Meeting the challenge ANNUAL REVIEW 2 4 6 8 10 About Us Chair and Highlights Consumer CEO Message Payment Trends

Australian Payments Network Limited ABN 12 055 136 519 CONTENTS 12 14 20 26 30 Level 23, Tower 3 International Towers 300 Barangaroo Avenue Sydney NSW 2000 Our Year Managing Governance Policy and Board of Telephone +61 2 9216 4888 in Review the Payment Advocacy Directors Email [email protected] www.auspaynet.com.au Streams

This Annual Review is designed to provide our members and stakeholders with an overview of developments and achievements in financial year 2019-2020. References in this report to a year are to financial year ended 30 June 2020 unless otherwise stated. We hope you enjoy discovering more 32 33 34 35 about your association. Governance Our Team Membership Glossary Framework Australian Payments Network is the industry association and self-regulatory body for payments.

Through our network, we bring together a diverse range of organisations including financial institutions, major retailers, payment system operators and technology providers. Our members provide the products and services that enable individuals and public and private organisations to make and receive payments every day.

Delivering on our purpose to promote confidence in payments, we work with a wide range of stakeholders to ensure the payments system continues to meet the evolving needs of organisations and individuals.

As the self-regulatory body for payments our remit covers the following payment types.

$ $$$ $$ $$$ $ $ $$$ $

Cards Direct entry High value Cash Cheques Issuers and Bulk Electronic High Value Australian Cash Australian Acquirers Clearing System Clearing System Distribution and Paper Clearing Community Exchange System System

Additionally, AusPayNet’s COIN infrastructure network provides connectivity for low value payments.

4 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 5 In its latest update the RBA’s Payments System Board noted More broadly, in coordination with the Australian Payments Council, which has a wider focus on cross-industry systemic resilience, AusPayNet is working to enhance the Meeting the that “payment system operators and retail payment service payments system’s resilience and its crisis-management arrangements. providers have continued to cope well with the operational Challenge challenges posed by the [COVID-19] pandemic”. Governance Our governance work over the coming year will be focused on two areas that will shape The Reserve of (RBA) Governor has also observed that the payments the future of the payments system. system’s resilience has played an important role in the continued functioning of the Firstly, we will use the outcomes from our current consultation on the TrustID Framework economy and commented on the dynamism that can be observed in payments currently. to deliver a set of rules that underpin the governance of TrustID. Secondly, as the For AusPayNet, that dynamism was exemplified in the industry rallying to amend the technology and business models for payments acceptance change, both at point-of- contactless PIN limit from $100 to $200 at the beginning of the pandemic, to limit sale and online, we will develop a strategy to ensure positive customer and merchant shoppers’ physical contact with terminals. outcomes around the acceptance – and indeed initiation – of payments. This strategy will balance innovation – in terms of technology and business model – and security, Our industry’s dynamism was also evident in the way payments stakeholders came which remains paramount. together to create our Card-not-Present (CNP) Fraud Mitigation Framework. Its impact is evident in our recent fraud statistics, published in August this year: in 2019, card fraud In the coming year, AusPayNet will be conducting a review to ensure that our Constitution fell by 19.5% to $464 million, the biggest decline ever. Moreover, CNP fraud dropped by and governance framework remain fit-for-purpose in a time of accelerated change and 18% to $403 million. as our membership continues to grow and broaden in scope. We know from experience though that as one area of payments fraud becomes harder, criminal groups turn their attention to other areas, as is now evident in the rise in scams. Policy & Advocacy Building on significant effort already underway, we are focused on improving protection AusPayNet will continue to work with the RBA as it progresses the review of retail of vulnerable customers. payments regulation. As always, our intention is to ensure the appropriate balance between regulation and self-regulation is struck to achieve competition, choice This work on mitigating scams is at the heart of AusPayNet’s purpose: confidence in and positive end-user outcomes. This will also be true as we consider the Federal payments. Our three core functions support that purpose: managing the payment Government’s recently announced review of the regulatory architecture applying to the streams, governance, and an increasing focus on policy and advocacy. payments system. We will also work closely with ASIC on its review of the ePayments Code with a view to ensuring that our Members have clarity on their obligations and are able to Managing the Payments Streams protect their customers effectively. A very clear message from last year’s consultation on the Future State of Australia’s In this, the most extraordinary of years, we acknowledge our fellow directors, Members, Payment Systems was the need for modernisation of those payment systems. To that the RBA and other regulators, and all of our stakeholders. We also thank AusPayNet’s end, we will support the community through the customer-led decline of cheques. staff for their dedication and skill at a time of peak workload for the industry. Their Rob Craig We will also begin preparatory work for the longer-term transition away from the direct commitment and engagement – whether virtual or physical – is vital not only for entry system, BECS. While BECS remains the workhorse of the payments system, this AusPayNet, but the payments system and wider economy. is important strategically. The risk otherwise is that legacy infrastructure eventually becomes a cost, not just to financial institutions but to their customers and the wider economy. The 2021 FY will see consultations with BECS Members and direct entry Rob Craig, Chair Andy White, CEO end-users, to begin managing that transition. In parallel with efforts to address the BECS and cheque systems, AusPayNet will continue to manage migration of the High-Value Clearing System (HVCS) to the ISO 20022 message standard. This is an important strategic opportunity to harmonise messaging with the NPP and so enable the potential for payment flow to be determined by business needs rather than by the messaging infrastructure itself. By increasing overarching redundancy between the high-value and NPP systems, we also improve overall systemic resilience. At the international level, migrating the HVCS to ISO 20022 brings it into line with the messaging framework used for cross-border payments. Not only does this enable more efficient, lower-risk payments to and from international counterparties, but it allows us Andy White to utilise richer, more structured data for improved screening around fraud, scams, KYC, AML and sanctions.

6 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 7 Industry responded quickly to Under AusPayNet’s approval process, COVID-19 including temporarily we assessed 76 new card-accepting increasing the contactless PIN terminals and solutions and conducted limit to help reduce physical 113 device renewals to ensure the contact with terminals. security of card payments.

