BILLIONS VALUE OF CASH WITHDRAWALS $BILLIONS

Australia is fast becoming a POS ATM POS ATM less-cash society. ATM withdrawals have been steadily declining for the 1.2 200 last five years, with a record drop of 7.5% this year bringing the number down to 0.9 150 625.4 million. The value of withdrawals dropped 4% to $133.1 billion. 0.6 While the numbers are smaller, this trend 100 is mirrored at point-of-sale. The number of cash-outs in 2016/17 dropped 7.6% 0.3 50 to 236.9 million and totalled $16.9 billion, a 4.9% drop on the previous year. 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

DOWN7. 5 % DOWN $6.5B

Source Reserve Bank of Australia Monthly Statistics – www.rba.gov.au

18–29 30–39 40–49 50–64 65+ 100

80 % OF CASH PAYMENTS 60 51% 42% 40 36% 31% 28% Australians under 40 years of age use cash for less 20 than one-third of payments. 0

Source Reserve Bank of Australia 2016 Consumer Payments Survey – www.rba.gov.au

AUSTRALIAN PAYMENTS NETWORK 8 PAYMENTS INNOVATION Innovation is vital to payments system modernisation. We lead industry-wide initiatives to bring about more convenient ways of paying, while maintaining a robust and secure payments system. ANNUAL REVIEW 2017 PAYMENTS INNOVATION

As the home of collaboration and cross-industry innovation, AusPayNet brings together a wide range of stakeholders on a range of topics requiring industry coordination.

Contactless payments Next generation banknotes Supporting secure innovation for transport Notwithstanding the steady growth of All ATMs, POS and other card-accepting Throughout the year, we worked closely contactless payments, cash remains an devices in Australia are security evaluated with industry to support Australia’s first important payment . To ensure the to ensure they protect sensitive customer Contactless Transport Payments trial integrity of banknotes into the future, the data. Most innovative devices and systems launched by Transport for NSW on 6 July 2017. Reserve Bank of Australia (RBA) is rolling-out fit within local and international security next generation polymer banknotes with standards requirements, but some use a In partnership with Transport for NSW, cutting edge anti-counterfeiting features. diferent paradigm for protecting customer we developed the new framework for information. AusPayNet is working with PCI We are supporting the RBA initiative by the trial, and brought issuers, acquirers, to ensure the standards remain relevant. card schemes and transport authorities coordinating industry eforts to ensure a together to drive the initiative forward. smooth transition as each denomination This year, we introduced a process for is released into circulation. This involves considering non-standard technologies Commuters on Sydney’s Manly ferry can now updating all cash equipment and dispensing to encourage innovation, and to address use their own debit or credit card (or smart machines to ensure they are capable of emerging technologies while limiting the phone or wearable), instead of an , handling new banknotes as well as the old potential for fraud. We also expanded our to tap on and of. We are now engaging with banknotes while they remain in circulation. device evaluation and approvals process to transport authorities across Australia to include devices without PIN entry capability. The new $5 banknote was successfully develop a national ‘open-loop’ framework Some 50 card-accepting devices and introduced in September 2016, and the for transit. systems were approved during the year. $10 banknote in September 2017. With the With many transport authorities worldwide new $50 banknote due for release in 2018, looking to replace their proprietary ticketing we are also monitoring upgrades and cards, our work is gaining attention overseas. reconfigurations to ATMs.

AUSTRALIAN PAYMENTS NETWORK 10 ANNUAL REVIEW 2017 PAYMENTS INNOVATION

Australia’s new WE REPRESENT INDUSTRY ON DOMESTIC AND GLOBAL STANDARDS BODIES payments platform ISO Fintech Technical Advisory Group The New Payments Platform (NPP) is new ISO/TC68 national infrastructure designed to meet the evolving needs of the digital economy. ISO/TC68 Financial Services/Working Group 7 – ISO 20022 It is a world-class platform for delivering ISO/TC68 Financial Services/Technical Group 1 – ISO 20022 fast, versatile, data-rich low-value payments. ISO/TC68/SC2 Financial Services Security AusPayNet was instrumental in the NPP’s early development in terms of industry ISO/ TC68/SC2/Working Group 11 collaboration, governance and structure. ISO/TC68/SC2/Working Group 13 Since establishing NPP Australia Limited in December 2014, we have continued ISO/TC 307 Blockchain and Distributed Ledger Technologies to provide administrative services to ISO20022 Payments Standards Evaluation Group the new company. This year, following ISO20022 Registration Management Group the appointment of Adrian Lovney as the first CEO, NPP Australia has set-up its own Standards Australia Committee IT/5 management team. We retain an active Standards Australia Committee IT/5/3 interest in this major industry initiative and are assisting with member education. Standards Australia Working Group IT/5/4 Developments this year included ‘PayID’ Standards Australia Working Group IT/5/8 for the NPP addressing service and ‘Osko’ SWIFT Australian National Member Group for BPAY’s overlay service. Once customers SWIFT Australian User Group register for PayID, they will be able to pay each other using a mobile phone number Payments Card Industry Security Standards Council (PCI SSC) (Afliate member) or email address, rather than bank account details.

