Four large banks and eight other financial institutions in Australia are planning to build a more efficient network for real-time payments. The target is to make the new network robust enough so that transfers can be made from both mobile devices and fixed computers. With the new network in place, businesses will be able to receive money at the moment of purchase itself instead of waiting for days and sometimes even weeks.
Swift, a Belgium based company also known as Society for Worldwide Interbank Financial Telecommunication system, is building the new network in Australia. Swift’s payment system is currently used by more than 10,000 banks globally for international money transfer. The new payments platform touted as the Australia New Payments Platform is expected to go live in 2017. 12 financial institutions including 4 banks have formed the New Payments Platform (NPP) Steering Committee in collaboration.
NPP consists of ANZ, Australian Settlements, Bendigo and Adelaide Bank, Citi, Commonwealth Bank of Australia, Cuscal, Indue, ING Bank (Australia), Macquarie Bank, National Australia Bank, Reserve Bank of Australia and Westpac Banking Corporation. NPP will manage the project and has signed a A$1 billion contract with Swift to build and operate the NPP basic infrastructure. Swift’s solution will be using peer-to-peer technology. Other components of the solution include:
The network: a local messaging channel for high-volume exchange of messages and that too with low latency
The switch: a payments gateway for handling clearing and settlement tasks
The addressing database: a proxy addressing lookup service to allow payment routing based on identifiers like mobile phone number or email address. Fiserv will work with Swift to develop this database.
If developed successfully, the new system would bring real-time, flexible, data-rich payments capability to the participating institutions, enabling them to transfer funds within seconds between two Australian accounts. Although banks have adopted current technologies in general, they do lack behind other payment platforms like PayPal and virtual currency platforms like BitPay when it comes to real-time payments.
The new initiative by financial institutions in Australia, to bring a secure real-time platform with digital payments features and services, is indeed a great move to bring innovation that transforms legacy payments systems. This would further open the gates for third parties to develop customized B2C and B2B applications. Moreover, the implementation of a more powerful payments network would make other forms of personal identification more relevant, such as using the mobile phone number instead of an account number.