Strategic Review of Innovation in the Payments System:
Conclusions – June 2012
A Model for Real-time Retail Payment and Settlement Hubs

As discussed in ‘Summary of Conclusions and Next Steps’, the Board believes that the Australian payments system ought to be in a position to deliver real-time retail payments in the coming years and it sees considerable merit in this functionality being delivered by a hub. This attachment seeks to flesh out a model for providing real-time retail payments via payment and settlement hubs and proposes a timeline.

The characteristics of a real-time retail payments hub would be as follows:

  • initially providing credit transfers, with future capability for debits, future-dated payments and other payment types
  • payment messages based on ISO 20022 standards
  • messages capable of carrying additional remittance information
  • resilient connectivity to all deposit-taking institutions
  • the receiving bank to provide real-time funds availability – required by the end of the first year of operation
  • the sender (payer) to have confirmation of the funds destination before committing a payment
  • the sender (payer) to receive confirmation that the payment has been made into a valid recipient account
  • 24 x 7 resilient operation with high levels of security
  • future capability for use of customer identifiers (e.g. mobile phone number) for ease of addressing payments and to assist in account switching
  • open access for financial institutions and payment service providers; that is, potentially accessible to consumer and business customers of all authorised deposit-taking institutions (ADIs) offering retail transaction banking
  • settlement of each payment in central bank funds (through an enhanced ‘fast’ settlement service in RITS)
  • support for a range of secure payment channels, including the use of mobile devices

As discussed in Section 4, there are different ways in which a hub providing real-time retail payments could be delivered. The following proposes a timeline based on the Reserve Bank, at least initially, owning and governing the system. Timelines might be longer with industry ownership if there is an initial need to establish ownership and governance arrangements:

  • Reserve Bank to consult with the industry on key requirements and capabilities for a real-time payments hub solution, with conclusions available by the first quarter of 2013
  • a tender process for construction of the payments hub commencing around mid 2013, with selection made by end 2013
  • industry connectivity requirements available by mid 2014
  • the Reserve Bank to develop the capability for RITS to process ‘high speed and high volume’ settlements by end 2014
  • a real-time retail payments hub to be available by end 2014 for external testing by ADIs
  • all ADIs (that offer transactional banking services) to have the ability to at least receive payments from the new hub (possibly via a service provider) by end 2015
  • ADIs using this service to develop the capability to provide real-time funds availability following settlement by the end of 2016.