The new offering allows people to securely verify their identity to third parties without repeatedly sharing unnecessary data about themselves, according to ConnectID officials.

Instead of providing proof of identity documents, customers can now ask a participating business to verify their information using organizations they already trust with their data, such as their bank.

“This new service will help customers reduce oversharing their data, giving them greater control over what data is being shared and used and choosing which organizations they trust to store their personal information,” said Andrew Black, ConnectID’s managing director.

“What’s important to know is that ConnectID is not creating new honeypots of data; in fact, we never see or store customer data,” he added. “And from a business perspective, the ability to collect only what is required means they can comply with legislation and reduce their risk profile.”

AP+ resulted from a complex series of negotiations that saw Australia’s competition regulator permitting the country’s three largest domestic payment companies, BPAY Group, Eftpos and NPP Australia, to merge into a single entity in September 2021.

Eftpos Australia initially developed ConnectID. In 2021, it became the first non-government operator of a digital identity exchange to be accredited under the Australian government’s Trusted Digital Identity Framework, which sets standards, rules and guidelines based on international best practices.

Since then, the service has had strong industry support from various “strategic partners,” including Australia’s four major banks. So far, only Commonwealth Bank and National Australia Bank have made ConnectID available to their customers for “a number of use cases.”

“We recognize this is something that no individual bank can deliver effectively on its own, and it made sense for us to work with AP+, which is an experienced network operator and has existing relationships with the banks,” said Angela Mentis, chief digital, data and analytics officer at NAB. The other two major banks, Westpac and ANZ, have yet to offer ConnectID services to their customers.

Michele Bullock has been appointed as the next governor of the Reserve Bank of Australia (RBA) for a seven‑year term beginning September 18. She will be the ninth RBA governor and the first woman to lead Australia’s Central Bank in its 63‑year history.

Bullock, who joined the central bank as an analyst in 1985, has been deputy governor since April 2022. She takes over from incumbent Philip Lowe, who’s initial seven-year term was not extended.

Australian Federal Treasurer Jim Chalmers said Bullock’s appointment comes “after a long, methodical, considered and consultative process.”

The news was welcomed by Australia’s business and banking sectors. Bill Evans, chief economist at Westpac Banking Corporation, said this move continues “a recent tradition” at the RBA where the deputy governor steps up once the governor’s term is completed.

Bullock’s arrival in the top job comes just as major changes recommended by an independent review of the RBA are being implemented. Notably, RBA board meetings will be much longer, with greater staff input beforehand, and there will be fewer such meetings: down to eight from 11 per year. Also, the bank will explain its decisions in more detail.

Ahead of these and other long-term changes, the new RBA governor will continue efforts to rein in consumer price inflation, which hit a high of 7.8% in December 2022.

Although inflation is predicted to print at around 6.3% later this year, it remains well above the RBA’s target range of 2%-3%. Thus, more rate increases are expected on top of the cumulative four percentage point increase in the official cash rate since May 2022, up from a historic low of 0.1%.

Australia’s unemployment rate is also predicted to rise—from 3.5% to 4.5% by 2024. This is a sore point for Australia’s larger trade unions, who have called for a “reset” of the RBA’s view that such a rise in unemployment is needed to combat inflation.

Bullock will be in the spotlight to explain any actions taken by the RBA to counter these emerging trends.          

Australia’s first payment service providers have started offering PayTo to merchant and business customers. PayTo is expected to become a digital alternative to direct debit for retail customers and to add certainty to B2B transactions.

The service was developed over several years by Australia’s real-time national payments infrastructure provider, the New Payments Platform (NPP), and a consortium of financial services firms.

PayTo is expected to become a digital alternative to periodic payments and other similar arrangements.

To succeed, it will need to remove uncertainty from the payment process, reduce inefficiencies and greatly reduce the risk of fraud, according to Katrina Stuart, managing director of NPP Australia. “For consumers, PayTo brings much better visibility and control over their payment arrangements, providing a far superior digital experience compared to the now outdated direct debit system.”

Companies benefit from the upfront validation that the customer’s account details are correct when a PayTo Agreement is authorized.

It works by enabling a merchant or business to establish a ‘PayTo Agreement’ with users. These agreements are then stored within a customer’s internet banking or mobile banking app, where they can be viewed and managed, making it a secure option for the customer.

PayTo checks upfront for adequate funds in the paying customer’s account when a payment is initiated, reducing rejected payments and manual exception handling.

