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The 2011 breakdown of the MAMBO (me and my bank online) project – a relatively secretive negotiation between Australia’s big four banks intended to create greater account portability, speed of money transfers, online payment alternatives to credit cards and more – was a low point in Australian banking. The project was to be a sign of innovation. Australian banks, it seemed, were stepping out of the dark ages of electronic payments. Then it all fell over.
In 2012, the Reserve Bank of Australia stepped in and demanded that, by the end of 2016, a system be developed collectively by Australian authorised deposit-taking institutions (ADIs) that would speed up and unshackle the current payment system. It must allow for the acceptance of real-time payments, the making and receiving of low-value payments outside of banking hours, and more detailed remittance information.
The real-time payments steering committee was set up to develop a proposal for the way forward, which was accepted by the RBA. The Australian Payments Clearing Association has set up a new senior industry steering group to make this happen.
Everybody will benefit in some way from the changes. Fostering a more efficient transfer of money benefits everyone, from government departments to retailers to corporates to micro-businesses and individuals.”
Paul Lahiff, the New Payments Platform Steering Committee,
The Chairman of the New Payments Platform Steering Committee, Paul Lahiff, says the industry group, which represents the four major banks as well as 13 other ADIs, is implementing a solution more exciting and innovative than the one the RBA outlined.
“First, we’ll be managing the creation of the basic infrastructure that allows all of the financial institutions to communicate with each other in a secure environment,” he says. “Then, on top of this infrastructure, any number of overlay services could be made commercially available to ADIs to offer to their customers. This strategy encourages innovation, dynamism and competition in the market.”
The App Store approach to technology – building a secure central platform that opens up its functionality to third parties to build customer-specific applications – has seen enormous success in other arenas, such as smart phones. This idea, says Lahiff, could revolutionise the payments processing industry.
The New Payments Platform will immediately offer the capacity to make payments with close to immediate (less than 10 seconds) funds availability, creating an all-new level of cash flow for businesses. It will operate 24 hours a day every day, rather than only during banking hours, and will offer the ability to make more detailed remittance information available.
The New Payments Platform will also present the opportunity to use more user-friendly identification information, such as a mobile phone number instead of a BSB and account number, in a highly secure environment.
Financial institutions and others can offer their own customised platforms to further individualise the payment offerings for the needs of specific markets.
“We are often asked to speak about our plans and strategies at conferences and other events both domestically and overseas,” says Lahiff. “Much of the banking world is watching our approach with great interest, as nobody has attacked the problem in this way.
“Everybody will benefit in some way from the changes. Fostering a more efficient transfer of money benefits everyone, from government departments to retailers to corporates to micro-businesses and individuals.”
And the good news for businesses and individuals, adds Lahiff, is that they won’t be required to do the heavy lifting for the new systems. “Once we have laid the tracks, a competitive marketplace can work on new payment services to use the tracks at a much lower marginal cost,” he says.
The New Payments Platform, Lahiff believes, could be a game changer in the Australian business environment. “I don’t think we can yet comprehend how things will develop and what types of innovations will come about as a result of this system,” he says. “We first need to ensure the central platform is secure and rock solid, then everything else will be built on top of that.”