In the next two years, new rules are taking effect in Australia that will change the way payments are handled. If you're paying a bill or transferring money from one bank account to another, it typically takes three days until the transaction is finalized. After the new changes take effect, it will take a matter of seconds. It's a huge change, and it means that banks are going to have to reinspect their systems to make accommodations.
A typical bank has upwards of 50 banking applications that all interact together to provide services to their customers. It's a big project to get all those systems to do real-time settlement. Even though there are some creative approaches to the issue, it all comes down to scale.
One of the most common approaches is to implement a payments hub, which is a flexible piece of software that handles all different types of payments. The payments hub is located at the center of the bank's operations. The advantage of a payments hub is flexibility to introduce new interfaces. For example, if you need to change the interface for the Federal Reserve in the US or the Reserve Bank in Australia, you can isolate the changes you need into that one interface. You can do real-time settlement out of that hub without necessarily having to change all 50 different applications to support the new interface.
Another challenge comes from meeting obligations when it comes to service levels. Since you've got so many transactions flowing through the network, it's a major issue to consider. It's one thing if transactions are investigated at the end of the day. It's very different if you're looking at the response time while it's happening. Remember, real-time settlement takes place within seconds—six seconds in Australia—and there are many things that need to take place in this short window of time (such as fraud detection).
You need to be altered immediately when you're in breach of those service levels so you'll be aware that you haven't met the expected timing on the transaction. Of course, the penalties aren't locked in yet since we're still in the early days. (The go live date is 2017 for real-time payments in Australia.)
The act of making payments should stay as smooth as possible for customers. That's one of the metrics that banks will have to track during the transition process. There should be no extra friction introduced from the change to real-time settlement. What customers will notice is the nearly immediate availability of funds. They'll no longer face the rare occasion when their money hasn't entered the account after three days. (Maybe because they were trying to make a payment that ended up failing because of a lack of required funds.)
Even though there may be some subtle changes initially, a new payments platform with real-time payments solutions opens up a whole new way to pay. It'll potentially bring a new set of available banking services to customers.