Shaping industry standards Fostering emerging AusPayNet is at the front line in the technologies development of Australian standards as Additionally, AusPayNet is a member of two well as global ISO and PCI standards for new committees established by ISO this year. card payments systems. An important focus for industry is the harmonisation In March 2017, we joined the FinTech of rules between the difering Technical Advisory Group set-up to drive security standards. data and technology standards for FinTech innovation. The Advisory Group This year, we contributed to major is establishing a proactive dialogue with revisions to standards for secure Fintech communities, public sector bodies cryptographic devices (ISO 13491), and and ISO, to address common issues for cryptographic keys used to initialise collectively. We also sit on the Blockchain and POS terminals (AS 2805.6.5.3.). PCI PTS Distributed Ledger Technologies committee, PIN Security Requirements V3.0 was representing Australia on the Identity and released for review on 15 August 2017. Governance study groups. An expert group Significantly, the new requirements drawn from our network of participants is include clarifications on the use of ensuring an industry-wide perspective is cryptographic keys which reflect brought to both ISO committees. current Australian standards.

AUSTRALIAN PAYMENTS NETWORK 11 EFFECTIVE SELF-REGULATION We work with a wide range of participants to maintain a self-regulatory regime for Australian payments. Our advocacy work draws on a shared industry understanding of the needs of a well-functioning payments system. ANNUAL REVIEW 2017 EFFECTIVE SELF-REGULATION

SHAPING THE FUTURE OF PAYMENTS REGULATION

As the payments environment continues to evolve, the regulatory environment is also evolving. We take a proactive role in influencing the public policy debate, working closely with policymakers and regulators.

This year, we participated in Government Competition in the Australian Black Economy inquiries concerning data availability, open Financial System In late 2016, the banking, competition in the financial system, The PC launched a further inquiry in established the Black Economy Taskforce and the black economy. July 2017, with a focus on establishing to look at ways to combat the black whether there are barriers to competition economy in Australia. As a part of this work, Data Availability and Use through innovation, and whether innovation the Taskforce is investigating measures Following our submission to the Productivity benefits are directed towards consumers. to reduce the role of cash in the economy, Commission’s (PC) initial consultation Our submission highlighted that competition and further encourage the uptake of digital outlined in our last year’s Annual Review, in payments is generally driven around payments. We provided technical assistance we made a submission to the Draf Report three core trends: consumer pull, technology to the Taskforce, and lodged a submission to in December 2016. push, and evolving regulation. Australia the Additional Policy Ideas paper released in Our submission welcomed the PC’s draf has a competitive payments environment August 2017. recommendation “that the private sector evidenced by the numerous forms of payment ATM Code is best placed to determine sector-specific options available, and the strong shif towards We initiated a review of the ATM Access standards for its data sharing”, and contactless and mobile payments. Code to ensure that it remains relevant to highlighted that AusPayNet would provide Mobile Wallet Technology industry needs. This involved consulting with support and guidance to achieve this In early 2017, the RBA issued a discussion stakeholders, and liaising closely with the RBA. outcome for the payments industry. The PC’s paper titled Dual Network Cards and Mobile As part of this process, participants shared Final Report was provided to Government in Wallet Technology. This followed some their perspectives on future directions and March 2017, and released in May 2017. stakeholder concerns that the difculty innovation trends within the ATM industry. Review into Open in enabling both networks on a debit card This work is ongoing with outcomes In May 2017, the Government announced onto a mobile device may result in less anticipated in 2018. a decision to introduce an opening competition and cardholder choice. In banking regime, and commissioned an collaboration with industry, we provided independent review to explore appropriate insights into approaches that other implementation and regulatory models and international jurisdictions had taken to timelines. In our September 2017 submission address these issues. The RBA chose not to the Issues Paper, we pointed to successful to introduce regulation in this policy area self-regulation in payments as a potential but sought appropriate undertakings from model for certain aspects of open banking. relevant stakeholders. A report is due to the Government by the end of 2017, with a response expected early in 2018.