“Businesses and corporates will also be able to use PayTo to authorize a third party to facilitate real-time payments on their behalf, such as payroll and accounts payable,” says Stuart.

She confirms that the earliest adopters will include specialist merchant payments firms and fintechs: Azupay, Ezypay, Monoova, Paypa Plane and Zai–all sponsored by NPP participant Cuscal–and Zepto that will offer PayTo services as an NPP connected institution.

The list of banks Stuart expects to offer PayTo options to their customers “in coming months” includes the country’s largest bank, Commonwealth Bank of Australia and its subsidiary BankWest, along with Australia’s fifth largest, Bendigo Bank, and large mutuals Great Southern Bank, People’s Choice Credit Union and RACQ.

Most remaining customers will have PayTo enabled on their accounts by April 2023.

The use of reverse factoring, a type of supply-chain financing solution, has been steadily increasing across the globe. In reverse factoring, a company or its financing partner pays a supplier’s invoice upfront or before the usual payment date, but at a discounted rate. Credit rating agency Fitch Ratings warned in 2018 that reverse factoring effectively served as a “debt loophole,” and that use of this financing instrument has ballooned, though no one knows by exactly how much.

One reason behind the greater use of reverse factoring has been corporations’ increasing delays in payments to their suppliers. This was highlighted in October, when UGL Engineering of Australia pushed its payment deadline to suppliers to 65 days from the end of the month in which invoices are received.

UGL is owned by Cimic Group, Australia’s largest construction company. Before this change, contractors dealing with Cimic were paid within 30 days. UGL told its suppliers if they wanted to be paid sooner than the new 65-day period, they should work with its financing partner, Greensill Capital. But UGL didn’t specify the cost of the timelier payment.

Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), whose office has conducted several investigations into payment terms, condemned UGL’s actions. In a statement posted in February on the office’s website, she said if big businesses continues to flout reasonable payment terms, she will have no choice but to recommend federal legislation requiring all businesses to be paid in 30 days. The Australian government has been operating the ASBFEO office since March 2016.

“The economic case for faster payment times is clear, not just in Australia but internationally,” Carnell said in the statement. She cited a Harvard Business School study that found that the adoption of 15-day payment times by the administration of former US President Barack Obama created 75,000 jobs and delivered an additional $6 billion to US workers’ pay.

Thorburn is perhaps the most powerful figure brought down so far in the 13-month-long inquiry into misconduct in the banking, pensions and finance industries. Recruited by NAB in 2005 as head of retail banking, he was promoted to country head of its New Zealand operations before becoming group chief executive in 2014. Under his watch, however, NAB was widely seen to have developed a culture of greed.

Thorburn and NAB chairman Ken Henry—who was credited with helping Australia through the global financial crisis as head of Treasury—attracted particular attention for their apparent lack of contrition in the witness box. Kenneth Hayne, a former High Court justice who headed the inquiry, noted in his final report that he was “not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly.” Both Henry and Thorburn announced their resignation on February 7.

The proceedings were webcast live. The sight of bank executives in the glare of unrelenting questioning caught the attention of the public, as did admissions of practices such as charging fees for no service (FFNS) to customers, including the estates of long-dead customers. Evidence showed this practice was both deliberate and profitable. The cost to NAB’s customers of FFNS alone is estimated at more than A$100 million (US$71.2 million), which the bank has promised to repay.

NAB was by no means the only institution singled out in the inquiry. Other high-profile scalps include CEO Craig Meller and Chairwoman Catherine Brenner of AMP, Australia’s largest wealth manager. They left last April over staff revelations to the regulator that AMP had charged fees for no service on more than 20 occasions. Hayne’s report disclosed recommendations for a further two dozen prosecutions, including of employees at three of Australia’s four major banks.

Sibos 2018, the global banking technology expo, wasback in Sydney, Australia for the first time in a dozenyears, and the evolution in payments in the interveningperiod is startling.

The opening plenary was fronted by Shayne Elliott,chief executive of ANZ Group, who suggested “partnering andopening up … as a business model” as the theme for Sibos 2018.Elliot sees real-time payments technology, including Australia’seight-months-old New Payments Platform, as a key component ofthe bank of the future. Another is open banking: giving customersaccess to and direct ownership of their data. “When these twocome together, we’ll see new revenue streams,” Elliott predicted.