The CNP Fraud Mitigation Three work streams are supporting Framework, launched on implementation of the TrustID 1 July 2019, is having an early framework: a governance structure impact on reducing online for the framework, accreditation, card fraud. The e-commerce and a trust mark.

HIGHLIGHTS community remains vigilant as volumes increase during COVID-19. We made submissions to regulators and Government including on the Review of The industry consultation on Retail Payments Regulation, the Future the future of payment systems Directions for the Consumer Data Right informed development of an and and Regulatory Action Plan with a focus on Technology and participated in the modernisation and ensuring Senate Committee’s Public Hearing. system efficiency.

Building on the success of previous As the appointed central years, our December 2019 Payments co-ordination body, we are leading Summit was the biggest ever, bringing the significant industry project together a record number of participants to migrate the HVCS to ISO20022 to explore emerging topics. messaging.

8 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 9 NUMBER OF DIRECT ENTRY PAYMENTS VALUE OF DIRECT ENTRY PAYMENTS $ $ $ NUMBER OF(Billions DIRECT ENTRY) PAYMENTS (BILLIONS) VALUE OF DIRECT($ Trillions ENTRY PAYMENTS) ($ TRILLIONS) Direct Entry Direct Debits Direct Credits Direct Debits Direct Credits The accelerated The number and value of direct debits grew by 6.5% and 33.5% respectively 1.0 5.9 8.7 2.4 2016 shift to digital payments following a significant drop in all direct 2016 entry payments in FY 2019*. While the value 1.1 6.1 2.6 9.2 2017 is clearly reflected of direct credits increased by 11.0% this 2017 year, the number dropped by 1.3%. The 5.5 9.1 1.2 2.7 2018 in Australia’s RBA’s March 2020 Bulletin explains that 2018 0.8 2.3 7.2 this decline is likely the result of financial 2.5 2019 institutions migrating some direct entry 2019 8.0 0.9 2.2 payments mix. payments to the NPP and this is expected to 3.4 2020 2020 continue. Nonetheless, the system remains 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0 5 10 15 20 the workhorse of the payments system, carrying nearly $11.4 trillion this year. * A break in the data series occurred in 2019 due to change in the RBA’s method of statistical collection.

Source: Reserve Bank of Australia

NUMBER OF CARD PAYMENTS VALUE OF CARD PAYMENTS NUMBER OF CASH WITHDRAWALS VALUE OF CASH WITHDRAWALS $ NUMBER OF CASH WITHDRAWALS (MILLIONS) $ VALUE OF CASH WITHDRAWALS ($ BILLIONS) Cards$ $ NUMBER(Billions) OF CARD PAYMENTS (Billions) VALUE($ OF CARDBillions PAYMENTS) (Billions) Cash (Millions) $ $ ($ Billions) Nearly two-thirds of all consumer payments The accelerated shift to digital payments Debit Cards Credit Cards Debit Cards Credit Cards are now made with cards*. Customers made during COVID-19 can be seen in the sharp decline in ATM withdrawals. Following the 675.8 138.7

more than 10.6 billion card transactions this 2016 2016 4.6 2.4 256.4 307.9 2016 year – 7.6% on FY 2019. The strong growth 2016 4.0% drop in FY 2019, ATM withdrawals fell 625.4 133.1

by 18.6% this year, down to 469.9 million. 2017

of payments has continued during 2017 5.2 2.6 277.2 319.7 2017 COVID-19. Debit card use increased by 10.5% 2017 The value of ATM withdrawals also dropped 600.2 132.7 2018 to 7.7 billion transactions whereas credit by double digits (11.1%) for the first time, 2018 6.0 2.8 305.1 329.7 2018 2018 card use largely remained steady, increasing down to $114.9 billion. It is predicted that 577.3 130.0 2019 by 0.5%. By value, debit card transactions those who are using less cash are likely to 2019 6.9 2.9 333.4 336.2 2019 2019 grew by 9.2% to $364.2 billion outstripping continue choosing digital payments after 469.9 114.9 2020 2020 7.7 value, which dropped by 3.5% to 2.9 the pandemic is over. 364.2 324.3 0 30 60 90 120 150 2020 0 100 200 300 400 500 600 700 2020 $324.3 billion, for the first time ever. 0 100 200 300 400 500 600 700 0 2 4 $ 6 8 10 12 $ $ Source: Reserve Bank of Australia Source: Reserve Bank of Australia * RBA 2019 Consumer Payment Survey

NUMBER OF POINT-OF-SALE DEVICES NUMBER OF ATMS NUMBER$ OF CHEQUE PAYMENTS VALUE OF CHEQUE PAYMENTS NUMBER OF POINT-OF-SALE DEVICES NUMBER OF ATMS NUMBER OF CHEQUE$ $ PAYMENTS (MILLIONS) VALUE OF CHEQUE PAYMENTS ($ TRILLIONS) ATMS and POS devices Cheques (Millions) ($ Trillions) The strong consumer preference for Cheque use has been declining for more card-based payments is enabled by a high than a decade, and by around 20% annually number of POS devices - among the highest 934,001 32,156 126.4 1.20 2016 over the last four years. Continuing the 2016 2016 penetration per capita globally. This year, 2016 trend, this year cheque use dropped by 99.9 1.15 931,771 32,095 2017 the number of POS devices fell by 8.7% due 2017 2017

2017 21% to 47.6 million – almost a third of the to rationalisation of inactive terminals and, number used in FY 2015. Having dropped a 80.4 1.00 961,247 30,940 2018 2018

to a lesser degree, closure of businesses 2018 2018 staggering 35.0% in FY 2019, cheque values due to COVID-19. Having progressively 0.65 981,244 28,797 dropped by another 28.6% this year to 60.2 2019 2019 2019 declined over the last four years in line 2019 $467 billion. This ongoing decline reflects with declining cash use, the number of 0.47 895,957 25,719 the many alternative digital options now 47.6 2020 2020 2020 ATMs dropped a further 10.7%, primarily 2020 available for large value payments 0 30 60 90 120 150 0.0 0.2 0.4 0.6 0.8 1.0 1.2 0 200000 400000 600000 800000 1000000 0 5000 10000 15000 20000 25000 30000 35000 due to removal from locations impacted by e.g. PEXA for property settlement. COVID-19. Source: AusPayNet Source: Reserve Bank of Australia

10 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 11 1 2 3 Managing the Governance Policy and

payment streams Through self-governance, we are able Advocacy to balance innovation and security The customer preference for faster, to promote competition and deliver Interacting with our stakeholders is data rich payments with 24/7 efficient outcomes. the essence of everything we do and availability is driving modernisation vital for supporting our policy and and efficiency gains. advocacy initiatives.

