RBA push for real-time payments to benefit businesses struggling with “dated” payment systems
The banks are under growing pressure to settle electronic money transfers more quickly, after the Reserve Bank said Australia's current system was not meeting consumers' expectations.
As consumers embrace online shopping, the RBA’s governor, Glenn Stevens, said yesterday that key aspects of Australia's payments system looked ''a bit dated''.
In an address to the Australian Payments Clearing Association, Stevens warned that innovation in the customer-facing technology was moving at a pace much greater than the underlying infrastructure.
“It is very clear that both individuals and businesses are demanding greater immediacy and greater accessibility in all facets of their day-to-day activities. This includes payments,” said Stevens.
Stevens said while people were able to book an airline ticket and choose their seat at any time of the day or night and payment was initiated, if a business or an individual wishes to receive funds into an account at a financial institution, that same immediacy is not available.
“For instance, if a business wishes to make timely use of the proceeds from a large shipment, or an individual is in need of emergency assistance from a government agency, options are very limited,” said Stevens.
“This is because the infrastructure that underpins retail payments assumes that making funds available the next business day is sufficient.”
Stevens said the Australian system was dated in comparison to systems for real-time transfers available in countries ranging from the United Kingdom to Mexico.
“It is our belief that availability of real-time transfers would fill some important existing gaps, but would also open up enormous potential for innovation on top of that system,” said Stevens.
The RBA also wants to look at the availability of the payments system out of standard banking hours, as it had received enough complaints about the length of time it took banks to transfer payments outside of banking hours to suggest expectations were not being met.
“Some systems, such as card payment systems, give the impression of operating 24/7, but in reality no funds move between financial institutions out of hours, constraining the services that can be offered to end-users of the payments system,” said Stevens.
He said the timeliness of electronic payments was likely to feature in the Reserve Bank's review of payment innovation, which will be released in the coming weeks.
The speech by Stevens comes as the Commonwealth Bank announced plans to upgrade its core banking platform to deliver "real-time banking" that could display transactions as they happened and provide same-day cash to business customers from EFTPOS sales.
The bank announced its plans yesterday in a detailed briefing on its four-year upgrade that began in April 2008.
Gavan Ord, business policy adviser at CPA Australia, told SmartCompany a move to real-time payments was “very welcome”.
“We know a lot of companies are moving to business to business transaction and making them electronic, anything that can improve the efficiency to real-time settlement would be greatly welcomed and would bring us into line with best practice worldwide,” says Ord.
“This reflects where business is already at; business will benefit from real-time settlement.
“It will lead to better management of cash flow, particularly for some businesses with very high turnover. They won’t have payments going out sitting in abeyance.”
Ord says the move will benefit consumers as well as business.
“From a consumer point of view, they would also appreciate when they download music or pay off a credit card that the transaction is immediately recorded. This will mean more satisfaction and greater trust in the online system,” he says.