The RBNZ wants a timetable as Payments NZ starts design work on a real-time payments system

The Reserve Bank and the Council of Financial Regulators have criticized New Zealand’s banking and payments industry for not providing real-time payments fast enough.

Payments NZ recently reached out to the central bank with a number of questions about some foundational design components for a real-time payment system. 

In a written response, RBNZ assistant governor Karen Silk welcomed the initiative but complained that it had taken so long to begin. 

“Real-time payment capability is a prominent example of so-far missed developments that has put New Zealand payments behind on the global stage,” Silk said. 

"Real time payments can directly contribute to a more efficient and reliable money and payments system that supports innovation and inclusion. New Zealanders and the New Zealand economy should benefit from having access to modern real time account-to-account payments capability.  If it is well designed, implemented and governed, it should have the potential to improve the levels of innovation and competition across the payments landscape," said Silk.

The Council of Financial Regulators’ (CoFR) new vision statement, released on Thursday, reiterated that more needed to be done to ensure payment systems were meeting NZ’s needs.  

The CoFR includes the Financial Markets Authority, Commerce Commission, Ministry of Business, Innovation and Employment, The Treasury, and the RBNZ. 

Laggard

There are only two countries in the OECD that do not have real-time payments already, New Zealand and Israel. Steve Wiggins, Chief Executive of Payments NZ the bank owned company that governs NZ's core payment systems, told interest.co.nz last year that he envisaged NZ consumers being able to pay in real-time by 2030.  

Real-time payments mean consumers, merchants, and financial institutions can pay friends and customers, settle bills, and transfer money immediately, 24/7. It means payment can be made exactly where and when it's needed, which can be especially useful when transacting online or via an app, and for small businesses. Australia’s payments industry has supported real-time account-to-account payments since February 2018. 

NZ banks only moved to 365-day a year payments, incorporating weekends and public holidays, in May this year. Prior to that, banks would only make transfers on working days. 

The RBNZ said real time payments would contribute to a more efficient and reliable system. 

“New Zealand’s banking and payments industries have fallen behind internationally in making real-time payments possible between accounts held at different banks,” it said on Thursday. 

Payments NZ oversees a self-governing industry, and is owned by ANZ, Westpac NZ, BNZ, ASB, Kiwibank, TSB, HSBC, and Citibank.

Timetable sought

The RBNZ said it would be monitoring the industry’s progress towards real time account to account payments. 

“As a first step, we expect [the] industry to set out a timetable that demonstrates its commitment and progress.”

The central bank said it expects the private sector to lead and “make meaningful progress” on developing and implementing New Zealand’s real time account-to-account payments capability.

In a report on real-time payments, Deloitte noted that most existing real-time payment systems offer an instant fund transfer service that can be initiated through smart phones, tablets, digital wallets, and the internet.

It said real-time payments could enable better cash management and improve liquidity for financial institutions, merchants, consumers and society. 

"The liquidity improvement can be especially impactful to small merchants who may be used to waiting days for their settlement, possibly creating a positive impact on their cash flow and daily sales outstanding," Deloitte said.