RESPONDING TO OUR ENVIRONMENT (COVID-19) PREVENTING PAYMENTS FRAUD SHAPING FOUR KEY POLICY AREAS • Acceleration of trends and changes to consumer behaviour • Implementation of the CNP Mitigation Framework • Self-Regulation (RBA’s Review of Retail Payments Regulation) • Temporary increase in contactless limit • Significant drop in annual card fraud including CNP fraud • Consumer Protections (ASIC’s e-Payments Code) • Clarification around chargebacks • Expanded focus on scams and identity fraud • Innovation (Senate Select Committee on FinTech and • Assisting members through process adjustments RegTech and CDR) TRUST ONLINE • Efficiency (Government’s Deregulation Taskforce) MIGRATION TO ISO 20022 MESSAGING • Progressing work on the TrustID framework • Central coordination authority for migrating HVCS messaging • Consultation on governance arrangements MEMBER ENGAGEMENT • Governance structure established • Development of robust accreditation processes • Over 300 relationship meetings with members • First of four phases - planning and design phase - currently and trust mark • Briefing sessions with the fintech community underway • Welcomed eight new members taking our membership to 137 EMERGING TECHNOLOGY FUTURE STATE OF PAYMENTS • Authentication principles, AI and QR codes workshops REGULATORS AND GOVERNMENT • Consultation on the future state of payments • Collaboration with Standards Australia on AI • Ongoing relationship with RBA and formal liaison with • Focus on modernisation and operational efficiency Policy department • Managing the consumer-led decline of cheques ACCESSIBILITY AND INCLUSIVITY • Liaise with Treasury, the DTA and the Productivity • Action Plan published in August 2020 Commission • Close engagement with disability community • Guidelines for Accessibility in PIN Entry on Touchscreen SECURE INNOVATION Terminals WORKING WITH LAW ENFORCEMENT • 76 new terminals and solutions assessed • Fraud in Banking Forum • New Mobile-POS ‘tap to phone’ solution approved SHAPING GLOBAL AND LOCAL STANDARDS • Financial Coalition Against Child Exploitation Australia OUR YEAR IN REVIEW • PCI’s Contactless Payments on COTS standard adopted Working Group • Development of global and Australian standards • Hosted two ISO Working Groups PAYMENTS SYSTEM OPERATIONAL RESILIENCE • PCI SSC Asia-Pacific Community Meeting in Melbourne REGULAR EVENTS AND PAYMENTS SUMMIT • Working with RBA and APRA on retail payment incidents • Events program included sessions on COVID-19 and payments, reporting ONGOING EFFECTIVE SELF-GOVERNANCE scams and cybersecurity • Supporting APC in work on improving cross-sector system • Our December 2019 summit was the largest ever • Ensuring self-governance approach remains fit for resilience purpose • Review of the technology underpinning the COIN • Review of AusPayNet’s constitution INFORMING STAKEHOLDERS • Speaking engagements at industry forums • Blogs, website and social media engagement

12 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 13 Responding to our environment

COVID-19 has seen a significant acceleration Assisting our members of trends and changes to consumer behaviour. These have included a decline in As the industry association, we have adjusted cash use and increase in card payments at processes to enable members to better focus point-of-sale. In response to this, through on their COVID-19 related priorities. These the course of the year we focussed on three included making changes to time-related key areas. rules to allow for increased volumes, and freezing some non-time related reporting Managing the Point-of-sale convenience requirements. In response to concerns expressed about COVID transmission through physical contact, COVID-19 has accelerated pre-existing trends the industry increased the PIN limit on including the decline in cash use and strong Payment Streams contactless transactions from $100 to $200. growth in debit card payments at POS. The progressive roll-out on certain cards and at certain retailers commenced in early April NUMBER OF MONTHLY ATM WITHDRAWALS 2020, initially for a three-month period. The Number of monthly ATM withdrawals

industry has extended the temporary $200 50

limit until 17 December 2020 in line with the 45

Government’s COVID-19 Biosecurity Emergence 40

Declaration and continues to review and make 35 The customer preference for faster, data rich decisions based on Government advice. 30 Balancing merchant and 25 payments with 24/7 availability is driving 20 cardholder needs 15 modernisation and efficiency gains. An early payments-related concern 10 arising from COVID-19 was that the scale 5 of chargebacks by cardholders could result 0

in liquidity pressures on merchants. Card Jan-2020 Feb-2020 Mar-2020 Apr-2020 May-2020 Jun-2020 schemes, issuers and acquirers responded Source: Reserve Bank of Australia to this potential challenge to ensure that consumers and merchants are not adversely NUMBER OF MONTHLY DEBIT CARD TRANSACTIONS affected in these unique circumstances. Number of monthly debit card transactions This involved using standard chargeback processes in a way that does not exacerbate 700 pressure on merchants, while balancing the 600

needs of cardholders. Our blog in April 2020 500 outlined the guidance for COVID-19 related 400 chargebacks and highlighted the consumer protections provide by the Australian 300 Consumer Law. 200

100

0

Jan-2020 Feb-2020 Mar-2020 Apr-2020 May-2020 Jun-2020

Source: Reserve Bank of Australia

14 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 15 Payments Shift to Digital Payments modernisation Customers are well-served by payment options and the range of choice continues to grow.

