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.