- During the Coronavirus pandemic, the Reserve Bank of Australia highlighted a significant shift to contactless and mobile payments by merchants and consumers.
- The RBA maintained that the proportion of payments made using banknotes is declining, and cash is mainly used for face-to-face transactions.
The Coronavirus pandemic and the subsequent lockdowns have taken a toll on the Australian economy. At present, the Australian economy is facing massive losses, and the fear of recession is looming large. The pandemic has changed life around us to a great extent. The period witnessed not only an increase in e-commerce business but also a surge in digital payments.
Away from the traditional mode of payment, people have now resorted to cashless transactions. Taking a note of the evolving trend of digital payment, the Reserve Bank of Australia, in its Corporate Plan for 2021/2022, said that in response to COVID-19, there has been a considerable shift to contactless and mobile payments by merchants and consumers in recent days.
Image Source: © Eyeofpaul | Megapixl.com
While recognising the accelerated use of electronic payment methods in the retail payments system in recent days, the RBA maintained that the proportion of payments made using banknotes is declining, and cash is mainly used for face-to-face transactions.
The corporate plan also revealed that there had been significant innovation in consumer-facing technology, and there continues to be potential for the entry of new technologically enabled service providers to widen payment options further.
What all did RBA say on digital payments?
The Corporate plan released said that the user and industry expectations concerning the speed of payments, and the capacity to combine information with payments, have been increasing. These trends are reflected in substantial growth in New Payments Platform (NPP) enabled transactions, facilitating 24/7 real-time payments. In addition, the RBA apprised that the government is seeking to implement more modern electronic payment services, and its banking requirements will continue to change depending upon the advancement in payments technology and modification in the way government agencies communicate with the public.
The RBA statement read that there is a strong focus on fraud prevention and cyber resilience among payment service providers and operators of payments infrastructure with digital payments. Noticeably, the Federal government is likely to enact new laws to regulate the digital payment service providers, including tech giants such as Apple and Alphabet's Google. Moreover, the RBA has said that it will also continue to promote competition and innovation in the payments system by working with non-traditional payments service providers with an aim to open an Exchange Settlement Account at the Bank as part of their business model.
Besides, the Bank will work with the payments industry and payments system users on policy issues relating to both legacy and emerging payment methods.
Steps taken by RBA to ensure public confidence in banknotes is high
The Bank intends to ensure that public confidence in banknotes is high and threats from counterfeiting are reduced. Over the past decade, the Bank's key initiative to enhance banknote security has been its Next Generation Banknote program, which involved issuing a new series of banknotes with upgraded security features. Though the program has now come to an end, wide recognition and distribution of these new banknotes over upcoming years will be an essential focus to back this objective.
What are the other things which find a mention in the Corporate Plan of the RBA?
In its corporate plan, the Board has retained the target for the April 2024 Australian Government bond yield and said it would continue to execute the bond purchase program. If required, the Government bond purchases in secondary markets will be conducted, to achieve the April 2024 bond yield target.
The RBA has maintained that underlying inflation and wage outcomes remain subdued on the nominal side of the economy. However, a gradual or modest pick-up in inflation and wage growth is also expected.
Speculations are rife that the Country's economic growth is likely to be negative in the September quarter, with a minimum contraction of 2%. Given the current situation, when cases are rising to a new high with each passing day and the government is in no position to lift the lockdown restrictions, it seems that the trouble for the Country's economy is likely to continue. It is to be noted that two consecutive quarters of decline in GDP lead to recession. The Country fell into recession for the first time in three decades due to the Coronavirus outbreak in June 2020.
In addition, a recent Australian Bureau of Statistics figures revealed that with the seasonally adjusted total of 17,601 dwelling approvals, there has been a decline of 8.6% in July, the lowest monthly total since January.
The corporate plan for 2021/22 reveals that Australian citizens are increasingly adopting the digital mode of payments, and the traditional mode of transaction has taken a backseat. It remains to be seen how the government responds to this transition and regulates the digital payment service providers such as Google, Apple and others in days to come.