AUSTRALIAN PAYMENTS NETWORK 13 ANNUAL REVIEW 2017 EFFECTIVE SELF-REGULATION

COORDINATING CORE PAYMENT SYSTEMS

For over 25 years, AusPayNet has ensured efcient, mature and highly reliable payment systems to support Australia’s economic growth.

Through committees of member representatives, we manage core systems for cards, cheques, direct entry, high-value corporate payments and bulk cash. We also over see the Community of Interest Network (COIN) infrastructure system, which provides connectivity for low-value payments trafc. These systems provide the rules and decision-making structures that ensure the smooth transfer of funds between accounts held at diferent financial institutions. The rules for each system are a combination of regulations and procedures and minimum standards for processing and technology. A number of this year’s developments are summarised below.

Our Executive Committee

BOARD OF DIRECTORS

APCS BECS HVCS IAF ACDES COIN Management Management Management Issuers and Management Management Committee Committee Committee Acquirers Forum Committee Committee Cheques Direct Entry High Value Cards Cash Infrastructure

Digital cheque clearing Account switching SWIFT has introduced When the IAC was formed The Reserve Bank of The COIN provides was introduced in is supported by an new security controls in 2015, a key feature Australia is progressively network services and 2015 to speed up the electronic mailbox to its global standards, was that certain rules rolling-out next connectivity for cards, cheque processing through which financial against which SWIFT would be enforceable, generation polymer direct debit and direct cycle. To further institutions exchange members will need with fines payable for banknotes. Ensuring credit payments, improve efciencies, documents. The SLAs to self-attest their non-compliance. The readiness for each new cheques, and BPAY bill the retention period for for these information compliance from 2018. Sanctions Tribunal has denomination as it is payments. We welcomed physical cheques has exchanges have been We are working to ensure been established for released into circulation three new members: been reduced from 8 reduced from 5 days HVCS is in alignment with this purpose. It will make remains a key focus Adyen, Genpact and days to 5 days. to 3 days. the new controls, and to independent decisions for the Australian Payments Express. establish a baseline for and give members Cash Distribution and industry compliance. a fair hearing. Exchange System .

AUSTRALIAN PAYMENTS NETWORK 14 ANNUAL REVIEW 2017 EFFECTIVE SELF-REGULATION

FRAUD PREVENTION

Combatting card fraud is a key focus for financial institutions and card schemes. We continue to coordinate cross-industry prevention measures through our Issuers and Acquirers Community.

Online card fraud New guidelines Chip technology at ATMs Following consultation with regulators and As Australians embrace the convenience We have been tracking the industry’s industry, we released new guidelines for of contactless cards and online shopping, progressive rolling-out of chip technology issuers and acquirers outlining best practice fraud is also increasing. With chip technology (EMV) at ATMs. By the end of 2016, the vast for fraud detection, customer authentication, providing strong protection for in-person majority were EMV compliant. With the and data security. The voluntary guidelines fraud, in line with global trends, card fraud introduction of a liability shif in early 2017, are intended to complement existing systems is moving online. In 2016, cards transactions the ATM owner, rather than card issuer, is and practices to help further secure the totalled $714.5 billion, of which 0.074% was now responsible for any fraud losses where online environment. fraudulent, with 78% of this occurring online. an ATM is not EMV compliant. The liability shif Merchant education regime is enforced by AusPayNet rules. New research Alongside this, we commenced building This year, we commissioned significant an education program to generate greater research to help better target preventative awareness of card-not-present (CNP) fraud measures. The research covered the and prevention measures. The program impact on consumers, learnings from other encourages merchants to work with countries, and how the online payments their existing providers – , landscape and fraud are changing. payments gateway provider, or website developer – to implement the best solutions for their business. 0.07% $533,793,542 AUSTRALIAN CARDS FRAUD IN 2016

$714,493,362,892 AUSTRALIAN CARDS TOTAL IN 2016

AUSTRALIAN PAYMENTS NETWORK 15 LEADERSHIP IN COLLABORATION Industry collaboration is pivotal for ensuring the future evolution of the payments system. As the payments landscape becomes more diverse, the range of organisations we bring together continues to expand. ANNUAL REVIEW 2017 LEADERSHIP IN COLLABORATION

LEADING THE WAY

Efective collaboration is essential to achieving payments system improvements.