MIGRATION TO ISO 20022 Consistent with the governance structure outlined in the Conclusions Paper, we have MESSAGING established the steering committee, mobilised In February 2020, the RBA and APC published the program management office, and formed the first two working groups. Work is currently 83 % of the ISO 20022 Migration for the Australian Over 1 in 10 people underway to develop message specifications point-of-sale card Payments System - Conclusions Paper, setting use mobile wallets4 out the strategic direction for migrating High that are harmonised with existing SWIFT usage transactions are contactless6 Value Clearing System (HVCS) messaging to ISO guidelines and the NPP. This first Planning and 20022 standards. We welcomed AusPayNet’s Design phase is due to end in March 2021. It Online shopping appointment as the central co-ordination will be followed by a one-year build phase and six months of industry testing, before the HVCS 5.4 million PayIDs and in-app purchases authority for this significant industry-led up 16% to starts processing new ISO 20022 messages registered to enable project, which will span the next four years. receipt of instant 337 million Osko $220 billion5 alongside the current MT messages for a two- payments7 P2P payments year coexistence period in November 2022. We 2 225,000 digital this year look forward to leading industry through these property transactions phases to achieve full migration to ISO 20022 in December 2019 by November 2024. alone1 59% of people are aware of BNPL services – Coexistence over 10% have Planning and ISO 20022 3 Build Industry Test MT and ISO used them Design 20022 messages messages

March 2021 March 2022 Nov 2022 Nov 2024

CONSULTATION AND ACTION PLAN The Action Plan outlines the industry’s response to the evolution of payments. As The customer preference for faster, data the uptake of convenient, digital payment rich, 24/7 payments is rapidly changing methods accelerates, the focus is on the payments mix. In November 2019, we modernisation and ensuring payments consulted with industry to build a consensus system efficiency through the rationalisation view on what the payments system might of older systems like APCS for cheques and look like in the next 5-10 years. This work BECS for direct entry. The Plan outlines areas culminated in the Future State of Payments for future actions including developing a Action Plan, published in August 2020. roadmap to manage the transition away from BECS and a strong focus on managing the consumer-led decline in cheque use. This Source: work will continue into 2021. 1. PEXA 2. BPAY Group 3. Roy Morgan 4. Roy Morgan 5. RBA Payments Statistics 6. RBA Consumer Payments Survey 2019 16 AUSTRALIAN PAYMENTS NETWORK 7. NPP Australia ANNUAL REVIEW 2020 17 Secure innovation Payments system operational resilience

Reflecting the strong preference for card- Global developments The payments system’s operational resilience Next generation connectivity based payments, Australia stands out globally continues to be an important focus as with one of the highest penetrations of In response to the growing focus on the shift to digital payments accelerates. AusPayNet’s Community of Interest Network point-of-sale (POS) terminals. Prior to use in commercial-off-the shelf (COTS) mobile AusPayNet has been working with the RBA and (COIN) continues to be a significant piece of the market, all card-accepting terminals and devices for payment acceptance, we made APRA on retail payment incidents reporting. payments infrastructure. Launched a decade solutions including POS terminals and ATMS, significant contribution to the development of The target outcomes are to modernise ago, the COIN provides physical connectivity must undergo AusPayNet’s standard device PCI’s Contactless Payments on COTS standard. reporting on operational outages, improve the for low value payments traffic including approval process to ensure the security of This was released in December 2019 and consistency and utility of incident data, and cheques, direct entry and cards as well as sensitive card data. Approvals are renewed adopted by AusPayNet’s Issuers and Acquirers implement a framework for data disclosure for BPAY bill payments. We are reviewing the every three years provided there is no Community shortly after. Solutions that meet by financial institutions. We assisted the RBA technology underpinning the network to substantial change in security technology, these standards provide merchants with with its industry consultation on this topic and ensure the COIN provides next-generation applicable standards, or security threats. secure contactless acceptance solutions that will continue to play a role when work resumes connectivity for Australian payments into the This year, we assessed 76 new terminals and protect card data. Building on this work, PCI after the COVID-19 hold. future. solutions, and conducted 113 device renewals. is now developing a new standard to enable merchants to accept PIN-based contactless Additionally, we are supporting the APC in Crisis Management Additionally, AusPayNet assesses devices and transactions on COTS devices. achieving its goal of improving cross-sector AusPayNet is reviewing the industry Crisis solutions that are market leading in nature systemic resilience. Through a series of This year, we saw greater interest in using Management plan given the increased and that as a result, cannot be adequately workshops and consultations members of digitisation of payments and subsequent assessed against existing global standards. cloud based cryptographic services to the APC are considering both immediate and manage the encryption keys used to protect reliance on electronic payment methods. The With the goal of ensuring that accreditation longer-term initiatives for uplifting resilience. review includes how we respond to major does not hinder innovation, AusPayNet works card data. AusPayNet is participating in the recently formed PCI Special Interest Group incidents as an industry, the co-ordination closely with product companies to ensure of our response and the use of technologies that their solutions meet baseline security on Best Practices for Cloud Cryptographic Services, which is considering the security and process improvements that may assist in requirements. This year we were delighted more timely responses and resolution. to approve a new Mobile-POS ‘tap to phone’ implications of these new services. As an solution for use in the Australian market. Affiliate Member, AusPayNet continues to play an integral role in the development of these PCI standards.

