Repairing Australia's outdated payments system

By Simone Rosamond-Davis

In this age of fast-moving technology when you can make a financial transaction on your smartphone, it is frustrating to have to wait, usually until the next business day, to receive the funds from deposits in your savings and checking accounts. 

That's just the way it is in Australia -- banks in other countries are able to process direct deposits, make transfers, and debit payments almost instantaneously. 

Glenn Stevens, governor of the Reserve Bank of Australia, says that Australian banks are falling behind and they need to catch up with the rest of the world by making financial transactions quicker for consumers. 

"With systems for real-time transfers available in countries ranging from the United Kingdom to Mexico, Australia's approach is starting to look a bit dated," Stevens said at the Australian Payments Clearing Association in Sydney. "It is our belief that availability of real-time transfers would fill some important existing gaps, but would also open up enormous potential for innovation on top of that system."

Mr. Stevens argued that presently card payment systems give the impression of operating 24/7 but in reality, no funds move between financial institutions out of business hours, which minimises the services that can be offered to users of the payments system.

Already consumers expect to be able to download a book to their kindle or music from iTunes while they are sitting on the train. However the Australian payments system currently doesn't operate this way. With customers demanding greater accessibility, the Reserve Bank of Australia has begun to investigate the payments system.

The RBA looked at trends and developments in payment systems overseas and at possible gaps in the Australian payments system that may need to be filled in the next five to ten years. The bank's main goal is to establish a system that provides real-time retail payments, with real-time funds availability, by the end of 2016. This would mean:

• Same-day settlement of all Direct Entry payments by the end of 2013 or sooner
• The ability to make real-time retail payments by the end of 2013 or sooner
• The ability to make and receive low-value payments (Direct Entry, real-time payments and crediting of card payment receipts) outside of normal banking hours by the end of 2016 or sooner
• The ability to make and receive low-value payments (Direct Entry, real-time payments and crediting of card payment receipts) outside normal banking hours by the end of 2016 or sooner
• The ability to send more complete remittance information with payments by the end of 2016
• The ability to address payments in simple manner by the end of 2017

But for now we'll have to go on waiting. In the meantime, always remember that if you don't have enough funds in your debit account and you place a purchase, your bank could charge you an overdraft fee. Usually around $10, these fees can add up and you might not even realize it until your monthly statement comes in.

 See more: Survey: Aussies worried about credit card surcharges, Reserve Bank to keep regulating bank fees