ANZ’s Jo Spencer on modern payment systems around the world – A banker’s view

From our geographical size to the lean structure of our banking systems, Canada and Australia share many similarities. We are also both on a payments modernization journey, so Payments Canada was pleased to have the opportunity to speak with the Head of Technology, Strategy and Architecture at ANZ Bank, Jo Spencer. Since Jo’s experience spans the globe, we also invited him to join our open panel discussion at Sibos next month for a banker’s view on payments modernization around the world.

Jo, you have been involved in a number of wholesale payments implementations around the world and now, with ANZ, you are a design consultant on the real time payments rail in Australia, the New Payments Platform (NPP). What’s capturing your attention these days?
I’ve been involved in payments infrastructure for about 26 years, beginning with the CHAPS system in the UK in the early 90s. I moved around the world from there, developing RTGS [real-time gross settlement] projects in about 20 countries, including Europe, Saudi Arabia, India and Hong Kong. Each of these solutions were traditionally built on international payments standards and networks (like SWIFT) with similar features, but with different requirements based on each country's respective nuances.

It’s fair to say that RTGS solutions haven’t changed significantly over the years, but now we’ve started thinking about real-time payments. Real-time payments are typically large volumes of lower value payments, processing 24x7 and settling as netted values using RTGS systems. With NPP, we’ve designed it to settle payments individually and in real-time. Therefore, we have designed-in the potential for the NPP solution to replace the Australian RTGS system in the future.

The other interesting trend in the evolution of payments systems is the use of ISO 20022 as the messaging standard  across different payment types.  This allows the potential to consolidate payments processing systems that can process all payment types and allows interoperability of these payment types across different payment infrastructures.

ANZ operates in 32 countries around the globe, predominantly in Asia-Pacific. For ten years we have had a strategy of rolling out common solutions to support international RTGS or ACH payments, that has allowed us to reuse these solutions to process these real-time payments in some countries.  However, where we have high volumes of payments – and we process millions of payments each day in Australia and New Zealand - we are finding our traditional payments systems are starting to struggle and we’ve had to change our solution approach to support real-time payments.

At the same time as building ANZ’s target solution for NPP go-live later this year and our solution to Hong Kong Faster Payments System for next year, we’re having to replace our heritage solution for RTGS payments processing in Australia and New Zealand.  So aligning the solutions is the key outcome we’re looking for. It’s really the perfect storm at the moment!

ANZ has been a strong supporter of NPP, which goes live later this year. What excites you about a real-time rail?
Real-time payments is all about the customer-to-customer experience.  NPP has the ability to really change how people and businesses behave, how they interact with the bank and how commerce happens. 

The customer is going to get real-time delivery of payments between accounts using information they understand to identify a target account, like a mobile phone number.  In addition, NPP has the concept of Overlay Services that allows the system to evolve to support multiple specific services in different service models. Whether someone is buying a car or a house, the payment process can hook into the broader business context and the customer doesn’t even need to be aware of it. Retail and institutional customers could drive value from it, finding new ways of doing business and changing the way products are sold. Customers will benefit from the added visibility, accessibility, immediacy - and the frustration around the uncertainty of payments will just evaporate.

What excites me from a delivery perspective is that we are designing NPP with future change in mind.  That’s my role as the design authority on the NPP program. We’ve been able to shape the SWIFT solution so that this can evolve and we’ve needed to think ahead about the possible new payment types that can be supported, primarily by configuration only.

NPP, with its payments addressing PayID solution, also has the potential to link in with a future customer digital identity framework.  From my perspective, once we have a national solution for digital identity, it could be used for multiple applications.  Broader use allows the cost justification to get better and better, and we’ll have the standard rails that can cope with more and more applications. In this way, NPP is architected to evolve to support not only new payments solutions, but also other participant interactions.

Has the NPP journey allowed for any unanticipated opportunities for ANZ? 
One thing we have learned is that any real time payment system implementation needs the whole bank to be aware of what’s going on. As I said before, it’s a customer to customer experience, not a bank to bank experience, so it’s given us the opportunity to evolve our solutions across the whole payments lifecycle. The channel distribution of payments origination has to be slick, for both internet banking and mobile initiated payments. In addition, fraud prevention and detection are more important than ever, and the impact of real-time 24x7 accounting, reporting and customer operations are very challenging. These are critical issues that banks have to think about - not just the payment itself but the business context of the payment, and not just compliance but customer engagement. It’s been a very interesting experience which we are replicating in multiple countries. There are enough similarities in processes and operation models that we can leverage a lot of the solutions in other countries efficiently and cost effectively, which helps.

We are looking forward to seeing you at Sibos. What entices you to travel so far for this conference?
I typically go to Sibos every other year – it’s the best way of getting those people together who really know what they are talking about to discuss the problems and solutions to the problems we are all facing. Open banking is obviously one that’s coming through from Europe, and a few years ago it was the cryptocurrency trend and distributed ledger technology. Different disruptor solutions for international payments could be a focus in Toronto.  All these initiatives come together at Sibos and because it’s global, the views are not always what you would expect. The views of different experts make you think about your own challenges in a different way. Of course, it’s also cool to catch up with old pals… and meet new ones!