Telstra enables same-day bank payments
Telstra has said that a new service it switched on last week will pave the way for financial institutions to complete inter-bank same-day transactions within 12 to 18 months.
(Cashmoney image by Martin Kingsley, CC2.0)
The big four banks as well as other smaller institutions have signed on to the service, which enables banks to communicate with each other through a virtual private network (VPN) set up by Telstra.
Prior to using the VPN, banks created multiple links between each other, according to Australian Payments Clearing Association (APCA) chief executive officer (CEO) Chris Hamilton, whose organisation worked with Telstra on the service. "At the moment there are hundreds of those links," Hamilton said.
The EFTPOS system, for example, has 17 participants Australia-wide, he said. Each of those participants had to find a way to link to other banks' computer systems to clear payments.
But it's not only EFTPOS transactions that use such a network, debit and cheque transactions also need a clearing method, as well as BPAY.
"What we're talking about is replacing the communications infrastructure between those points of presence," Hamilton said, with the points of presence being the banks' servers operating to clear payments.
Now, instead of financial institutions having multiple bilateral links between each other, authorised members of the association can access Telstra's network for the connections, without being a customer of the telco for anything else.
However, there was no requirement for the banks to use the telco. "There's sort of a Trade Practices problem about that because we're in effect forcing them to use a particular provider and there's no need to do so," Hamilton said. A "transitional" cost would be necessary, but there would be cost savings over the long term, Hamilton said.
A massive benefit will be same-day debit and cheque payment clearing, according to director of IP and integrated data solutions at Telstra, John Ieraci. "Instead of settling transactions overnight, the payments industry wants to settle within two to three hours, which is currently what is on offer in some overseas markets. So that was one of the drivers," he said.
Step one to same-day transactions for debit and cheque payments, Ieraci said, was enabling an environment for faster communications. Step two was the banks upgrading their infrastructure. Ieraci predicted that if banks took advantage of the newer technology, same-day transactions would start to become a reality in 12 to 18 months.