These themes tied into a third strand that emerged from bankers’comments: their fear of fintechs has unambiguously morphedinto recognition that it’s better to co-operate than compete.“Collaboration between fintechs and banks could bring somethingmore than either of them could offer separately,” Fabrice Denele,senior vice president for partnerships and interbank relationshipsand head of consumer solutions at Natixis, said at a panel discussion.The two will “find new ways to do business,” he predicted.

Other speakers were inclined to agree that a partnership modelis the way forward. “The banks and the other financial institutionswill figure out what is their sweet spot, what is the secret sauce thatwe bring to the table,” said Thomas Nielsen, chief digital officer ofDeutsche Bank’s global transaction banking arm. “I think there’splenty of room” for collaboration with fintechs.European banks now have little choice, with the EU’s PaymentServices Directive 2 in place. PSD2 requires financial institutionsserving European markets to allow third-party providers access topayments, customer transactions, and account data, once customerconsent is given.

Sibos 2018 directed special attention to the emerging openbankingregime in Australia itself. Regulators there have beenwatching developments in Europe and the UK, and last year tappedScott Farrell, a partner at major law firm King & Wood Mallesons,to lead a review of how an open banking regime might operatein Australia. Farrell’s report, presented last December, made 50recommendations, all accepted by the Australian government.

Importantly, Farrell recommended government agencies run allaspects of the system, rather than allowing the banks to set theirown rules. The report pushed for: a comprehensive educationcampaign to be delivered by all participants, including fintechs andgovernment; access to data to require informed, explicit customerconsent with the ability to opt out; the whole concept to be formallyevaluated 12 months after commencement.

The first phase of open banking in Australia is scheduled to

begin in July 2019, with initial access limited to credit/debit

card, deposit and transaction account data from the major banks.

Implementing the first tranche of recommendations is likely to be

very tight, given that crucial new legislation is still being drafted,

as are some key data access standards.

In a panel discussion on “Open Banking Perspectives,” Farrell

explained that, in contrast to other jurisdictions, the introduction

of open banking in Australia is just the first of an ambitious set

of economy-wide changes. Banking is the first sector to which

Australia’s new Consumer Data Right initiative—giving consumers

more control of their data—is to be applied, with energy and

telecommunications next.

“The fact that open banking goes beyond the industry is

encouraging, as it allows industries to share data responsibly and

ultimately, perhaps, transform their business models,” said panelist

Nigel Dobson, banking services business domain lead at ANZ.

Open data elevates data to a level at or above money, he suggested.

“If you do that, it introduces the need for checks and balances

and security and liability,” said Dobson. “It does add friction to

the process. If you want assurance, you have to expect friction to

ensure confidence in the system. And to have the data economy

genuinely mature, there will be these steps.”

The relationship between fintechs and the established transaction-banking players in Australia reflects developments elsewhere in the world, along with some important local influences.

One key factor at play in Australia is the dominance of its financial sector by four major banks, who collectively hold more than 80% of most aspects of the domestic market—which makes it hard for challengers to get traction; despite early promise, most upstart fintechs have struggled to make a dent in any incumbent player’s market share. Even global giant Apple Pay is yet to reach a deal with four of the five largest retail banks.

Stuart Stoyan, outgoing chairman of FinTech Australia and co-founder of MoneyPlace, one of the county’s most successful peer-to-peer lending startups, sees collaboration with second-tier regional banks and mutuals outside the Big Four as the most promising trend for his sector. “The problem with large banks is that they have an existing business they are trying to protect,” he says. “They also believe that they have the best-in-class offering.”

His own experience shows how collaboration can strengthen innovators: MoneyPlace was a startup P2P lender but lacked the scale needed for long-term survival, until Auswide—a small, ambitious regional mutual bank based in coastal Queensland—took a stake in the company. The payoff for Auswide was a capacity to assess risk and offer personal loans to its customers, and while it sold its stake in January, it will remain a strategic partner.

More recently, a deal with Australia’s largest nonbank lender, Liberty Financial, has allowed Liberty’s substantial mortgage-brokers’ network to offer business and personal loans through MoneyPlace. For MoneyPlace, the deal brings in 20 years of data on Liberty borrowers, which it can use to refine its assessements.

Collaboration has also worked well for other Aussie startups looking for the scale that partnership with a major financial-services player will bring. Simple KYC, a 3-year-old startup, has been taken under the wing of American Express. “This solution is tackling a regulatory issue, and we believe it also provides American Express with a premium customer experience,” says Bevin Aston, director of product management for Global Corporate Services at American Express Asia-Pacific and Australia. “Simple KYC has been able to simplify the sometimes-tedious processes associated with offline data to create easy and efficient onboarding processes for our customers. We are taking the best practice in Australia and expanding its use around the Asia-Pacific region, including Singapore, Hong Kong and possibly Japan in the future.”

