Experts are concerned the introduction of a central bank digital currency in Australia could reduce consumer rights without adding any real benefits to the financial system. Meanwhile, expect a shake-up to the payments system in coming years as digital innovations are progressively rolled out. 

 “An Australian central bank digital currency (CBDC), would give a lot of information to governments or other parties. Your bank already knows a lot about what you do. But you could see a world where governments might be able to turn off your ability to use digital payments or currencies,” says University of Sydney Business School associate professor, Daniel Gozman.

 He uses a pandemic as an example.

“If you don't want people to move outside a certain region, one way to encourage or enforce that is to make sure payments don't work outside an area. Moving to a world where we completely digitise cash reduces the anonymity of cash and that gives power to other organisations and the government,” says Gozman.

Another reason there has been no real push for a digital currency in Australia is because there is a lack of impetus for one, as there is in other parts of the world.

“Australia has a relatively simple financial system the New Payments Platform has done a great job in implementing faster payments. So, we already have many of the benefits that come with a central bank digital currency,” says Gozman.

 More broadly, he says the degree of innovation possible within payments is linked to digital forms of identity. “At the moment we have our card on our phone and the bank has our identity. But if we have a more digitised version of an identity system, such as a chip in your brain to control payments, you need to have some kind of way of managing your identity with that and that's the challenge,” he adds.

Dr Ben Hamer, chief futurist with future design studio, ThinkerTank, says there’s already substantial work taking place to make sure Australia’s payments system is ready for the future.

 In terms of what’s really cutting edge right now, he names tap-to-pay devices and invisible payments are just two innovations currently shaking up the financial system“You don’t need a card or even a digital wallet app anymore. Our phones, watches and even smart rings can handle tap-and-go payments, with biometric security built in,” says Hamer.

With invisible payments, think Uber or Amazon Go, where you don’t even think about paying, it just happens in the background. “This frictionless model is creeping into retail, hospitality and even travel,” says Hamer.

On a B2B level, systems like the NPP are enabling instant transfers 24/7 and that infrastructure is opening up new use cases for both consumers and businesses.

 “At the same time, the buy now, pay later model is evolving beyond retail into sectors like healthcare and education, with tighter regulation and more transparency,” says Hamer.

As for what will be cutting edge in the future, he says programmable money and AI-powered personal finance agents will become commonplace.

 “Imagine an AI that knows your spending habits and income and automatically decides which payment method to use such as points, credit or crypto, for maximum benefit. With CBDCs, governments and institutions could create money that’s coded for specific purposes, like welfare payments that can only be spent on essentials,” says Hamer.

“Biometric authorisation will become the default way we approve payments, especially in physical stores using things like fingerprints, face scans and even palm veins.”

Ambient payments – which is when you pay while you walk or drive out of a store without tapping – through  the Internet of Things, where your car might pay for petrol, tolls or parking without you doing anything will become common. “Your fridge could re-order groceries and pay automatically,” says Hamer.

This will be supported by global interoperability. He says cross-border payments will feel just like local ones: instant, cheap and simple. “They’ll be driven by global standards and digital wallets that work anywhere.”

 So, while it can feel innovation in local payments has been slow, in the next few years, expect digitally-supported changes that will push the Australian financial sector to the forefront of the global economy.

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