In 2020, our Payments Direction team was focused on working with the industry to develop a view of what the ecosystem could look like in 2030 and a roadmap that identified the industry’s priorities and initiatives over the medium term. This work resulted in our Payments Modernisation Plan (PMP) discussion document, which we sought feedback on at the end of last year.
The PMP identified the building blocks that will be required to modernise New Zealand’s payments ecosystem and deliver that 2030 future view. It is based on five guiding principles that put Kiwis at the heart of everything we do. The principles are to:
- help Kiwis achieve their financial goals,
- improve financial inclusion,
- build a more productive New Zealand,
- improve the financial resilience of Kiwi businesses and consumers, and
- support competition and innovation to give Kiwis more choice in payments.
The initial stakeholder feedback round for the PMP closed in December and through this process we received feedback which will help us further refine the plan.
While developing the draft plan, one of the key areas identified by our PMP industry working group was a need to understand how real-time capabilities could fit into our future roadmap before we finalise it. This is now being done through a real-time working group that has been established with representatives from our Participant and Member organisations and is now in a discovery sprint phase.
As part of this discovery phase, we’re collating work previously done by Payments Direction to assess a range of real-time payments capabilities in a New Zealand context. We’ll then go through a strategic options assessment which will be sent to industry stakeholders for feedback. Once we have their feedback, we can then finalise our payments modernisation strategic roadmap and progress to next steps.
In November 2022, the payments industry will move from the current MT payment messaging type to the ISO20022 messaging format for cross-border transactions and domestic payments that go through our High Value Clearing System (HVCS). We are managing this industry project to design the messaging specification and message usage guidelines that will be used by Participants of our HVCS.
The move to ISO20022 as a messaging standard allows for richer and more granular payment information to be attached to a transaction. This will benefit both our HVCS Participants, but ultimately also end users in terms of the payment information that will accompany those transactions.
Around 30 representatives from across our Participant organisations, SWIFT, and the Reserve Bank of New Zealand (RBNZ) are involved in the working groups and have come together on a regular basis since last year. Once the standards have been finalised, Participant organisations will then start to make changes to their own systems to meet the new industry specifications.
SWIFT is acting as the subject matter expert on this project by providing guidance, training, and support about ISO2022 and the related global standards.
Meanwhile our Consumer Electronic Clearing System (CECS) Management Committee is developing a standard for the CECS rule set to send chip data from domestic ATM acquirers to domestic card issuers. This will help enable issuers to decline card transactions that are likely counterfeit, therefore contributing to the reduction of card fraud and at the same time continuing to instil confidence in the safety of New Zealand’s payments system.
Our API Centre is well underway with its 2021 programme of work. Key to this programme is investigating how we can support streamlined partnering between API Providers and API Third Party Standards Users. The Terms of Reference (ToR) has been signed off to begin this project and we’re in the process of planning and setting up the industry working group that will drive it forward. We expect to involve API Standards Users and other key stakeholders in this work as it progresses.
Last year we worked with the API Council to update our vision and strategic statements of intent for the API Centre, which we’ll be publishing on the centre’s website soon. They are now guiding the centre’s aspirations and work programme. The statements are guiding the work we are undertaking this year on streamlining the fundamental aspects of the API Centre framework, which includes policies and governance processes that enable the centre to be more efficient, effective, inclusive, and responsive.
The centre is in the last stages of finalising the scope of work for v3.0 of our Payment Initiation and Account Information API standards. We consulted on seven potential functionalities that could fall into the scope for v3.0. We sent out a detailed draft scope and impact assessment questionnaire to API Centre Standards Users and Community Contributors in February as part of the consultation process for the scope.
Some of the key themes to emerge from the feedback we received back included:
- Making sure v3.0 is well-targeted, delivers material benefits and the scope isn’t too wide.
- Getting the timeline right so work on v3.0 does not impact on Standards Users’ v2.1 implementation and adoption efforts. At the same time, the industry wants to maintain momentum.
- Extending the reach of existing functionality across a wide range of customer groups, particularly those with business banking accounts.
- Ensuring v3.0 will remain relevant in any potential New Zealand Consumer Data Right regime.
Another big focus for the API Centre this year is around supporting Standards Users to get up and running and using v2.1 standards, as we focus working on not only the delivery of standards but also solving some key operational issues at an industry level to ensure consistency.
If you’re interested in finding out in more detail about the centre’s work, make sure you’re signed up to receive our API Centre email updates.
We recently made a submission on the Ministry of Business, Innovation and Employment’s issues paper on ‘Regulating to reduce Merchant Service Fees’, and a copy of our submission is available on our website. Our submission noted that card-based payments are only one component of an efficient retail payment system, which also includes account-to-account payments. We outlined the important role Payments NZ and our industry participants have played in the self-governance of the payment system, and the impact this has had in creating the safe, efficient, open, interoperable, and innovative retail payment system we have today.
Meanwhile, the Financial Market Infrastructures (FMI) Bill, which establishes a new regulatory regime for FMIs, is at the third reading stage in Parliament. Once the Bill has been enacted, the RBNZ will be engaging with us further in relation to the development and implementation of its new regulatory framework and how that may impact our HVCS and Settlement Before Interchange (SBI) systems.
We’ve been busy planning our industry events scheduled for this year, while keeping in mind the ongoing challenges of travel and other restrictions.
We’ll kick off the year with our first strategic forum in April in Auckland. Our strategic forums provide an opportunity for representatives from our Participant and Member organisations to come together and talk about strategic issues that impact our industry and identify any upcoming opportunities.
In 2020, we held our first The Hub online series. It was very well-received, so we’ll be running another one this year. We hope to include some in-person networking as well to catch up with the industry. We’re currently working on the programme and will be announcing more details soon, including how you can register. If you’re interested in being a sponsor for this series, please get in touch with our Events Manager, Liza Beach at [email protected]
If you’re interested in attending The Hub series or receiving updates about the event, make sure you’re on our mailing list for The Hub. Use the ‘Manage your email subscriptions’ link at the bottom of the company update email you received and make sure the checkbox for The Hub is ticked. If you're completely new to our mailing lists, you can sign up here to stay informed.