18 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 19 Preventing payments fraud

Industry fraud prevention requires close Scams collaboration and partnership between financial institutions, card schemes and Scams and identity theft also continue to merchants. be a focus for AusPayNet’s Fraud in Banking Forum. During the year, a working group Globally, online card fraud is rising in line chaired by IDCARE finalised the Identity Theft with the strong growth in e-commerce and Scam Response Standard and Guidelines. transactions. Reducing this card-not-present These provide practical guidance to financial (CNP) fraud, which accounts for some 87% of institution staff on supporting victims, all fraud on Australian cards, remains a key including best practice communications industry priority. and response processes. The Standard and Governance On 1 July 2019 we implemented the industry Guidelines were adopted across AusPayNet’s CNP Mitigation Framework developed in frameworks in February 2020. close collaboration with the e-commerce community. The Framework sets fraud thresholds that define acceptable levels of risk for both issuers and merchants. Since its implementation, the majority of merchants who exceeded the fraud threshold in a report quarter dropped back below the threshold in Through self-governance, we are able to the next quarter. These efforts are already having an impact. AusPayNet’s Payment Fraud Report published in August 2020 shows that balance innovation and security to promote in 2019 CNP fraud fell by 17.7% to $402.6 million, its first fall ever. While the Framework’s competition and deliver efficient outcomes. benefits are yet to be fully realised, the e-commerce community remains vigilant as online volumes increase during the COVID pandemic. While all card fraud fell by 19.5% to $464 million – the biggest decline ever – losses While card fraud through scams rose sharply in 2019 to $634 million. The industry is now expanding its fell by 19.5% – the focus to include this area of growing concern. biggest decline ever – losses due to scams rose sharply

20 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 21 Trust Accessibility online and inclusivity

A wide range of public and private sector Accreditation Along with the many benefits of new on point-of-sale (POS) touchscreens. They are organisations are focused on improving technologies comes the need to ensure a key step in efforts to ensure innovations in their online service delivery. This focus Robust accreditation of service providers inclusion and accessibility for all users. payments technology are accessible to the has intensified in recent months, with the will play an important role in establishing Following close engagement with the widest population and an important start of emphasis on remote access to services. As confidence in services. At the highest level, disability community throughout 2019, on collaborative work on enhancing accessibility part of this, there’s increased understanding accreditation will ensure that providers 3 December, International Day of People and inclusion in payments. about the requirement for secure, convenient continue to meet the security, privacy with Disability, we released Guidelines for and privacy enhancing ways for organisations and interoperability requirements of the Accessibility in PIN Entry on Touchscreen to interact with customers. Framework. AusPayNet is developing robust Terminals. The Guidelines are designed to accreditation processes with input from make it easier for people living with vision The TrustID Framework aims to support this subject matter experts from across the digital and/or motor impairments to make payments growing requirement. TrustID is an open, identity landscape, including from the Digital contestable framework that can be used by Transformation Agency. different organisations to offer a range of interoperable identity services to individuals Trust Mark and private sector entities. The TrustID Accredited service providers will be able to Framework is designed to allow individuals display a trust mark to indicate to customers to establish their credentials online with an that the service has been approved by the Emerging accredited service provider, and then use TrustID governing body. The work is being those credentials to verify who they are when progressed by a number of potential service interacting online with a range of different providers and the trust mark will be finalised technology service providers. AusPayNet is progressing early in 2021. work in three key areas of governance, accreditation and a trust mark. Governance Collaboration has continued on emerging Our exploration of authentication and QR Acknowledging the strategic importance technologies. Through a series of workshops codes provides a strong foundation for further of the framework and ongoing governance with members and other stakeholders our consideration of how payments acceptance is requirements, we commenced a thorough technology focus has explored authentication evolving. consultation with a wide range of principles, the ethical application of AI, and QR stakeholders. This consultation, expected codes. to complete in early 2021, will shape the governance structure of the Framework. AusPayNet is We have benefited from collaboration with The overarching intention is to promote Standards Australia on AI, and anticipate competition and innovation, while effectively progressing work on continued inquiry as we take a use case- controlling and managing risk. based approach to examining the use of AI in the TrustID Framework payments. to provide a secure, convenient and private way for businesses and consumers to interact online.

22 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 23 Shaping global and Effective local standards self-governance

AusPayNet is at the frontline of standards In December 2019, we were delighted to host As the pace of innovation accelerates and development as a participant on global two ISO working groups, bringing together participants in the payments industry and domestic standards bodies including technical experts from across the globe diversify, a priority is to ensure that our ISO, PCI, EMVCo, Fast Identity Online Alliance including the US, UK, France, South Korea and approach to self-governance remains fit for (FIDO), World Wide Web Consortium (W3C) and China. Other highlights included participation purpose. Standards Australia. A key focus is to increase in the PCI SSC Asia-Pacific Community Meeting This year, we commenced a review of standards alignment and consistency where held in Melbourne in November 2019. AusPayNet’s constitution and governance possible, while ensuring the security and structure, including corporate objects, interoperability of card payments In Australia. decision-making architecture, funding, We currently hold the positions of Convenor of membership and board structure. The review two ISO Working Groups and Chair of Standards will continue through the 2021 financial year. Australia IT005. Additionally, AusPayNet is a member of the Board of Advisors of the PCI SSC and participates in all major PCI Working Groups.

EMVCO Associate – Industry Group ISO/TC68/SC2 Security ISO/TC68 Financial Services/Working Group 7 ISO 20022 ISO/ TC68/SC2/Working Group 11 ISO/TC68/SC2/Working Group 13 ISO/TC307 Blockchain and Distributed Ledger Technologies PCI SSC Affiliate Member We participate PCI SSC Board of Advisors in the following PCI SSC Encryption Task Force standards PCI SSC Mobile Task Force committees and PCI SSC Mobile Working Group bodies: PCI SSC PIN Assessment Working Group PCI SSC PIN Transaction Security Working Group PCI SSC SIG Cloud Cryptography PCI SSC Software Security Working Group Standards Australia IT-005: Financial Transaction Systems Standards Australia IT-041: Blockchain and Distributed Ledger Technologies SWIFT Australian National Member Group SWIFT Australian User Group

24 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 25 Shaping payments policy