Bringing the network together Stakeholder engagement Our events As part of a program to assist understanding This year, AusPayNet participated in more Our regular relationship meetings with of emerging issues, we held a series of events. than 70 industry conferences and events, members and stakeholders provide an both locally and overseas. We presented invaluable opportunity to share information Open banking is a theme that resonates on a range of current topics including on and encourage involvement in our activities. globally and locally and we were delighted the changing payments landscape, digital We were delighted to welcome four new that David Beardmore from the Open Data identity, payments fraud and emerging organisations to our membership: Adyen Institute (ODI) was able to join a panel technologies. Our international speaking (Issuers and Acquirers Community/COIN), discussion with representatives from our engagements included major events and Gemalto (Afliate), Genpact (COIN), and ICPACE community (see page 18) to cover forums in Canada, , , Payments Express (COIN). some of the main drivers and insights from the Netherlands and Israel. overseas. The ODI was a key contributor to Member survey the UK’s Open Banking Standards and David Following the success of our half-day The member satisfaction survey we provided valuable insights into the UK’s conference last year, we have been exploring conducted in March 2017 showed positive experience. Moreover, it was interesting to opportunities to build a dedicated annual results, with 84% of members satisfied contrast the diferent starting points of the industry event. To this end, we are partnering with our services. The key satisfaction various jurisdictions and to distil lessons for with Transactives, an independent entity drivers were our work in driving industry this market. well-known for its selective and premier collaboration and managing payments global conferences including the European system rules and regulations. Members’ In July 2017, we hosted ‘An insider’s view Payment Summit. The inaugural Australian priorities include the NPP, mobile payments, of digital identity’ event bringing industry Payment Summit will be held at the Hyatt payments innovation, and fraud prevention. together with international speakers from Regency in Sydney on 13 December 2017, The survey results are being used to assist Canada and the United Kingdom. Attendees and we are delighted to have Dr Philip Lowe, the strategic planning process. heard first-hand how the Canadian banks Governor of the RBA as our keynote speaker. stimulated the identity market. With the NPP a key priority for financial institutions, in August 2017 we hosted an update session with NPP Australia CEO, Adrian Lovney and BPAY CEO John Banfield.

The Payments Council hackathon at Stone and Chalk in Sydney, 11-13 August 2017.

AUSTRALIAN PAYMENTS NETWORK 17 ANNUAL REVIEW 2017 LEADERSHIP IN COLLABORATION

AusPayNet’s communications and engagements activities help support our thought leadership, policy and advocacy roles.

Representatives from our ICPACE community discuss Open Banking.

International liaison In August 2017, a visit to Silicon Valley Improving information exchanges resulted in meetings with PayPal, Facebook, Financial institutions also share payments In February 2017, we hosted the annual Stripe and WePay. It also provided insights on information with law enforcement agencies International Council of Payment Association Fintech, and on blockchain through meetings to assist their criminal investigations and in Chief Executives (ICPACE). This year’s with Chain and Ripple. prosecutions. In December 2016, we kicked- meeting included representatives from of a project to establish standardised Canada, New Zealand, South Africa, United Working with law enforcement formats for these information exchanges Kingdom and United States, and for the first Fraud prevention requires close involvement using electronic means. The first stage time, the Netherlands. AusPayNet played a between financial institutions and law involving the four major banks and NSW foundational role in establishing ICPACE in enforcement. In 2014, we established the police made significant improvements to 2004. We are now looking to setup a similar Fraud in Banking Forum to promote dialogue information turnaround times. We are now forum for sharing information among between the two communities and share working with law enforcement in other Asia-Pacific payments organisations. strategic information on current and states and further financial institutions AusPayNet also visits other countries to emerging banking fraud issues. This year, across Australia. stay abreast of trends and innovations. the Forum formed new relationships with Our visit to China in December 2016 included the Australian Cybercrime Online Reporting meetings with the People’s , Network (ACORN), the Australian Federal Baidu, WeCash, Alipay, Ping++, China PNR and Police Criminal Assets Confiscation Taskforce, WeChat, and provided invaluable insights the Fraud and Anti-corruption Centre and the into China’s Fintech community. Serious Financial Crime Task Force.

