One of the advantages to having a small economy is the flexibility.

It’s why New Zealand has one of the world’s leading payments systems, and was able to update its system seamlessly in 2012, following several years of behind the scenes work by major banks and the Reserve Bank of New Zealand (RBNZ).

What NZ achieved was the introduction of Settlement before Interchange (SBI) which enables banks to exchange payment information, and pay their obligations on the same business day. It is acknowledged as a cutting edge system by global standards, but questions remain as to whether it went far enough to future proof the country’s payment system.

SBI sits under RBNZ’s Exchange Settlement Account System, and integrates with the member-owned cooperative SWIFT (Society for Worldwide Interbank Financial Telecommunication), which acts as the intermediary for other access points to the payments system.

Same Day Settlement To Be Overtaken

It replaced the Interchange and Settlement system, and it allows for bulk retail transactions to be queued by SWIFT for same day settlement, instead of next day settlement as occurred in the past.

Globally there is a push towards 24/7 real time payments systems. Australia is one of the leading nations in the field with its New Payments Platform (NPP) under construction and expected to bring instantaneous payments by 2017.

New Zealand’s most recent upgrade was more a step change, and its prime purpose was to remove settlement risk from the NZ payments system.

But it remains a bulk payments system that at best could provide settlements every hour, and therefore is not a true 24/7 system.

NZ Attractive To New Payments Players

It also lacks the information storage that Australia’s NPP will contain, and therefore is not attuned to the merchants and their desire for additional information to drive efficiency.

Which potentially makes New Zealand more attractive to new comers to the payments system like Google, Apple, Facebook and Bitcoin.

NZ is unlikely to have to go back to the drawing board to enter real time payments. It could tweak its SBI by adding a clearing system, reducing settlement windows, and getting banks to post funds immediately into an account to match settlement rates.

This would in effect turn SBI into a 24/7 system.

Potential For Centralised Customer Data

New Zealand could also centralise customer information, both as a data base, and to provide open access to banks for unique consumer identifiers, like email address or phone number, or even biometrics when a reliable “signature” becomes available.

This would allow easier collection of transaction data to turn into useful information for retailers and merchants, as well as streamlining the “talk” between banks to identify and execute consumer transactions across the payments system.

While New Zealand’s payment system remains a leading platform, it requires more tweaks, to become a true 24/7 payment system.

This article represents the views and opions of the author and do not necessarily reflect the opinions of BPAY.

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