This week the Reserve Bank of Australia published its review of innovation in the nation's banking and payment services. While it highlighted several clear advances, the regulator identified a number of "market failures that may prevent innovation[s]" -- innovations such as real-time payments, the ability to make low-value payments outside business hours and same-day settlements of all "Direct Entry payments".
The full document, a 1MB PDF, can be found on the RBA website. It's chunky in content and hardly a thrilling read, so here are the important parts I was able to see.
Firstly, how about those "market failures":
[The Reserve Bank] is satisfied that there are some market failures that may prevent innovation in the payments system. In other words, market forces might not be sufficient to produce some types of innovation that are in the public interest ... In large part they consist of coordination problems that make it difficult for industry players to agree to implement an innovation that requires collective effort to succeed. It is also possible that existing commercial arrangements might make it difficult to build a business case, for instance because new services will attract business away from existing profitable business streams.
Coordination problems and difficult commercial arrangements? Sounds about right.
Given these "failures" can be addressed, real-time payments would be a priority for the RBA:
The ability of individuals, government agencies and businesses to make retail payments, with the recipient having visibility and use of those funds in near to real time, is an objective that seems likely to become more pressing. Indeed, one of the key trends identified ... was an increased focus globally on speeding up payment processing through faster settlement or payment initiation.
The RBA believes instant, or near-instant payments have benefits beyond convenience for the average person. For example, it could be used by the government to provide immediate financial relief to businesses and individuals. It's also confident that if banks can manage instant payments to customers of the same institution, it "makes sense that this type of functionality should be available across financial institutions".
So-called "low-value" payments outside of business hours were also identified as an achievable innovation. The RBA notes that while such payments can be initiated on weekends and public holidays, processing can take days:
However, the systems used for the exchange of non-card payment instructions between institutions do not generally operate on weekends, meaning that no [transactions] are exchanged between banks and no interbank settlement occurs. Banks' accounting systems also do not generally recognise weekends for account posting purposes.
Together, these factors mean that the recipient of a [payment] initiated after a bank's cut-off time on a Friday night might not receive those funds until Tuesday. The same might be true for a merchant accepting a payment via eftpos on a Friday night. These delays are of course longer during long weekends.
In an attempt to get banks and merchants to implement these changes in a practical timeframe, the RBA has outlined a number of dated "strategic objectives". I don't know how much sway the Reserve Bank has in enforcing these, but the agency must have some confidence, stating it won't "rule out the possibility that some could be delivered sooner":
- Same-day settlement of all Direct Entry payments (by end 2013)
- The ability to make real-time retail payments (by end 2016)
- The ability to make and receive low-value payments (Direct Entry, real-time payments and crediting of card payment receipts) outside normal banking hours (by end 2016)
- The ability to send more complete remittance information with payments (by end 2016)
- The ability to address payments in simple manner (by end 2017).
A key objective is the establishment of a system that would provide real-time retail payments, with real-time funds availability, by the end of 2016. This type of system has been a focus of innovation in a number of other countries.
If you're diligent enough and have the funds available, getting payments sent on time is usually not a big deal. But we don't live in a perfect world. Surely technology can deliver real-time payments within four years, if not sooner? It's certainly not a convenience I'd say no to.