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Keeping the community Supporting the Australian informed Payments Council Enabling the future Having established principles for data Payments touch everyone. We have a The Australian Payments Council is the sharing last year, we supported the role to play in sharing information, which strategic coordination body for the Australian Council in an industry-wide hackathon. improves understanding of how payments payments system. It was established by the The hackathon drew participation from support the economy. payments community with the support of across Australia and led to the creation the RBA in 2014 to ensure that as the future Payments developments and insights of applications that clearly illustrated the unfolds, the payments system continues to AusPayNet publishes a quarterly newsletter value of transactional data. Participants meet the needs of the economy. – Payments Monitor – to keep stakeholders came up with a range of ideas for new apps, and interested parties informed. This is AusPayNet is the administrator of the Council from personal finance management tools, complemented by our “Views and News” blog and provides a range of services including to crowd sourcing funds in the wake of a which provides insights on topics that have secretariat support, as well as policy and natural disaster. international as well as local relevance. technical subject matter expertise. Improving public understanding Over the course of the year, we have Positioned for the future Our Milestones reports track Australia’s supported the Council on the delivery of transition to digital payments and the shared industry vision articulated in The rebrand of our organisation, the is published with an accompanying the Australian Payments Plan. The work of first in 25 years, is an important part of infographic. This year’s report shows the Council is based on three key areas, repositioning to better meet future needs. that the vast majority of Australians are identified as being critical to the continued Our new name reflects our evolution, and moving away from cash and cheques. success of the payments system. These are: the importance of the network efect in This is because of the widespread use of security and trust, managing the payments payments. We unveiled our new logo and new technology combined with a strong mix, and enabling the future. tagline shortly afer moving to new premises preference for faster, more convenient in Barangaroo. Our new home ofers space Security and Trust payment options. for collaboration, and the new way of Highlights from this year include extensive working is proving a source of inspiration AusPayNet collects payments fraud data exploratory work on digital identity and for the team and our members. We have from financial institutions to assist the helping the payments community to identify been progressively rolling-out our new industry in monitoring fraud trends. The common cyber needs. Both these activities corporate identity across the business and aggregated data is published twice-yearly are helping to lay the foundation for a secure digital channels, including a new website, to help inform consumers and businesses and trusted payments system. LinkedIn and Twitter. The rebrand is building about payments fraud. Additionally, we Managing the payments mix awareness for our role in helping payments publish a comprehensive report annually Building on research completed last year, thrive, and we are excited about the new on fraud trends and steps businesses and the Council continued its engagement opportunities ahead. consumers can take to help protect against with a wide range of users. The Council’s card fraud. work in this area will ensure that as digital payments dominate, all consumers and businesses have access to appropriate payment methods.

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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 Board’s mandate is to act in the best interest of the overall payments system.

There were a number of changes to the Board during the year, and up to September 2017. Simon Babbage and Kees Kwakernaak were elected to replace Paul Apolony and David Carter in October 2016. Lindsay Boulton resigned from the Board in February 2017 and was replaced by Michelle McPhee. The names of the directors in ofce as at 30 September 2017 follows:

Robert Craig, Chair Stuart Woodward, Deputy Chair Simon Babbage BSc (Hons), BCA, MAICD BA (Hons), F Fin, GAICD, B Comm, M Comm, CPA, GMP, MAICD Chief Operating Ofcer, General Manager, Payments Representation, Country Head Global Liquidity and Cash and Care NSW Cash-Flow and Transaction Services, Management, HSBC Limited Institutional Banking and Markets, of Australia

Mr Craig was appointed in January 2014 Mr Woodward was appointed as a non- Mr Babbage was elected by Electing Members as an independent director and Chairman. executive director by the CBA in February as a non-executive director in October 2016. He serves as: Chairman and member of the 2005. He serves as: Chairman of the Fraud He is a member of the Australian Payments Remuneration Committee. in Banking Forum and Chairman of the Council and Chairman of the High Value Nomination Committee. Clearing System Management Committee.

