Exploring an evolving payments landscape with the Commonwealth Bank of Australia
- "Based on industry data, more than 30% of Australians have been using mobile wallets when they make payments instore. As compared to US, that’s 1.7% and for Germany at 6.1%, and I see that trend continue to grow."
- "Banks have a large and trusting customer base and extensive in-person and digital distribution network, which provides a strong starting point for gaining scale with payments innovation. But the growth of non-bank disruptors proves that customers are willing to switch for convenience, lower cost, and other personalised benefits that help them to achieve specific tasks."
- "Banks have built a lot of payments infrastructure and we are the primary participants, but we also need to ensure the regulatory settings are also capturing the new entrants or new participants in order to maintain ongoing safety and security and trust in the payment’s ecosystem."
In the VISION by Protiviti podcast, Susan Yang, General Manager, International Payments and Network Management at the Commonwealth Bank of Australia, sits down with a pair of Protiviti payments experts to discuss how she and her team are leading the ISO 20022 program and the digital international money transfer (IMT) strategy execution for CBA. Protiviti’s Ruby Chen and Rupesh Mahto ask Yang about the future of the payments space, including the impact of emerging technologies such as cryptocurrencies and blockchain, as well as the increasing number of international payment remittance fintechs entering the market.
In this podcast:
1:15 - Australia’s payments ecosystem maturity
4:30 - How are banks positioning themselves to stay competitive in the payments space
7:01 - International payments – banks and other players
9:09 - Emerging risks for banks and future growth
11:50 - The future of payments in Australia, near term and long term
Joe Kornik: Welcome to the VISION by Protiviti podcast. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-suite and executive boardrooms worldwide. Today, we’re exploring the future of money and I’m excited to welcome Susan Yang to the program.
Susan is General Manager, High Value and International Payments at the Commonwealth Bank of Australia where she and her team are leading the ISO 20022 program and the digital IMT strategy execution for CBA. Susan spends much of her time exploring cross-border payments with the domestic ISO 20022 industry migration steering committee, the domestic Cross-Border Payments Advisory Council, and the Global Cross-Border Payments Interoperability and Extension Taskforce. Susan, thank you so much for joining us today.
Susan Yang: Happy to be here.
Kornik: I’m pleased to hand off interviewing duties today to my Protiviti colleagues, Director Ruby Chen and Senior Director Rupesh Mahto. Ruby, I’ll turn it over to you to begin.
Ruby Chen: Thank you, Joe. Hi, Susan. It’s so wonderful to have you with us today. We’re really excited to speak to you, so let’s jump into the interview questions. The first one we have is around your views on Australia’s payment ecosystem maturity. There have been significant changes to payment technology and capability across the globe recently, including real-time payments, mobile payment systems, near-field communication technology, QR code payments, open banking, cryptocurrencies, blockchain, and many of these terms were unknown practically 10 years ago, yet now they’re a fundamental part of the payments landscape. Where do you see Australia today on the maturity map?
Yang: Ruby, I’ll touch upon a few really important recent changes in the domestic payments’ world. Let’s maybe start and have a look at the real-time payments. There are more than 60 countries, I think, that have real-time payment systems globally now and then in Australia, we launched a real-time payment system, NPP or New Payments Platform, and it’s data-rich payment, so it allows for 280 characters inclusive of foreign characters and even emojis. It also has allowed for addressing service, so PayIDs enable payments to be made to net mobile, email address, and business registration numbers.
The NPP really provides a solid foundation for ongoing innovations with the most recent addition of PayTo, so a new efficient way to enable payer customers to preauthorize real-time payments from their bank accounts.
Now, let’s have a look at NFC. Australia is one of the biggest users globally for NFC contactless payments. Based on industry data, more than 30% Australians have been using mobile wallets when they make payments instore. As compared to US, that’s 1.7% and for Germany at 6.1%, and I see that trend continue to grow. Because of the presence of big technology companies in digital wallets, the regulators are now considering how to ensure ongoing competition and innovation in this space.
Because we have such a mature NFC infrastructure, QR codes have been taking off to the same extent as in some other countries such as India or China. However, there is still some interest in innovating in the QR code space, mainly when there are payments linked to royalty, identity, or reconciliation applications. This is because QR codes enable for rich data to be encoded in a process for payment transactions.
