SYDNEY – Reserve Bank of Australia (RBA) governor Philip Lowe has called on the nation’s lenders to intensify efforts to reduce the cost of payments and increase their speed, including for cross-border transactions.
“Slow progress by the major banks imposes a cost on the rest of the industry,” Mr Lowe said in a speech on Wednesday, referring to delays in launching a direct debit service that allows businesses to receive real-time payments from customers’ bank accounts.
“Investments have to be put on hold as successful uptake of the system requires a critical mass to be operational,” Mr Lowe said. The RBA now expects the service to be launched in April 2023.
Mr Lowe did not talk about monetary policy or the outlook for the Australian economy in the speech, his last for the year, according to the RBA’s website.
He also restated his frustration at the persistent high cost of international payments from Australia, undermining the nation’s commitment to make such payments cheaper, faster, more transparent and easier to access.
“Progress is being made in this area, but it is slow,” he said. “There is a lot more to be done here, and we need the assistance of Australia’s financial institutions to make further improvements.”
The nation’s four major banks – Commonwealth Bank of Australia, Westpac Banking, Australia and New Zealand Banking Group, and National Australia Bank – together hold 72 per cent market share, meaning there is limited pressure on them to innovate.
According to data from the Society for Worldwide Interbank Financial Telecommunications (Swift), more than 80 per cent of the time taken for a cross-border payment to reach an Australian recipient is due to the final Australian dollar leg, Mr Lowe said.
“A number of other comparable countries process incoming payments more quickly, including some in similar time zones. We need to do better here,” the RBA chief said.
Australia’s financial industry is committed to providing a new international payments business service that will allow the final Australian dollar leg of inbound payment to be processed much faster by December 2023, Mr Lowe said.
“Delays will hurt Australian customers and hold back Australia’s progress in meeting its G-20 (Group of 20) commitments,” he added.
In a separate statement shortly before Mr Lowe’s address, Treasurer Jim Chalmers said the government will in 2023 update and strengthen Australia’s payments system and establish a framework for the licensing and regulation of crypto service providers.
“Unfortunately, our regulatory architecture has not kept pace with changes in the market, including the advent of new digital products and service,” Mr Chalmers said.
“We will work closely with regulators, industry, and consumer and business advocacy groups over the coming months to get these reforms right.” BLOOMBERG