A platform where more payments can be made in real time at the bank architecture level may be on its way, but there still needs to be a strong business case for it, according to Australia Payments Clearing Association (APCA) CEO, Chris Hamilton.
Speaking at Bank Tech 2012 event in Sydney, Hamilton mentioned the Reserve Bank Australia’s efforts to identify the potential gaps in innovation in Australia’s payments system (PDF) and identified timeliness of payments as one of the main gaps that needs to be addressed.
“We are assuming, based on the RBA’s work, that in four to five years’ time there will be this real-time payment,” Hamilton said.
However, he said finding a strong business case for this platform is a challenge that the banking industry is currently facing. “There is, I think, a lot of views out there in the banking world that says the stuff the RBA wants to see happen doesn’t have a business case. They are not saying it’s not a good idea but what they are saying is, ‘If I as a profit making institution want to invest in that I want to have a return on my money in some reasonable time frame for the amount of risk I’m taking’, and it’s often hard to see that in Australia.”
He said there may be demand for a real-time payment platform in Australia in theory, but it’s difficult to determine customer take-up, which is why the industry is not yet seeing a strong business case for it.
“It comes down to customers’ willingness to change. A lot of us are creatures of habit and while there’s clearly theoretical demand for that, if the customers are not yelling at you for it and if they don’t know what they can do with it then they [could] take a long time to pick it up. I think that’s a problem with a lot of these things — you have got to build the platform before anyone can prove to you that customers are going to want it, you have to just theoretically guess that they are going to want it. But that’s not a reason for not acting, it just makes it hard,” Hamilton said.
Hamilton gave the example where the Faster Payments Service in the UK took a couple of years for it to take off: “They went from an environment where they had three-day settlement and typically you couldn’t get any faster than three days… [So] they built the Faster Payments Service which has been in operation for four years now and delivers real-time payments or near real-time payments to the consumer. You would have thought that would have had a business case because there would have been a lot of people crying out for it. But it did no serious business in the first two years of its operation at all.”
CEO of mobile payment technology company mHITs Limited, Harold Dimpel, recently said that Australian banks are “reluctant” to do a lot of innovation in payment technology, and as much as the credit providers and other third parties involved in payment technologies are willing to innovate, they “still rely on legacy bank payment architecture, which certainly can hold back a lot of things”.