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Chris Campbell Jennifer Clark Anne Collard B Ec, M Bus (Finance), MAICD FAICD B Ec (Hons), MAICD Head of Payments Policy and Strategy, Deputy Chair of the Australian Maritime Head of Payments Industry & Capabilities, Group Safety Authority; Chair of Government audit Wholesale Digital & Transformation, Australia and risk committees and New Zealand Banking Group Limited

Mr Campbell was appointed as a non- Ms Clark was appointed as an independent Ms Collard was appointed as a executive director by Westpac in April director in June 2014. She serves as: non-executive director by ANZ in 2003. He serves as: Chairman of the COIN Chairman of the Policy Experts Group, September 2016. She serves as: Management Committee, member of the member of the Audit, Risk and Finance Member of the Nomination Committee. Audit, Risk and Finance Committee, and the Committee, and the Remuneration Remuneration Committee. Committee.

Rosanna Fornarino Leila Fourie David Jay MBA, MAICD PhD Economic and Financial Sciences, MAICD B Ec, MBA, FCPA, F Fin, FAMI, MIIA, GAICD Executive General Manager Fulfilment Chief Executive Ofcer, Chief Executive Ofcer, Technology and Operations, Australian Payments Network Australian Settlements Limited Limited

Ms Fornarino was appointed by NAB as a Dr Fourie was appointed as chief executive Mr Jay was appointed as a non-executive non-executive director in April 2016. She ofcer of the Company on 12 September director by Building Societies Members in serves as: Chairman of the Australian Paper 2016. She serves as: Member of the August 2010. He serves as: Chairman of the Clearing System Management Committee. Audit, Risk and Finance Committee, the Audit, Risk & Finance Committee, member Remuneration Committee, and the of the Remuneration Committee and the Australian Payments Council. Nomination Committee.

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Craig Kennedy Kees Kwakernaak Michelle McPhee MBA, GAICD MSc, MAICD B BUS (Hons), GAICD Managing Director, Managing Director, Head of Banking, Limited First Data Australia & New Zealand Reserve Bank of Australia

Mr Kennedy was appointed as a non- Mr Kwakernaak was elected by Electing Ms McPhee was appointed as a non- executive director by Credit Unions Members Members as a non-executive director in executive director by the RBA in February in August 2016. He serves as: Chairman October 2016. He serves as: Chairman of 2017. She serves as: Member of the Audit, of the Bulk Electronic Clearing System the Australian Cash Distribution and Risk and Finance Committee, the Management Committee. Exchange System Management Committee Nomination Committee, and the and the Next Generation Banknotes Support Remuneration Committee. Steering Committee.

Kate Mulligan BA, LLB (Hons), MAICD Managing Director, King Irving

Ms Mulligan was appointed as an independent director in June 2014. She serves as: Chairman of the Issuers and Acquirers Forum.

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GOVERNANCE

The AusPayNet Board is responsible for setting the company’s strategic direction and corporate governance. The current Chair, Robert Craig, was appointed in January 2014 and is an independent voting director. The CEO is charged with implementing Board endorsed strategy and managing the day to day afairs of the company. The CEO is a board-appointed, non-voting, executive director.

Board committees Board charter Ethics, policies The Board has established a management The Board carries out its functions and and procedures committee for each AusPayNet framework exercises its powers in accordance with AusPayNet promotes a high professional and including its clearing systems, Issuers and the Board charter, which sets out its role ethical standard. Management policies cover Acquirers Community, and infrastructure and responsibilities. The Board reviews human resources, technology, external system (COIN). Acting under delegated the charter regularly. matters, finance and general management. authority from the Board, management committees are responsible for the efcient Reserve Bank of Australia operation and management of each Risk management framework. Specialized sub-committees are The RBA has the right under the AusPayNet AusPayNet has put in place a risk also established under certain frameworks Constitution to appoint a director to the management framework which the to address technical and other issues. Board, and currently has a representative Board oversees. Key risks and risk on the Board. Senior staf of the RBA and The Board has also established the following appetite are regularly reviewed and AusPayNet also consult on a regular basis committees to assist in managing the the risk framework is submitted to on issues of industry policy. company’s afairs: both internal and external review. • Audit, Risk and Finance Committee – reviews the company’s internal financial Code of Conduct practices, budget and audit results All directors, management committee and monitors the efectiveness of members and senior executive staf the company’s financial controls and must comply with a Directors’ and administrative policies. Ofcers’ Code of Conduct. • Nomination Committee – supports the Board on matters relating to the eligibility, appointment and election of directors. • Remuneration Committee – establishes remuneration policies and practices for the company generally and recommends remuneration levels and contractual arrangements for the CEO, independent chair and independent directors.

