A progressive payments sector can be aided by a strong regulatory framework. We explore moves around the world that enable an evolving, innovative system.

The global payments landscape is undergoing unprecedented change. Since the first minted coins emerged in Anatolia (now Turkey) around 600BC, people have used hard currency to buy and pay for goods and services. But with rapidly evolving technologies, market disruptors and digital connectivity all driving a shift to a cashless world, global regulators are striving to keep up with innovations in the payments sector and rising consumer demand.
There is a renewed focus on open banking initiatives and the introduction of regulatory “sandboxes” (allowing start-ups to test a new product or service for up to a year without a licence) to support the safe and phased development of new products and services, the CEO of the Australian Payments Network, Dr Leila Fourie, says.
“Globally, regulators are looking at how to deliver improved consumer outcomes, offering them more choice across the economy,” Fourie says.
 Open banking underway
The days of one bank being the centre of a consumer’s banking and payments universe are over. With the move to open banking, consumers can share their banking data between institutions and entities, if they so choose. Against this backdrop, one of the biggest regulatory upheavals to hit the payments sector is the European Union’s Revised Payment Service Directive, or PSD2.
The next 10 years will see profound changes to all aspects of the economy
Coming into effect in member states in January 2018, PSD2 compels banks to provide third parties with access to customer data and enable those third parties to initiate a transaction, once authorised by the customer. Entities outside the host bank, such as non-banks and fintechs, will be able to build apps and services around the banking interface. This overhaul is expected to drive innovation in the payments sector, as well as open up competition and facilitate a host of new personal finance management applications.
The move towards more open banking has also helped drive local discussions on the issue. In Australia, the federal government committed in its 2017-18 budget to introduce an open banking regime. It has commissioned an independent review to advise on the best model, which has been delivered to Treasurer Scott Morrison at the end of 2017. The terms of reference imply that the move to open banking in Australia is largely inevitable.
The review’s mandate is to make recommendations to the Treasurer on: the most appropriate model for open banking in Australia; a regulatory framework under which an open banking regime should operate; and a roadmap and timetable for its implementation.
While Australia’s review proceeds, South Korea has already gone a step further, launching a platform that will serve as a database of consumer banking information upon which financial institutions can build services. The aim is to stimulate fintech development.

On a cashless course

A predominant feature of the payments marketplace is the move towards a cashless economy. Indeed, some jurisdictions are actively working to hasten the uptake of digital payments and the demise of cash.
The European Payments Council has developed the single euro payments area project (SEPA), which enables consumers to pay in euros with a single card and account across 34 countries and territories. The national regulations underpinning SEPA have been in force since 2009 and on 21 November 2017, instant SEPA payments of up to €15,000 ($A23,500) within 10 seconds began.
In India, demonetisation regulations introduced in November 2016 triggered a rise in adoption of the mobile wallet - these store credit card or debit card information in digital form on a mobile device, enabling consumers to make payments with their smartphone, tablet or even smartwatch, rather than a plastic card.
The next 10 years will see profound changes to all aspects of the economy
While these measures were ostensibly a way of cracking down on the shadow economy and use of illicit and counterfeit cash, they will help propel the mobile payments market in India to reach a forecast $US4.4 billion by 2022, representing growth of 150 per cent in five years.
In a bid to become a top-20 economy by 2020, Nigeria has introduced a cashless society project. In April 2017, the Central Bank of Nigeria reintroduced cash-handling charges of up to 2 per cent for cash deposits and withdrawals. Ghana has a carrot rather than stick approach to digitising payments, paying e-wallet customers up to 7 per cent interest on balances.
The global payments regulation space is clearly moving rapidly. “The next 10 years will see profound changes to all aspects of the economy, as three interdependent trends mature: the extent to which everyone is connected; the opening up of networks; and the layering of rich services on these open and connected networks,” Fourie says.
“Alongside this development, payments will become increasingly digital, integrated and embedded as a range of organisations, both globally and nationally, strive to deliver a secure and seamless payment experience.”
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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