The Reserve Bank of Australia (RBA) has established a team of five to work towards a central payment hub that will eventually facilitate real-time fund transfers between different banks.
Speeding up such types of payment transfers was one of the goals set by the RBA in its Strategic Review of Innovation in the Payments System report, which was released in June.
The report identified shortcomings in payments innovation in the banking sector, and made several suggestions on how to improve it. Currently, fund transfers between different banks can take several days to clear, and the RBA wants to make this a real-time process by 2016. It also wants to have the centralised hub built by 2014 to replace a complex "web of bilateral links."
The RBA is looking to pass payments done on the centralised hub through its core settlement systems called the Reserve Bank Information and Transfer System (RITS).
Several banks have implemented same-day transfers between internal accounts, but to make this possible between competitive banks, there needs to be a collaborative system in place.
At the Mobile and Contactless Payments Australia conference in Sydney this morning, RBA head of payments and policy Dr Tony Richards set up project SPRINT, which stands for "send, pay, and receive in no time," and the new team has been working on it for around 2 months.
"The team's role will be to coordinate with the industry throughout the project to ensure the goals of the [payment systems board] continued to be met, and also to begin preparations towards the settlements hub the bank has committed to provide," Richards said.
The SPRINT team is now looking at all of the decisions that need to be made in the future to ensure that there is a clear path forward for real-time payments by the end of the year. This includes deciding whether an industry solution is appropriate and meets the payment system board's objective.
In response to the Strategic Review, the Australian Payments Clearing Association (APCA) set up a real-time payments committee. The team, which will "evolve as required," will be also be working with the payment industry body's new committee.
The RBA and APCA are coming together to discuss a number of issues that will impact the real-time payments concept, including operating models of the centralised payments hub, selecting the appropriate technology offerings to implement, and establishing an industry governance body to oversee the hub.
Construction on the centralised hub is expected to commence by the end of this year.
Private-sector options for centralised hub
Richards said that the RBA is looking at a number of potential private-sector offerings for the centralised payment hub project, but refused to go into specifics.
APCA head of industry policy Brad Pragnell, who was also speaking at the Mobile and Contactless Payments event, noted that there are a number of options out there for the RBA.
He highlighted offerings from IT services firm Accenture a one example.
"I'm sure there are a number of potential suppliers that will be coming forward in the next few months," Pragnell said.
He is acutely aware of the risk that the back-end hub system that the RBA wants to build may become outdated by the time it is implemented, and noted that it is something that the bank along with the APCA will be thinking about.
"The communications and connectivity costs that determined a lot of the previous decisions [on payment systems] aren't there anymore; they are a fraction of what they were 20 years ago," he said. "When you think about Moore's Law, in 10 years' time we need to think about how we can avoid building tomorrow's legacy system today."