Throughout the course of this year, AusPayNet Innovation has continued to shape four key policy areas. The payments system is a foundational Self-regulation component of Australia’s digital economy. Drawing upon our experience in payments Self-regulation underpins the Australian system governance, AusPayNet contributed to payments system and has supported a wave a number of Government inquiries. of innovation. This was highlighted in our submission to the Reserve Bank’s Review of In May 2020, we welcomed the opportunity to Retail Payments Regulation which commenced respond to the Inquiry into Future Directions in late 2019. The review was paused in March for the Consumer Data Right. Our submission Policy and advocacy in light of COIVD and AusPayNet looks forward highlighted the prerequisites for a successful to further consultation when it resumes later data economy: an effective and robust in 2020. governance framework, and customer identification and verification. Efficiency The Senate Committee on Financial We responded to the Australian Government’s Technology and Regulatory Technology Deregulation Taskforce, which is examining is reviewing Government fintech policy. the stock of government regulation. AusPayNet provided a written response in Referring to the Government’s priority areas December 2019 and attended a public hearing of modernising business communications in February 2020, giving the Committee Developments in the regulatory landscape to assist in the COVID-19 recovery, our an overview of the payments system, the submission supported the broad intent changing way we pay, and our work to support continue to play an important role in the way and highlighted two specific areas for payments innovation. attention. These included advocating for payment method neutrality to support digital that payments are evolving. payments and amending the Electronic Transactions Act to allow for the electronic provision of verified credentials (whether or not the credentials were originally contained in a physical document). Consumer Protections Consumer protection is key to ensuring public confidence in payments. With that in mind, AusPayNet continued to engage with ASIC’s review of the voluntary ePayments Code in 2020. AusPayNet provided advice on a range of issues, including direction that the Code might not be the most appropriate vehicle to address the topic of scams, which are quick to adapt and change. We also highlighted that the revised Code should remain flexible and responsive to future developments, including the Consumer Data Right (CDR).

26 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 27 Stakeholder engagement

Member Engagement arrangements with their Policy department Payments Summit Stakeholder communication to promote discussions on issues affecting Our members are at the heart of everything the payments system. We also liaise with The annual AusPayNet Summit is a significant Bringing all stakeholders along and creating we do. Through our member engagement Treasury, the Digital Transformation Agency event in the industry’s calendar bringing support for industry work is critical to initiatives, we collectively develop a broader (DTA) and the Productivity Commission on together a wide range of payments enabling change. Our communications understanding of the opportunities and issues of payments policy. Public regulators enthusiasts to explore the impact of emerging and engagement initiatives help us build challenges facing the payments industry. we work with include the Australian Prudential trends on the future of payments. Our connections with stakeholders with a view to This year, we had more than 300 relationship Regulatory Authority (APRA), the Australian December 2019 Summit, themed ‘Payments better informing conversations on payment meetings with members and kicked-off Securities and Investment Commission (ASIC) - The Key to the Best Customer Outcomes’, issues. These include speaking engagements regular briefing sessions with the fintech and the Australian Competition and Consumer was a sell-out event with over 300 people at conferences and other industry forums, community, providing a forum for ongoing Commission (ACCC). attending. Featuring leading international liaising with industry associations and discussion. and local speakers, panels and roundtables, consumer representative bodies, and The evolving payments landscape is reflected Working with law enforcement the Summit sparked lively debate to uncover participating in roundtables and critical in our growing and increasingly diverse AusPayNet’s Fraud in Banking Forum issues that need an industry-wide focus. We discussions on payments-related issues. The membership. We were delighted to welcome brings together fraud specialists from were delighted to have the RBA Governor, move to online events during COVID allowed us to seven new Participant members this year - financial institutions and law enforcement Philip Lowe, give his much-anticipated more easily participate in events hosted by other DBS Bank, Global Payments Australia, in1bank, communities to share information at a keynote address - a regular highlight of countries including the US, Canada and Asia. our summit - and thank all our sponsors, , Keb Hana Bank, Split Payments, strategic level on financial crime and As payments touch everyone, we also have members, regulators, and the wider payments China Merchants Bank - and Armaguard as an emerging banking fraud issues. The Forum an important role to play in helping the community for their ongoing support. Affiliate member. met four times this year, in Perth, Melbourne broader community understand payments Our annual member survey provides valuable and Brisbane, and a virtual meeting due to In light of COVID restrictions around developments. We do this through a range feedback and highlights possible areas for COVID-19. gatherings, we are replacing this year’s of initiatives including regular blogs, Summit with a series of online events newsletters, reports, and media briefings. further collaboration. This year, members’ Member and industry events overall satisfaction with their interactions culminating in a session featuring the RBA Visitors to the AusPayNet website, the hub with AusPayNet reached 94.7% - up from AusPayNet’s events program provides a Governor on 7 December 2020. We invite for our communications and information, 90.7% in 2019. Priorities for industry work collaborative forum for exploring emerging everyone with an interest in payments to join us. grew by 45.6% this year. Similarly, the number included managing the payment streams, trends and issues. This year’s topics included of people following us on LinkedIn was up promoting innovation and emerging digital ID, sanctions screening, COVID-19 and 49.9%, and our Twitter impressions more than technologies, and combatting fraud and payments, scams and cybersecurity. Due to doubled. We invite you to follow us on social scams. COVID restrictions, our 2020 events were held media and explore our website as we continue online only with a record number of members to develop these channels during the 2021 Liaising with regulators participating. financial year. and government We continue to work closely with regulators and government bodies on payments-related issues to ensure self-regulatory and market- based outcomes that are in the interests of all users. AusPayNet has an ongoing relationship with the RBA, which includes formal liaison

28 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 29 Board of Directors Jackie Kallman Kees Kwakernaak BPSYCHSC (HONS), MAICD MSC, MAICD Head of Payments Industry, ANZ Managing Director, First Data Network Australia Appointed as a non-executive director by ANZ in April 2018. Appointed as a non-executive director by Under the leadership of an independent chair, the Board has 13 members Ms Kallman serves as Chair of the HVCS Electing Members in October 2016. Management Committee. Mr Kwakernaak serves as Chairman of the comprising independent directors, the CEO, and non-executive directors ACDES Management Committee, the Next Generation Banknotes Support Steering appointed or elected by AusPayNet members. Committee, and member of the Nomination Committee.

