"The payments system is built on networks, which means that a certain amount of coordination and collaboration is essential for it to function and develop over time. The challenge is to encourage stakeholder collaboration that supports innovation and competition while discouraging collective or individual behaviours that are detrimental to payments system users." No one at APCA wrote this paragraph - it comes from the final report of the Canadian Government's Payments System Review. The thing is, we could have written it. It expresses APCA''s philosophy as the payment system self-regulatory body.
Believe it or not, the current US Presidential nomination process has thrown up a passionate debate about the nature of money, and particularly whether it is 'sound' or not. Voters are frustrated and fearful about the economy. Politicians (with no economics training) are arguing that in these uncertain times we need a currency backed by something 'real' like gold. This seems oddly backward-looking in the era of the internet. It begs a question: what sort of money do we need to fuel the economy of the 21st century?
Many of us are returning from the holiday break newly resolved on self-improvement – give up this, lose that, do better at the other thing. APCA too is resolved on self-improvement. Back in August 2011, we gave a public commitment to reform APCA’s own governance arrangements so as to make it a fit vehicle for more inclusive, stronger self-governance of the payments system. This is currently a hot topic for the Reserve Bank, and has been one for APCA for quite some time as well. So, next month, in February, we hope to be talking about a new model for how APCA works. This has to fit in with the views and needs of many different people and organisations, not least the public policymakers, so we know it probably won’t be a short conversation. But we hope it will be a successful one.
In Sydney in early June, we launched our consultation on the future of cheques. Our proposition is simple: based on long-term trends, cheques are steadily disappearing from the Australian community. That means problems down the track for those who rely on them, as they increasingly find their payment counterparties don't want to use or accept a cheque, even if they do. This consultation is not about cheque clearing at all: it's about making sure people have what they need. In the same week, on the other side of the world, the House of Lords in London began an acrimonious debate on the same issue: the future of cheques in the UK. The UK Payments Council has had closure of the paper clearing system on the agenda for several years, but they have not been able to win community support for the need to change.
So when you do a card payment, the shop owner can be certain she's getting paid because the card terminal does a real-time authorisation out of your card account ('value now'); but the payment system actually moves the money early the next business day morning or, for some payments, the morning after ('funds later'). Payments made on the weekend are the same in that value (authorisation) is still now, but the system only actually moves money between financial institutions on weekday mornings – which could be 2 to 4 days later. By the way, 'value now, funds later' is a lot better from the shop's perspective than 'promise now, funds later' – which is how a personal cheque works. In the good old days of branch banking, most people couldn't check their account balance outside business hours. Nowadays we all have much better information about our accounts through widespread ATM networks, internet banking and phone banking.