RBA seeks industry input on digital wallets and mobile payment apps

The Reserve Bank of Australia (RBA) has earlier today released an Issues Paper as the first stage of its Review of Retail Payments Regulation, which will take place over the coming year. The Issues Paper discusses and seeks stakeholder views on a number of potential issues that could be covered by the Review, such as surcharging and ‘no-surcharge’ rules, and issues relating to digital wallets and tokenisation of payments.

The RBA notes that, in recent years, technology firms including Apple, Google and Samsung have launched digital wallets for use in their respective mobile platforms. While not all card issuers in the Australian market currently support each digital wallet, many card issuers, including some smaller banks, credit unions and building societies support one or more digital wallets.

Mobile platforms and handset manufacturers may have rules relating to access to different aspects of the functionality in their devices. Google’s Android has supported third-party use of NFC functionality, including for payment applications, since 2013. By contrast, until recently, Apple prevented third-party use of NFC functionality in the iPhone, and it still does not provide access for third parties to create their own payment applications that directly use NFC functionality.

In July 2016, this was the subject of an application to the ACCC by four banks who sought authorisation to negotiate collectively with Apple regarding access to the iPhone’s embedded NFC controller and the Apple App Store, in order to provide their own digital wallets with embedded access to the NFC without relying on Apple Pay. In March 2017, the ACCC denied the application. At the time of the ACCC decision, only one of the four major banks and a number of smaller institutions using an aggregator had enabled their cardholders to use Apple Pay. At present, more than 80 financial institutions, including three of the four major banks, have enabled Apple Pay.

Given the growing importance of mobile devices and digital wallets in card transactions, the RBA would be interested in receiving information from stakeholders on the additional functionality and benefits provided, as well as the costs involved. The Bank seeks stakeholder views on any issues related to access to such platforms. In particular, this could include views on whether new entrants have appropriate access to digital wallets and if a broadening in third-party access to NFC functionality (with appropriate security) could have benefits for competition and efficiency in the market for digital wallets.

The RBA would also like to know more about QR-code based payments. The most prominent cases are Alipay and WeChat Pay, the Chinese mobile payment applications that have gained a large share of the payments market in China.

NPP Australia, the operator of Australia’s fast retail payments system NPP, has recently published a QR code standard for use of QR codes on the NPP. Additionally, the payments industry association AusPayNet is currently considering incorporating the EMVCo QR code specification (or aspects of it) into the industry rules that govern participation in various clearing streams in Australia, such as cards and the bulk electronic clearing system. AusPayNet is also investigating industry interest in creating a single QR code interface, similar to the Singapore QR Code developed by the Monetary Authority of Singapore (MAS).

While these types of mobile payment applications are not widely used in Australia, the Bank understands that there are now a number of merchants accepting QR-code based payments. The RBA would be interested in receiving information from stakeholders about the current extent of their use, any future proposed adoption of QR-code based payments, and any potential policy issues they raise.

The closing date for submissions is January 31, 2020.