Swift's initial move into faster domestic payments in Australia sets the groundwork for expansion into other markets, including the U.S.
Faster payments are getting significant attention worldwide. Australia's New Payments Platform joins projects such as the U.K.'s Faster Payments Service and South Africa's Real-Time Clearing. In the U.S., the Federal Reserve Banks' financial services unit has been studying options for a faster payments system in the U.S., and The Clearing House has its own faster payments project in the works.
"Every market is different, but it is definitely Swifts intention to replicate the Australian solution for other communities," said Juliette Kennel, head of market infrastructures for the financial messaging network Swift. "We have closely followed the real-time discussion that has been led by the Federal Reserve Bank and The Clearing House in the U.S. and are happy to continue investigating further if and how the Australian solution could apply."
Twelve banks in Australia have committed to funding the New Payments Platform project, signing a 12-year contract with Belgian-based banking co-op Swift to build and operate the system's basic infrastructure. The New Payments Platform represents the banks' response to the Reserve Bank of Australia's objectives on payments innovation.
The country's multi-year faster payments project has a goal of delivering real-time payments by 2017. Swift says its appointment to build the infrastructure represents the third phase of the New Payments Platform. Swift is targeting the third quarter of 2015 to complete its work with Australian banks and other payments providers in establishing its system.
Swift was initially designed for cross-border transactions, but has evolved into a payment infrastructure, said Gareth Lodge, a London-based industry analyst with Celent.
Swift has served domestic payments for U.K. banks, and its first move into real-time domestic payments was expected, Lodge said. "Those of us watching knew something was happening, not the least of which they advertised for a product manager for real-time payments earlier this year," he added.
Because Swift's infrastructure is already used in 80 other payment systems around the world, it is possible that "the goal for Swift would then be to sell this system to other countries," Lodge said.
Swift's system will incorporate peer-to-peer technology, reusing and reconfiguring Swift components already deployed in other markets, and build on Swift interfaces to make transactions more efficient for customers.
It will be based on three main technology components a domestic messaging channel that allows a high volume of messages in-country around the clock; a payments gateway switch for clearing and settlement of transactions; and a proxy addressing lookup service that allows payment routing based on personal identifiers such as mobile phone numbers or e-mail addresses.
It's possible that Swift has already actively engaged payments providers and planners in the U.S., Lodge said. However, Australia has a far less complex financial system than the U.S., he noted.
"But the U.S. has yet to explicitly say what they're going to do," Lodge said. "However, this construct [in Australia] has a lot that the U.S. can learn from because it's a platform for things to be built on, rather than the end-game."
Kennel said Australia is "more complex" than other markets because the country's financial network is "setting the bar very high" with 24/7 real-time immediate settlement of all individual payments in the central bank.
"Furthermore, Australia will operate a future-proof platform that will be able to handle additional data linked to the payment instruction, typically requested in business-to-business transactions," Kennel added.
U.S.-based technology vendor Fiserv also has been developing an open payment infrastructure to help establish real-time payments.
Another vendor, FIS, has declared its interest in supporting any faster payments initiative through its PayNet real-time payment rail that operates in the U.K. and Australia. FIS would also like a place in the Fed banks' plans for faster payments in the U.S.
"We have asked them to work with us, that we have the pilots in place, and we would be happy to be one of the solutions used," Peter Gordon, senior vice president of money movement solutions at FIS and general manager of PayNet, said at a recent conference in Chicago.