Richard Davies

Get set for real-time payments down under

16 Aug, 2012 05:05

The Reserve Bank of Australia (RBA) has been encouraging Australian banks to innovate for some time now. In a consultation paper released earlier this year, the Central Bank highlighted calls for the centralisation of the Australian payments architecture in order to implement a real-time payments system. This is a pertinent reminder that the implementation of Australian real-time payments is both inevitable and imminent.

Pressure for change in the industry is mounting. This comes not only from the RBA but also from customers. Schemes such as UK Faster Payments, G3 in Singapore and Payments in Real Time (a Swedish initiative), show that real-time payments programmes are spreading across the globe and are a phenomenon that cannot be ignored.

In many ways, Australia is already leaps and bounds ahead of other developed nations when it comes to the national payments infrastructure. Australians benefit from services such as BPAY to pay their bills and most would never dream of resorting to direct debits for their rent or utility charges. In addition, the country continues to invest heavily in its infrastructure and has been engaged in replacing legacy systems for several years.

Despite continued demands for innovation in payments, banks are still dragging their feet and it’s the new kids on the block, such as PayPal, that are starting to flourish and gain popularity with customers. It’s time for the banks to change tack and embrace real-time payments as a way to improve customer service. Technology is of course an important piece of the puzzle and investment in systems is clearly a necessity. There is a bigger picture though: in order for real-time payments in Australia to be a success story, banks must shift their attitudes and initiate a more open and candid discussion around implementation rather than stifle innovation.

Comments

Added: 17 August, 2012 - 03:41 | Finextra member says:

Never dream of resorting to direct debits? I pay all my bills and rent by direct debit. That way they get paid on time automatically. Who wants to pay a load of bills every month "manually"?

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Added: 17 August, 2012 - 17:33 | Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune

If the amount is fixed in advance (e.g. house rent), direct debit is fine. But, for variable amounts (e.g. mobile phone), I'd never dream of using direct debit, based on my personal experience with this leading UK MNO. I'd signed up for a GBP 25 / mo. plan for a 3G USB modem. With a few extras, my monthly bill would typically range from 25 to 35 GBP. Suddenly, one month, I received a bill for GBP 820. Armed with usage data, I called the MNO to explain why it was impossible for me to run up such a huge bill. I was surprised that the MNO's CSR readily admitted to a problem in their billing system and reversed the transaction without demur. I shudder to think how much more hassles I'd had to go through had I issued a direct debit mandate to this biller.

I was curious to know BPAY's lead time and visited the linked website. According to its FAQ, banks send out the payment on the same day. It's the biller who seems to procrastinate ("it can take a biller a number of days to apply a payment to your account."). So banks in Australia already seem to be offering Same Day Payment, if not near realtime payment.

This reminds me of an interesting situation that developed when a Top 5 UK bank went live with Faster Payments in May 2008. Within hours of going live, a leading MNO called its RM at the bank and told him to ensure that the sort code of its collection account at the bank was NOT enabled for FPS since since its internal systems weren't ready to sweep the bank account and apply credit to the customer's account in <3 days!

While my personal experience might not be representative, credit must be given where it's due: Maybe it's the billers who need to get their IT act together.