Eric Frost, Simple KYC’s founder, explains in more detail: “The time to onboard new clients was in some cases cut by up to 50%. That is a reduction from 20 days to, sometimes, 10, depending on how they deploy the system.”

Simple KYC identifies the ownership structure of the new client, overlaid with the financial institution’s own policies, to identify what’s needed to open up an account. In practical terms, this means bank clients are able to cut five, 10 or 15 days off the onboarding process for new small-business clients. For a larger client, Frost notes, it can take 60 to 90 days, depending on the documents and complexity involved.

“We help them identify that complexity up front, so that they know what documents are required,” he explains. “Reducing the sales cycle will make for a better customer experience.” Other more-specialized information requires that a system tap into other information sources—for example, identifying politically exposed persons. In some ways, it’s an aggregator of all the systems necessary to plug the gaps in a financial institution’s onboarding system.

Another boost to the local payments industry is the arrival of new state-of-the-art infrastructure.

Changing Infrastructure

Ian Pollari, partner at KPMG Australia and co-leader of his firm’s global fintech practice, describes the two biggest influences emerging in payments as essentially “hard infrastructure” assets. One is the decision by the Australian Stock Exchange (ASX) to move to a blockchain-based system, but the most important, in Pollari’s view, is the New Payments Platform.

Backed by 13 organizations, including the biggest banks, the NPP was developed by SWIFT after a very competitive tendering process and uses the ISO 20022 message schema. This is the global standard for electronic data interchange between financial institutions. Real-time settlement occurs via the Reserve Bank of Australia’s Fast Settlement Service. The NPP was opened for public access in February after several months of testing.

Pollari says that when designing and building the NPP, Australia has been able to observe similar systems around the world—for instance, the UK’s Faster Payments—and learn what works well and where improvements were needed. “It’s been designed to both provide the rails as critical infrastructure, and allow for banks, nonbanks, corporates and fintechs to work together to create new services or overlays,” he says.

So far, BPAY, a bill-payments scheme owned by Australia’s four major banks, is running the first of these overlays, known as Osko. This is a simple peer-to-peer payment (and request-to-pay) system based on known identifiers, such as a payee’s mobile number, email address or Australian Business Number. It also allows messages of up to 280 characters, including emojis, to accompany the payment.

Pollari, however, expects the next set of overlay services to deliver much more than simple low-value payments. “It’s not just [faster] payments. The rich data that can be sent with each transaction is an opportunity to remove inefficiencies, enhance transparency and allow for new value-added services to be created for corporate clients.”

The ASX shift to distributed ledger technology (DLT), also called blockchain, is the other piece of hard infrastructure that Pollari rates highly. A deal with Digital Asset Holdings will replace the ASX’s 1994-vintage CHESS (Clearing House Electronic Subregister System) platform, making it the first major exchange to adopt DLT.

“We believe that using DLT to replace CHESS will enable our customers to develop new services and reduce their costs, and it will put Australia at the forefront of innovation in financial markets,” Dominic Stevens, ASX managing director and CEO, said in a December 2017 statement. This has set the pace and direction of blockchain in Australia—it may be back or middle office driven rather than a crypocurrency-led payments revival. This is an example of so-called regtech performing tasks such as customer onboarding, market surveillance and monitoring, regulatory reporting, and KYC and AML measures.

Australian regulators are well-regarded around the world, Pollari says, and so its “regtech will get a significant amount of attention and interest from banks in the corporate and wholesale area in particular.”

One early-stage example is identitii, an Australian distributed-ledger KYC-monitoring solution for cross-border payments that is being tested around the world. This is an Australian company that uses blockchain technology skewed very much toward corporate payments. The firm uses patented tokenization technology that allows both parties of a payment transaction to be verified in real time.

“Identitii has created a platform for banks to exchange rich information about payments over legacy payment networks like SWIFT, RTGS and ACH,” says co-founder Nick Armstrong. “The problem we are solving is a lack of information in payment messages, which results in slow manual investigations, poor customer experience and risk of noncompliance.”

Already more than 600 fintechs dot the Australian landscape; and although most are clustered in retail payments and P2P lending, the relationship between payments innovation and Australia’s fintechs is set to expand further.