The independent directors have substantial voting rights to ensure public interest and broader Robert Craig, Chair community benefits are effectively represented. Olivia McArdle Michelle McPhee BSC (HONS), BCA, MAICD B COMM (ACCOUNTING & LAW), MBA, CA, MAICD BBUS (HONS), GAICD There was one change to the Board during the year. Paul Franklin stepped down from the Board and as Chief Operating Officer, icare Head of Deposits and Payment Products, Head of Banking, RBA Deputy Chair in December 2019. He was replaced by Macquarie Bank Limited Appointed in January 2014 as an Dianne Shay as a director and by Lynda McMillan as independent director and AusPayNet Chair. Deputy Chair. The names of the directors in office as Appointed as a non-executive director by Appointed as a non-executive director by Mr Craig also serves as Chair and member at 30 September 2020 follow. Electing Members in November 2017. the RBA in February 2017. of the Payments Review Committee and Ms McArdle serves as member of the Ms McPhee serves as Chair and member of Remuneration Committee. Audit, Risk and Finance Committee and the Audit, Risk and Finance Committee, and Remuneration Committee. member of the Nomination Committee and Remuneration Committee. Lynda McMillan, Deputy Chair Andy White, CEO MBUS, GAICD BA [HONS], MA [OXON), GAICD Kate Mulligan Dianne Shay BA, LLB(HONS), MAICD MAICD Head of Payments Representation, CEO, AusPayNet Services, CBA Managing Partner, King Irving Head of Payments Industry, Cashflow Appointed as CEO and an executive director Solutions, Customer Experience, Appointed as a non-executive director by of AusPayNet in March 2019. Appointed as an independent director in Limited the CBA in April 2018 and as Deputy Chair by Mr White serves as Chair and member of June 2014. the Board in December 2019. Ms McMillan the Governance Review Committee, and Ms Mulligan serves as Chair of the Issuers Appointed as a non-executive director by also serves as Chair of the Fraud in Banking member of the Audit, Risk and Finance and Acquirers Forum, and member of the NAB in December 2019. Forum and Nomination Committee, Committee, Payments Review Committee, Governance Review Committee. Ms Shay serves as Chair of the APCS and member of the Governance Review Remuneration Committee and the Management Committee. Committee. Australian Payments Council.

Chris Campbell Jennifer Clark BEC, MBUS (FINANCE) FAICD Mark Tibbles Derek Weatherley Head of Payments Policy and Strategy, Deputy Chair of the Australian Maritime Safety MAICD BCOMM, MACC, GAICD Group Authority and independent Chair of audit, CEO, Australian Settlements Limited CEO, Indue Limited risk, and finance committees for a number of Appointed as a non-executive director by different organisations Appointed as a non-executive director by Appointed as a non-executive director by Westpac in April 2003. Appointed as an independent director in Members in April 2019. Credit Union Members in April 2018. Mr Campbell serves as Chair of the COIN June 2014. Mr Tibbles serves as member of the Mr Weatherley serves as Chair of the BECS Management Committee, member of Ms Clark serves as Chair of the Policy Nomination Committee. Management Committee, and member of the Audit, Risk and Finance Committee, Experts Group, and member of the the Payments Review Committee. Remuneration Committee and Policy Audit, Risk and Finance Committee and Experts Group. Remuneration Committee.

30 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 31 Governance Framework Our Team The AusPayNet Board is responsible for setting the company’s Our Executive Committee is responsible for leading the strategic direction and corporate governance. AusPayNet team in delivering on strategic objectives.

Chair and CEO Board Charter, Code of Conduct ANDY WHITE, CEO The current Chair, Robert Craig, was appointed and Induction in January 2014 and is an independent The Board carries out its functions and voting director. The CEO is charged with exercises its powers in accordance with the implementing Board endorsed strategy Board charter, which sets out its role and and managing the day to day affairs of the responsibilities. The charter is supplemented company. The CEO is a board-appointed, non- by various board policies including a conflicts voting, executive director. management policy, a competition protocol Board Committees and a Code of Conduct, which all directors and management committee members must The Board has established a management comply with, and which is designed to ensure committee for each AusPayNet framework high standards of ethical and professional including its clearing systems, Issuers and conduct and compliance. Acquirers Community, and infrastructure The Board reviews the charter and other system (COIN). Acting under delegated policies regularly. An induction program for authority from the Board, management newly appointed board members provides Nancy Bryla Lynette Hickey Lauren Johnson Victoria Richardson Luke Wilson committees are responsible for the efficient an overview of AusPayNet’s governance General Counsel Chief Financial Officer Chief People and Chief Strategy Officer Chief Operating operation and management of each and policy framework and operations, as framework. Specialised sub-committees are Culture Officer Officer well as an understanding of their role and also established under certain frameworks responsibilities. to address technical and operational issues requiring subject matter expertise. Reserve Bank of Australia The Board has also established the following As a participant in payment systems, the Responding to COVID-19 Fostering a Purpose-Led Culture committees to assist in managing the RBA has been a member of AusPayNet company’s affairs: since its inception in 1992. The RBA has Ensuring the safety and welfare of our team Our strategic plan through to 2023 adopts a appointed a director to the AusPayNet Board, during COVID-19 has been paramount. We purpose-led approach to better balance the • Audit, Risk and Finance Committee: reviews have created a highly flexible environment different interests of our increasingly diverse the company’s internal financial practices, in accordance with its rights under the AusPayNet Constitution. Additionally, since and equipped our people with the resources members and stakeholders. budget and audit results and monitors the they need to work remotely. Supported by May 2007, the RBA and AusPayNet have been In a purpose-led organisation, we need to be effectiveness of the company’s financial high-quality systems, our people have worked liaising on payments policy issues under an leaders at every level. This year, we initiated controls and administrative policies. seamlessly from home during a challenging agreed set of procedures which have been set a leadership development program, which period. We remain vigilant and continue to • Nomination Committee: supports the out in a Memorandum of Understanding, which will run until December 2021, giving everyone make decisions based on government advice. Board on matters relating to the eligibility, includes senior staff of the RBA consulting across the organisation opportunities appointment and election of directors. with AusPayNet on a regular basis on issues to achieve their goals and inspiring high • Remuneration Committee: establishes of common interest. This ensures continued performance. Strengthening and broadening remuneration policies and practices for close cooperation between the RBA and key competencies for the future allows the company generally and recommends AusPayNet. us to continue to support the delivery of our corporate goals to the benefit of our remuneration levels and contractual Risk Management arrangements for the CEO, independent members. chair and independent directors. AusPayNet has put in place a risk management framework which the Board oversees. Key risks and risk appetite are regularly reviewed, and the risk framework is submitted to both internal and external review.