Lastly, let’s have a look at blockchain and CBDC. CBA has been experimenting with blockchain for a couple of years now with partners such as Wells Fargo, the Australia National Disability Insurance Scheme, and the World Bank. We are currently also part of RBA’s collaboration with the Digital Finance Cooperative Research Centre on a project to explore use cases and economic benefits of CBDC in Australia.
Rupesh Mahto: Hello, Susan. Very nice to meet you. It’s a pleasure to interview you today. From the payment’s perspective, I’m very passionate about payments and how Australia has been using payments in the region, but at the same time I have seen that there has been an increasing number of international payments being used, especially in the remittance field, I would say. Alongside, I see that the payments dimension has changed with the evolvement of virtual currency, metaverse being very particular in the market as well. How do you see banks like CommBank positioning themselves in the market to stay competitive for such use cases?
Yang: So nice to meet you as well, Rupesh. You’re right. New entrants and alternative rails, they are indeed driving innovation and competition in the cross-border payment space. For CommBank, our goal is to make cross-border payments, including remittances, faster, cheaper, more transparent, and inclusive while maintaining safety and security. We do this by constantly enhancing our international money transfer capabilities and also supporting the G20 Cross-Border Payment’s goals.
Some of the recent activities that CommBank has undertaken in order to stay competitive in the market include extending processing hours. We have extended the processing hours of incoming cross-border Aussie dollar payments to 24/5, and we are on the journey of further enhancing that to 24/7 before we add foreign currency payments. Implementing the ISO 20022 standards and also actively participating in the industry consultation and committees on [Unintelligible] these dangers across systems in different jurisdictions.
The other initiative will be to connect Swift with domestic real-time systems. For example, the ongoing initiative in Australia of distributing the next leg of cross-border payments by NPP.
Removing the fees for FS IMTs for any payments initiating from digital channels, and also absorbing correspondent banking fees to ensure the full amount can be received by overseas recipients.
Mahto: That’s a very insightful thought, Susan, and I think as we move towards much more bridging the gap of payments across the globe, I see there’s a good competition in the market in terms of how international payment providers have been involving.
Do you have some thoughts around how they will be evolving in the next few years? Will it be increasing more or the banks will be able to provide competitive services in that space?
Yang: Sure. G20 roadmap for enhancing cross-border payments is a significant trade guide in the industry on its priorities as well as development. The updated G20 roadmap was published, I think, February 2023. It assigns 10 actions across three priority things. That includes payment system interoperability and extension, the legal and regulatory provision frameworks, and data exchange and message standards. I’m excited by the possibility of leveraging ISO standards and the real-time cross-border capabilities to deliver enhanced value across a wide range of proper use cases such as supporting more efficient supply chains and trade, and multinational intercompany payments. I’m equally excited by the possibility of enabling faster and cheaper cross-border remittance flow for the payments between family members and C2B commerce.
I also expect over the next few years the real-time capability of all systems in the ecosystem of payments such as sanctions, transaction monitoring, fraud and scam prevention, they will all be more widely adopted and also linked to a more consistent legal and regulatory framework.
Chen: Thank you so much, Susan. Our next question is around your views on emerging risks. So not only do banks face increasing competition from non-bank disruptors, they also face growing operating costs from resourcing, systems, technologies, processes, and so on. What are some other emerging risks banks face in their payments ecosystem that could hinder growth in the future, and what can executives do to ensure banks are well positioned for the next decade?
Yang: Yes. We certainly have seen rapid and ongoing shifts in the way our customers pay and driven by technological innovation and also changing customer expectations. Banks have a large and trusting customer base and extensive in-person and digital distribution network, which provides a strong starting point for gaining scale with payments innovation. The growth of non-bank disruptors proves that customers are willing to switch for convenience, lower cost, and other personalized benefits that help them to achieve specific tasks, but the growth of non-bank disruptors proves that customers are willing to switch due to convenience, low cost, or other personalized benefits that help them complete specific tasks. Buy now, pay later or Apple Pay just are examples in that space.
