“Our payment system in 2016 is still being constrained by punch cards,” Reserve Bank of Australia governor Dr Philip Lowe yesterday told the House of Representatives’ Standing Committee on Economics.
It was Lowe’s first appearance before the committee as governor, having commenced the role on 18 September.
“If you go onto your Internet bank account at the moment and want to make a payment to someone else, you have got 14 characters to fill in about what the payment is for,” Lowe told the committee.
“The origin of that is that the message length is either 80 or 120 characters long — and it was originally 80, because 80 was the number of segments on the punch cards. When I started university, people were still using punch cards.”
This has been a “major problem” Lowe said, and one that the RBA and the banking sector are seeking to remedy with the New Payments Platform.
The first transactions employing the NPP are expected to be conducted in the second half of 2017.
NPP Australia Limited, the custodian of the platform, in June announced it had appointed Adrian Lovney as its inaugural CEO. Lovney’s appointment took effect this month.
The NPP project has been guided by the RBA’s Payments System Board.
“When this work is finished we will be able to make instantaneous payments to one another, with the money transferring between our accounts in a matter of seconds — and that is regardless of who we bank with,” Lowe said.
“The addressing will also be simplified. All you will need is an email address or a mobile phone number. The payer will no longer need to give their bank account number or their BSB; just the mobile number or the email address will do.”
“We will also be able to send a lot more information with the payments,” Lowe said.
NPP Australia has signed a 12-year contract with Society for Worldwide Interbank Financial Telecommunication (SWIFT) to build and operate key NPP infrastructure.
Lowe said that another major project at the RBA is the renovation of its banking infrastructure.
“The Reserve Bank is the main transactional banker for the Commonwealth government,” Lowe said.
“Like other financial institutions, we need to keep investing in technology so that we can provide a high level of service to our customers.”Part of that work includes developing systems so that the federal government can employ the NPP “to make quick and efficient payments to the community”.