Payments & Infrastructure

A safe, competitive and efficient payments system is essential to support the day-to-day business of the Australian economy. The Payments System Board of the Reserve Bank has a mandate to contribute to promoting efficiency and competition in the payments system, and the overall stability of the financial system. The Bank oversees the payments system as a whole, which encompasses a wide variety of individual payment instruments – ranging from cheques and payment cards to high-value corporate payments – and the usually unseen arrangements that ensure the smooth transfer of funds from accounts at one financial institution to another.

The Bank also has a formal regulatory role to ensure that the infrastructure supporting the clearing and settlement of transactions in financial markets is operated in a way that promotes financial stability. In addition, the Bank has an important operational role in the payments system through its ownership and management of the Reserve Bank Information and Transfer System (RITS), Australia's real-time gross settlement system.

Payments Policy

Watch video: Payments Policy


Tony Richards, Former Head of Payments Policy

The Bank has got a number of roles in payments systems. One important one is that we operate the system that banks use to transfer funds between themselves – and there's very high values going through that obviously, something like $180 billion a day on average through that system. And the other important one that I'd like to talk about is the Bank's role as regulator of the payments system, and that's done by the Payments System Board. The Bank has two Boards, there's the Reserve Bank Board and the Payments System Board.

The Payments System Board has been given the responsibility for competition and efficiency of the payments system and also for controlling risk and promoting the overall stability of the financial system.

Our work on retail payments emerged from the Wallis Inquiry which found that the cost of payments in Australia were quite high and they gave the Bank a mandate to improve the competition and efficiency in the payments system. So our early work was with respect to the payments card systems, where there were a number of fees that weren't particularly transparent. There were also restrictive rules on merchants and so the Bank has put in a series of standards or regulations to improve the competition and efficiency in the card systems.

We've also done some work on the ATM system where the emphasis has been on making the cost of ATM transactions transparent to customers (rather than finding out about the cost of it a month later on their bank statement), and also ensuring that the owners of ATMs are able to charge and continue to provide the services.

The Bank has a responsibility to ensure that licensed clearing and settlement facilities operate in a way that promotes the stability of the Australian financial system. The Bank has put in place standards and it does annual assessments against those standards. What we do is we have ongoing dialogue with the clearing and settlement facilities. We understand their business models, we understand the risks they're taking, the new products they're offering and once a year we do an assessment of those clearing and settlement facilities.

The New Payments Platform is an exciting project that is building a new centralised or hub-based infrastructure that all financial institutions will connect to. And among other things, it's going to facilitate real-time payments between households. So, for example, if I was wanting to sell my car on a Saturday afternoon privately, I'd be able to make sure that the money had arrived in my account from the buyer before I hand over the keys.

So the Bank has been working closely with the industry. It's a collaborative project and the industry participants will also be building their own apps et cetera to offer new and improved payments services to their customers.

Payments Settlements

Watch video: Payments Settlements


Greg Johnston, Head of Payments Settlements

Payments are often referred to as the plumbing of the economy.  When people buy and sell goods and services, a payment usually flows.  For more than half of those payments, the buyer and the seller bank with different financial institutions. So when that occurs money needs to flow from one financial institution to another to make the payment successful.  In Australia, that occurs across exchange settlement accounts at the Reserve Bank.

Payments Settlements Department's role is running the system that enables that settlement to occur. For high value payments, settlement occurs in real time as they’re exchanged between financial institutions. We do this to eliminate the risk, immediately as those payments are flowing, that relates to the obligation from one financial institution to another.

For low value payments such as those made by cards, direct entry and EFTPOS payments, settlement occurs after the exchange, usually at 9 am the next morning. But for direct entry payments we settle those later on the same day those payments are exchanged.

The system that settles payments in Australia is called the Reserve Bank Information and Transfer System, or RITS.  RITS settles around $170 billion high value payments each day, and probably a further $7 billion in low value payments every day.  Payments Settlements Department is also responsible for settling transactions that the Reserve Bank initiates, such as it implements open market operations.  It also is responsible for settling transactions initiated by overseas central banks that bank with the Reserve Bank here in Australia.

RITS is a critical component of the Australian financial system, it's owned and operated by the Reserve Bank, and we invest very heavily in ensuring that it is stable and reliable and always there to meet the needs of the Australian economy.  Supporting innovation is a very key theme for Payment Settlements Department at the moment.  The industry is involved in developing a new payments platform. This new platform will enable a new payment to be offered to the Australia community. It will enable a sender to send, in real time, a payment to a beneficiary and have that beneficiary be able to see that payment within seconds of the payment being sent.  In addition to that, there will be a good deal of remittance information that will be able to be sent with that payment. If you buy a car on the weekend and it happens to be an expensive car, instead of having to write out a cheque, you might be able to then pull out your mobile phone, send the payment to the car dealer and the car dealer can see straight away that the payment has been made and is therefore happy to give you the keys.