In order to ensure that the banks are well positioned for the next decade, banks must make sure they deploy their investment capital wisely and also ensure their technology infrastructure can accommodate build, buy, and partner options across the payment cycle. Through models such as CommBank’s venture scaling on X15, we are harnessing the potential of innovation and agility of start-ups but building with scale and safety in mind, leveraging the assets of CommBank.
We also partner directly with fintechs to supplement the bank’s core offering with experienced enhancement and value-added services. In addition, banks have built a lot of payments infrastructure and we are the primary participants, but we also need to ensure the regulatory settings are also capturing the new entrants or new participants in order to maintain ongoing safety and security and trust in the payment’s ecosystem.
Mahto: Thank you, Susan. Going forward, I’m very optimistic about payments and how payments are evolving and will evolve. Do you have any near-term view about what the future of payments looks like? When I say real-term, the next two years or five years, how do you see payments to be evolving in this market especially in Australia, and which areas in Australia could benefit the most from a payments landscape?
Yang: Yes. I’m also very optimistic about the future of payments because payments continue to be a very dynamic and exciting area, and I don’t see the amount of changes and innovation will be slowing down. We have modern, fast payment systems. However, the benefits and efficiency of speed have to be balanced with an equal focus on safety and security. The opening of the payments ecosystem to new participants without proper regulatory oversight will further increased exposure to scams, fraud, and disputes. Banks have rigorous and sophisticated risk monitoring capabilities to protect the integrity of payments, to resolve disputes, and to identify scams and fraud. Policymakers and the private sector need to find a way to bring beneficial innovation to market while still maintaining a high standard of safety and security set by banks.
In order to address the above concerns, in Australia, we are undergoing significant reform to the payment regulations to provide the guardrails of safe innovation.
Chen: Thank you so much, Susan. Last question from us, if I asked you to look out to, say, 2035 and even beyond, what do you envision in terms of payments and customers? What may surprise us?
Yang: Over the next decade, payments will continue to connect people, devices, homes, and maybe even cars spanning physical, digital, and virtual worlds. The trend towards digital will continue. In Australia, the government has set a target to retire checks entirely by 2030, for example. With the global implementation of ISO 20022 standards for payment messaging, for the first time we will have a common language in which to transact with anyone, anywhere.
What may surprise us is a value of trust a customer has with banks and how that can translate into business. If banks can continue to enhance our digital experience and provide value to customers beyond what could be considered traditional banking, providing a world-class digital experience is essential to our strategy here at CBA, and I’m optimistic about what we all continue to deliver for our customers.
Chen: Thank you so much, Susan, for those excellent insights. We really enjoyed our conversation and we learned so much from you today. We hope you did as well, Susan.
Yang: Thank you. I enjoyed our conversation as well. Thank you, Ruby and Rupesh, for having me today.
Chen: Thank you. Thanks, Susan. All right. Back to you, Joe.
Kornik: Thanks, Ruby, Rupesh, and Susan, and thank you for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to podcasts, and be sure to visit vision.protiviti.com to view all of our latest content. Until next time, I’m Joe Kornik.
Susan Yang is General Manager, High Value and International Payments, at the Commonwealth Bank of Australia where she and her team are leading the ISO20022 program and the digital IMT strategy execution for CBA. Susan is also responsible for the bank’s correspondent banking network and is actively involved with the domestic ISO20022 Industry Migration Steering Committee, the domestic Cross-border Payments Advisory Council and the global Cross-border Payments Interoperability and Extension Taskforce charged with providing faster, cheaper, more transparent and inclusive cross-border payments. Prior to joining Commonwealth Bank in 2017, Susan spent 16 years with Citigroup.
Rupesh Mahto is a senior director specialising in strategy, technology assessment and enabled execution, digital transformation, cloud migration, and application of emerging technology to business demands. He successfully leads interactions with CXO, focusing on increasing operational efficiencies, growth, and cost reduction.
Ruby Chen is a Protiviti director with over 12 years of experience in the financial services industry, for 10 of which she worked within the Big Four banks before transitioning into consulting. She has a broad range of experience providing advisory services and secondments across all three lines of defense.