Payment System Reforms: Innovation and Competition (Australia)

Philip Lowe, Assistant Governor (Financial System) at the Reserve Bank of Australia, spoke today at the Cards & Payments Australasia 2009 conference being held in Sydney, Australia. In his speech, he addressed "firstly, the recent reforms of the ATM system; secondly, the conclusions of last year’s review of the reforms to the card payment systems; and thirdly, the architecture and governance of Australia’s bilateral systems." In his discussion of the reforms, he comments, in particular, about online payments:

The Bank’s recent focus on online payments reflects a couple of considerations. One is that in many situations, consumers wishing to buy goods online have few payment choices other than to use a card issued by the international schemes. This lack of choice weakens competition, and is likely to become a bigger issue as online commerce continues to grow.

Another consideration is that fraud rates on online transactions appear to be steadily increasing. Almost half the fraud on credit cards occurs in situations where the merchant does not physically see the card, with the fraud rate increasing by around 50 per cent over the past year. If this trend were to continue, it could undermine consumer confidence in transacting online which would have obvious costs.