Reserve Bank of Australia governor Philip Lowe says a number of other nations are “well ahead” of Australia when it comes to the creation of portable digital identity services that can help address online payment fraud as well as “open up new areas of digital commerce”.
“Today, our digital identity system is fragmented and siloed, which has resulted in a proliferation of identity credentials and passwords,” Lowe said in remarks prepared for the 2019 Australian Payments Network Summit.
“This gives rise to security vulnerabilities and creates significant inconvenience and inefficiencies, which can undermine development of the digital economy. These generate compliance risks and other costs for financial institutions, so it is strongly in their interests to make progress here.”
The RBA governor noted the work by the government’s Digital Transformation Agency on developing the Trusted Digital Identity Framework (TDIF) as well as the work by the Australian Payments Council on TrustID.
TrustID is compatible with the DTA’s TDIF, allowing an identity established under the APC-backed framework to potentially be used to access online government services. The first version of TrustID was completed in June.
“The rollout of open banking and the Consumer Data Right should bring additional competition among financial services providers, and digital identity is likely to reduce the scope for identity fraud, while providing convenient authentication, as part of an open banking regime,” Lowe said.
Lowe also called for more work by the banking sector to realise the full potential of the New Payments Platform (NPP). The NPP was launched in early 2018. In addition to facilitating real-time payments, it supports data-enriched transactions.
Lowe acknowledged that the platform had “got off to a slow start” but was “now hitting its stride”. Last month, the NPP processed around 1.1 million payments a day, worth about $1.1 billion, Lowe said.
The RBA governor said he expected the volume to grow significantly once the Commonwealth Bank rolls out support for NPP functionality across its entire customer base.
“The layered architecture of the system was designed to promote competition and innovation in the development of new overlay services,” Lowe said.
“Notwithstanding this, one of the consequences of the slower-than-promised rollout of the NPP by some of the major banks is that there has been less effort than expected on developing innovative functionality.”
The platform’s custodian, NPP Australia (NPPA), in October issued a technology roadmap that includes a number of features that will be mandatory for NPP participants to implement, including message standards that take advantage of its structured data capabilities.
Lowe said that the NPP was helping swiftly deliver financial support for people affected by bushfires on the east coast of Australia.
In March, the government revealed that Centrelink had begun using NPP. The welfare agency was able to make emergency payments to people affected by floods in Queensland.
“During the current bushfires, the government has been able to use the NPP to make immediate payments to people at a time when they are most in need, whether that be on the weekend or after their bank has shut for the night,” Lowe said.
The RBA will continue to push for more progress on improving the resilience of electronic payment systems, he said.
The declining use of cash means that ensuring the reliability of electronic payments is critical to the smooth functioning of the Australian economy, the RBA governor said.
“We understand that, given the complexity of IT systems, some level of payments incidents and outages to services is inevitable,” Lowe said. However in recent years there has been a sharp rise in the frequency and duration of retail payment outages, the RBA governor said.
Earlier this year the RBA revealed it was working with the Australian Prudential Regulation Authority (APRA) to develop standards for reporting outage data, after 2018 saw a reverse to the downward in the period 2014-2017.
“These measures will provide greater transparency around the reliability of services and allow institutions to better benchmark their operational performance,” Lowe said.