Billion dollar plan to make electronic payments instant
The digital age has sped up the sales process, but getting the money can be stuck in the Stone Age.
"There's no doubt that old-fashioned payments regimes, and there's probably nothing more old-fashioned than a cheque, just aren't up to the digital era," said the boss of ANZ's Australian business Philip Chronican.
Which is why the big four banks and eight other financial institutions are planning to spend more than $1 billion building a network that will allow real-time payments from both fixed and mobile digital devices.
In other words, businesses will get their money the moment they make their sale.
"I think whether it's an individual customer or a small business or corporates or government, basically, people are looking for payments to be fast, easy and secure," said Paul Lahiff, the chairman of the New Payments Platform.
Making that happen will require this new network, and tasked with building it is Belgium-based payment system specialist Swift.
"I hope it will mean innovation, I hope it will mean new services being able to instantaneously send money to somebody else, instantaneously receive money and be offered new services that allow them to do things that are now very cumbersome, take a long time," said Swift's chief executive Gottfried Leibbrandt.
Right now when you make an online payment, if it is not to another account at your own bank, it can take around three days to get there.
The Reserve Bank has been increasingly pushing for that to be fixed, but the financial services industry said it is consumers who are really driving the change.
"Consumers are demanding more of their financial institutions in this space and the market is developing at such a rapid rate with Apple and Google and those types of things that I think in the absence of that, the financial institutions figure they would have lost out eventually," explained Mr Lahiff.
A view shared by ANZ's Philip Chronican, who says it would be a mistake to underestimate the new high-tech players trying to crack open the banking market.
"The current version of peer-to-peer lending isn't successful; the next iteration might be more successful," he argued.
"Same with Bitcoin - I think it's got some issues today, but who's to say that the next crypto-currency doesn't have some additional features that makes it more compelling?"
Which is why the big banks view the proposed new payments platform as self-preservation.
"My view is that the best way to compete is by making sure that your customers have what they need so that they're not looking for other providers to provide services," added Mr Chronican.
However, with the new payments platform not scheduled to be operating for nearly three years, the new digital kids on the block have more time to chip away at the big boys.
