Access Regime for the ATM System: A Consultation Document – December 2008 6. The Future Evolution of the ATM System

As discussed above, the Board has, for some time, expressed concern about the effect of Australia's reliance on bilateral payments system architecture. In the Board's view, while this architecture may have been useful in the original development of some payment systems – including the ATM and EFTPOS systems – it is no longer conducive to the efficient evolution of these systems or to the promotion of competition within these systems.

The difficulties are highlighted by the industry's draft ATM Access Code. While this Code is an improvement on current arrangements, it includes some provisions that are undesirable from the perspective of competition. In particular:

• it includes provisions that allow current participants to place limits on the number of concurrent implementations they have to carry out; and
• it allows up to 150 business days, or around 8 months, for the participants to implement new connections. This time frame, combined with the time required for processing applications and agreeing the project plan, means that it could take the best part of a year to establish a single connection.

These provisions are designed to ease the burden on current participants by limiting the links they have to establish and by stretching out the time over which the links need to be implemented. While such restrictions work to the advantage of the existing institutions, they also work to the disadvantage of potential new entrants. In the Board's view, a better balance needs to be achieved, with fundamentally different network architecture arrangements creating the possibility that new entrants could come into the system without the existing institutions having to incur significant costs. Such arrangements, coupled with appropriate governance arrangements, have the potential to promote both competition and innovation in the overall payments system.

A significant part of the current communications technology underpinning the ATM system (and indeed other Australian bilateral payment systems) is soon to become obsolete and will have to be replaced in the next year or so. This provides the opportunity for significant improvements to the systems' network architecture, which would in turn allow improved access arrangements. Given the timing, the Board views it as reasonable to expect that the changes necessary to support more open access to the ATM system could be in place by 2010. It expects that, as a consequence, by March 2010 much of the industry Access Code and associated Access Regime should be obsolete and will be able to be replaced with a model that provides for a single point of access.

The potential change to the access arrangements for ATMs also has implications for access to the EFTPOS system. Like the current proposals for the ATM system, the EFTPOS Access Code and Access Regime implemented in 2006 were established on the basis of a bilateral access model. The Board therefore anticipates that if any changes are made to the ATM system architecture to support a more efficient access model for ATMs, similar changes will also be made to the EFTPOS system. As a result, the current Access Code and Access Regime for the EFTPOS system should also be able to be simplified substantially in 2010.

The Board does not wish to specify a particular technology for the ATM and EFTPOS systems – ideally this is best done by the industry. There are, however, a number of characteristics that the Board views as important if the new arrangements are to effectively promote competition and efficiency. These include:

• a single point of access, enabling new entrants to establish one connection only. Furthermore, the arrangements should minimise the extent to which new entrants are required to individually negotiate with multiple participants;
• the use of message formats that are, to the fullest extent possible, standardised; and
• the use of international standards where appropriate.

If, by March 2010, the industry has not addressed the Board's concerns about the access model for the ATM and EFTPOS systems, the Board will consider a more active role. This may involve setting technical standards that the systems and the participants would be required to meet. The Board may also consider how the Bank could play a role in promoting access to retail payment systems through its own operations.