King welcomes roadmap to digital age payments system

The government has laid out a roadmap for a modern, digital payments system that will help to boost the productivity of banks and the broader economy, says Westpac CEO Peter King.

Treasurer Jim Chalmers has announced a five-point plan to overhaul the country’s payments infrastructure, including phasing out cheques by 2030, transitioning from the Bulk Electronic Clearing System (BECS) to the New Payments Platform (NPP), and stronger regulation for technology companies providing payments services, including digital wallets. 

“The best thing for business is that it gives us certainty - a long-term roadmap that we can build towards,” King said at an Australian Banking Association conference in Sydney. “For the productivity of the banks and the economy, having a direction and moving that way is fantastic.” 

One big advantage of the NPP is that, unlike BECS, the payer can verify the name of the account they’re sending money to, for example via an email address or mobile phone number, offering an important layer of security as banks look to counter the growing scourge of scams.

The government has set a target to fully transition to the NPP in five years, which could be challenging given that bulk payments such as payrolls, social security and superannuation are still largely done over BECS. Still, King was confident the timeline could be met. 

“It is a big change, so we’ll need all of the corporates, as well as the banks, and consumers, to get themselves on the NPP,” King said. That means registering a mobile, email or ABN with PayID – which provides a unique identifier to give the payer confidence that they’re transferring money to the right person or business.

Transitioning to the NPP was in keeping with the growth of the digital economy, providing faster, more secure, payments. As it grows in scale, so the cost of payments would also reduce, King added.  

The Westpac chief also welcomed Chalmers’ move to give the Reserve Bank more power to regulate digital wallets, which have surged in popularity in recent years. 

“It makes sense that we regulate all payments mechanisms equally,” King said. “The wallet in your phone has great capability, it provides great consumer experiences and service, but it’s not regulated by the country and I think it should be.”

Another part of Chalmers’ plan is to encourage more use of the Consumer Data Right, which allows consumers to give an accredited business access to their consumer data so they can offer products and services tailored to their needs. 

King has been critical of the CDR in the past due to its low uptake among consumers, but said it could have value if scaled up.

“We are looking to ingest data through CDR for mortgage applications – that is providing a little bit of benefit, but we’ve got to get it scaled. There’s no use putting more functionality onto a system if it’s not going to scale,” King said.

Turning to the broader economy, King said the bank had seen the volume of calls to its hardship lines increase under the strain of twelve RBA interest rate increases since May, 2022. 

“That’s not translating to actual hardship arrangements at this point,” he said, while acknowledging that early-stage mortgage delinquencies had ticked up in the six months to March. “Certainly, a lot more people are testing the waters, wanting to understand what’s available.

“We‘re very focused on making sure we’re ready to help customers and recommend they call us early if they need help.”

When considering the outlook for interest rates, King noted that there were clear signs that goods inflation was coming down, although services inflation remained sticky.

“The key metric there is employment – employment is still very strong, but interest rates will impact that at some point in the sense that the level of employment in the economy will come off a little bit.”