The Real-Time Payments Committee, a group of senior decision-makers for Australian financial institutions, is developing a proposal for Australia’s next-generation low value payments infrastructure. This article looks at the challenging work of the committee.
The RTPC is on a mission. It has promised to deliver a proposal for new payments infrastructure to the Payments System Board at the Reserve Bank by the end of 2012, so that requirements, design and build can begin in earnest in 2013. The last time the industry did anything like this was in the early 90’s, when financial institutions worked with the Reserve Bank to set up the new infrastructure for high value payments in Australia: The Reserve Bank Information and Transfer System (RITS) and its feeder system, the High Value Clearing System.
Historically, low value non-cash payments were either cheques – now in terminal decline – or direct entry, which is industry jargon for electronic account to account credits and debits. Direct entry is still growing healthily and meets the basic needs of millions of customers every day. In fact the payment types that the direct entry routinely supports – like internet pay anyone and mobile app payments – were unimaginable when the system was first conceived. That is surely a benchmark for good infrastructure – that it can be adapted to future and unforeseen needs as they emerge and evolve.
But as flexible and valuable as direct entry has been it does not meet all the anticipated needs of Australian businesses and consumers in the 21st century. Key unmet needs are very fast settlement, rich data integration and simple, flexible addressing of payments. These were the conclusions reached by the Reserve Bank in June, when it fired the starting gun for developing a new low value payments infrastructure. Since then, we have been exploring how customers might use new infrastructure that, unlike direct entry, has these characteristics.
There is a fair bit at stake here: millions of people and organisations arrange their affairs to use the basic low value payments infrastructure for uncounted numbers of different purposes. The economy grows organically around it. So adding to or changing the central plumbing is a major step. It affects nearly everyone.
In this kind of work, the public interest and the common interest of financial institutions unavoidably collide. It is neither feasible nor desirable to address one to the exclusion of the other. Both ultimately seek to serve the interests of Australian businesses and consumers, but from different perspectives. We need to recognise them both.
The public interest seeks the greater economic good of Australia. As the public regulator of the payments system, the Reserve Bank wants to promote integrity, efficiency and competitiveness so that Australia’s economy has the plumbing it needs to grow.
Financial institutions want this as well but also seek to offer products that customers want and will pay for – a market view of community interests. Payments services that are sustainably value-adding for customers over the long term are the only ones you can sell for a profit.
It is relatively easy to conceive of a new piece of infrastructure that ticks all the public regulator’s boxes – especially now that the Reserve Bank has clearly articulated what those boxes are. It is a little more challenging to conceive of a system that meets unmet needs in way that ensures sustainable, profitable payment services being provided by financial institutions to their customers. This is in part what BPAY was attempting in the MAMBO project.
But the real challenge is to conceive of a system which covers all the bases: public interest requirements PLUS sustainable, competitive service provision. Right now, we have an opportunity to harness the energy from the collision of interests to generate a better long-term outcome for everyone. I think we are well on the way to achieving this.
The RTPC is keeping the community informed of its progress through regular updates posted on APCA’s website.