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MEMBERSHIP

As the industry body for Australian payments, AusPayNet has 119 member organisations including Participant Members and Operator Members (100), other infrastructure system (COIN) members (7), and afliates (12).

AusPayNet Members Coles Group Limited # Mizuho Bank, Ltd Adyen Australia Pty Ltd # Commonwealth Bank of Australia # myMOVE Visa AP (Australia) Pty Ltd * Agricultural Bank of China Limited Community First National Australia Bank Limited # Warwick Credit Union Ltd Limited Australia Newcastle Permanent Westpac Banking Corporation # Limited * Credit Union Australia Limited Ltd Woolworths Limited # AMP Bank Limited Cuscal Limited # Oversea-Chinese Banking * Operator Member Corporation Limited # Australia Limited Defence Bank Limited Also a COIN member PayPal Australia Pty Ltd * Austraclear Limited * Delphi Bank p&nbank COIN Members Australia and New Zealand Deutsche Bank AG Banking Group Limited # efpos Payments Police Bank Limited Australia Limited Australian Military Bank Ltd Australia Limited * # Country Credit Union First Data Resources Australian Settlements Limited First Data Network QPCU Limited Australia Limited Australia Limited Auswide Bank Ltd , Australia Branch Fuji Xerox Australia Pty Limited G&C Mutual Bank Limited # B&E Ltd (Co-Operative Centrale Raifeisen- Genpact Australia Limited Gateway Credit Union Limited Boerenleenbank B.A.) Payments Express Bananacoast Community Credit Union Ltd Limited Rabobank Australia Limited Property Exchange Bank Australia Limited Limited RACQ Bank Australia Limited Transaction Network Bank of America, Heritage Isle Credit Union Limited Services Australia Pty Ltd National Association Holiday Coast Credit Union Limited Reserve Bank of Australia # Bank of China Hong Kong and Shanghai Royal Bank of Canada Afliate Members Bank of China (Australia) Limited Banking Corporation Limited – Select Encompass Australian Branch (Issuers & Acquirers Community) Bank of Communications Co., Ltd Credit Union Limited Sydney Branch HSBC Bank Australia Limited Southern Cross Credit Union Ltd Banktech Limited Limited Standard Chartered Bank Cardtronics Australasia Pty Ltd Bank of Sydney Ltd IMB Ltd State Bank of India Diebold Nixdorf Bank of Tokyo-Mitsubishi UFJ, Ltd Indue Ltd State Street Bank and Gemalto BankVic Industrial and Commercial Trust Company Giesecke & Devrient Australasia Bank of China Limited Bendigo and Sumitomo Mitsui IBM Australia Limited Bank Limited ING Bank (Australia) Limited Banking Corporation Ingenico International ING Bank NV (Sydney Branch) Summerland Credit Union Ltd (Pacific) Pty Ltd Big Sky Building Society Limited JPMorgan Chase Bank, Suncorp-Metway Limited # NCR Australia Pty Ltd National Association BNP Paribas Taiwan Business Bank, LCH Clearnet Limited Sydney Branch BNP Paribas Securities Services Quest Payment Systems Pty Ltd Macquarie Bank Limited Teachers Mutual Bank Limited BPAY Group Limited * # Thales Maitland Mutual Building The Rock UL Transaction Security Capricornian Ltd Society Limited Limited # China Construction Bank Mastercard Asia/Pacific UBS AG, Australia Branch Corporation, Sydney Branch (Australia) Pty Ltd * Citibank N.A. Mega International Commercial United Overseas Bank Limited Pty Limited Bank Co, Ltd Uniting Financial Services CLS Bank International Members Equity Bank Pty Limited Unity Bank Limited Members as at 30 September 2017

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GLOSSARY

ACDES Australian Cash Distribution and Exchange System APCS Australian Paper Clearing System ATM Automatic Teller Machine BECS Bulk Electronic Clearing System Blockchain A distributed ledger BPAY See www..com.au CNP Card-not-present COIN Community of Interest Network 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 New Payments Platform OPAL NSW public transport ticketing system PCI Payment Card Industry PCI PTS PCI PIN Transaction Security PCI SSC PCI Security Standards Council PIN Personal Identification Number POS Point-of-sale PPT Percentage point RBA Reserve Bank of Australia SWIFT Society for Worldwide Interbank Financial Telecommunications

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