32 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 33 Membership Glossary

AusPayNet has 137 member organisations including participant members, operator members, COIN members and affiliates. ACDES Australian Cash Distribution and Exchange System We thank them all for their support and contributions. AI Artificial Intelligence AML Anti-Money Laundering PARTICIPANT MEMBERS First Data Network Australia Limited Royal Australian Mint Australia Limited Rabobank, Australia Branch S.W.I.F.T. Services Australia APC Australian Payments Council Adyen Australia Pty Limited G&C Mutual Bank Limited (Co-Operative Centrale Raiffeisen- Pty Limited Agricultural Limited Gateway Bank Ltd Boerenleenbank B.A.) UnionPay International Co., Ltd. APCS Australian Paper Clearing System AMP Bank Limited Global Payments Australia 1 Pty Ltd Railway Credit Union Limited Visa AP (Australia) Pty Ltd APRA Australian Prudential Regulation Authority Australia Limited Limited trading as MOVE and New Zealand Banking Limited Limited Also a COIN member BECS Bulk Electronic Clearing System Group Limited Holiday Coast (now known as Reserve Bank of Australia Blockchain A distributed ledger Australia Post Regional Australia Bank Ltd) Royal Bank of Canada COIN MEMBERS Australian Military Bank Ltd Hong Kong and Shanghai Southern Cross Credit Union Ltd A2B Australia Limited CNP Card-not-present Australian Mutual Bank Limited Banking Corporation Limited Split Payments Pty Ltd First Data Resources Australia Australian Settlements Limited - Australian Branch Standard Chartered Bank COIN Community of Interest Network Limited Australian Unity Bank Limited HSBC Bank Australia Limited State Bank of India Fuji Xerox Businessforce Pty Ltd Digital ID Digital Identity Auswide Bank Ltd Limited State Street Bank and Genpact Australia Pty Ltd B&E Ltd trading as Bank of Us IMB Ltd Trust Company Property Exchange Australia Direct Entry Payments system for direct debits and direct credits Bank Australia Limited In1bank Ltd Sumitomo Mitsui Banking Limited (PEXA) Bank of America, National Indue Ltd Corporation EMV Europay, MasterCard, and Visa Transaction Network Services Association Industrial and of Summerland Credit Union Ltd Australia Pty Ltd Fintech Collaboration between financial services companies and technology innovators Bank of China China Limited Suncorp-Metway Limited Bank of China (Australia) Limited ING Bank (Australia) Limited Taiwan Business Bank, HVCS High Value Clearing System Bank of Communications Co., Ltd (trading as ING) Sydney Branch AFFILIATES Sydney Branch ING Bank NV (Sydney Branch) Limited IAC Issuers and Acquirers Community Advam Pty Ltd Bank of Limited JPMorgan Chase Bank, National Limited Armaguard Technology Solutions ISO International Organization for Standardization Bank of Sydney Ltd Association UBS AG, Australia Branch Pty Ltd Bendigo and Adelaide Bank Limited Judo Bank Pty Ltd United Overseas Bank Limited KYC Know Your Customer Cardtronics Australasia Pty Ltd Limited KEB Hana Bank Uniting Financial Services Diebold Nixdorf Australia NPP BNP Paribas LCH Clearnet Limited Unity Bank Limited Pty Limited BNP Paribas Securities Services Macquarie Bank Limited Victoria Teachers Limited, trading Gemalto PCI Payment Card Industry Capricornian Ltd (The) Maitland Mutual Limited as Giesecke & Devrient Australasia China Construction Bank Mega International Commercial Limited PCI SSC PCI Security Standards Council Ingenico International Corporation, Sydney Branch Bank Co, Ltd Warwick Credit Union Ltd (Pacific) Pty Ltd POS Point-of-sale China Merchants Bank Co., Ltd. Members Banking Group Limited Westpac Banking Corporation NCR Australia Pty Ltd Citibank N.A. trading as RACQ Bank Windcave Pty. Limited Optus QR Codes Quick Response Codes Citigroup Pty Limited Members Equity Bank Pty Limited Woolworths Group Limited Quest Payment Systems Pty Ltd CLS Bank International Mizuho Bank, Ltd RBA Reserve Bank of Australia Bank Limited Southern Payment Systems Pty Ltd Coles Group Limited MUFG Bank, Ltd. (trading as Pin Payments) SWIFT Society for Worldwide Interbank Financial Telecommunications of Australia MyState Bank Limited OPERATOR MEMBERS Thales Community First Credit Union National Australia Bank Limited Threatmetrix Pty Ltd Limited Newcastle Permanent Building American Express Australia Limited UL Transaction Security Credit Union Australia Limited Society Ltd Austraclear Limited Verifone Pty Ltd Limited Northern Trust Company (The) BPAY Group Limited DBS Bank Ltd., Australia Branch Oversea-Chinese Banking Diners Club Australia Pty Ltd Members as at 30 September 2020 Defence Bank Limited Corporation Limited Payments Australia Limited Delphi Bank (a division of Bendigo Police & Nurses Limited Google Payment Australia Pty Ltd and Adelaide Bank Ltd) Police Bank Limited Mastercard Asia/Pacific (Australia) Deutsche Bank AG QPCU Limited Pty LtdNPP Australia Limited EFTEX Pty Limited Queensland Country Bank Limited PayPal Australia Pty Ltd

34 AUSTRALIAN PAYMENTS NETWORK ANNUAL REVIEW 2020 35