According to a Reserve Bank sponsored survey released today while cash made up 62 per cent of the number of payments made by individuals in Australia in 2010, it represented less than a quarter of the value of all payments.  And, while online payment systems such as PayPal handled only 1 per cent of Australian transactions by value in 2010, technology enabled systems such as eftpos, BPAY, internet and telephone banking accounted for 37 per cent of transactions by value.

The Strategic Review which was first announced last year and which today began the public consultation phase is intended to take a medium term view, exploring technology and innovation that might impact and shape payments and policy over the coming five to ten years.

According to the Reserve Bank; “Its objective is to identify areas in which innovation in the Australian payments system may be improved through more effective co-operation between stakeholders and regulators.” And reading between the lines, if the banks don’t move fast enough the regulator is likely to mandate change.

While the Bank claims it has an open mind its issues paper, also released today, gives some clue of its early thinking. For one it comes down strongly in favour of multiple same day settlements rather than next day settlement of retail transactions. Improved payments access over holidays and weekends is also on the Bank’s agenda.

The issues paper points to a need for banks and financial institutions to develop more real time processing capability in order to: “uniformly make funds available in a timely fashion “. The Bank notes: “One question is whether a move to same-day settlement of retail transactions, combined with transparency of the timing of availability of funds, would apply sufficient competitive pressure to provide faster availability of funds, or whether other measures would be necessary to achieve this end.”

In a nutshell – if the banks don’t do it because it makes good commercial sense, they may be compelled to do it by regulation.

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