Modernising retail payments system could boost economy by up to $1.3 billion a year – RBNZ

New modelling from the Reserve Bank suggests overhauling the country’s outdated retail payments system could boost the economy by between $700 million and $1.3 billion a year.

The bank has today released a new issues paper on modernising the payments system.

In it, the bank said that each year around $2 trillion of retail payments flows between New Zealand banks and that, given the scale of payments, even small improvements can lift national productivity, enhance innovation and global competitiveness, and strengthen economic resilience.

The main payment systems in New Zealand include EFTPOS, debit cards, credit cards and bank transfers.

The paper said New Zealand’s payments system remained reliable for many users, but was increasingly falling behind global standards, with structural issues also slowing further modernisation.

It said reform of the system could benefit consumers by providing convenience and choice of payment methods, and access to modern features such as instant payments, request-to-pay and QR codes.

It said reform could also provide better protection against scams and fraud.

The issues paper noted there were performance and capability gaps, including a reliance on legacy platforms that was restricting competition and innovation.

The payment system also lacked modern features seen in other systems around the world and a lack of a domestic payment system posed risks to the country’s economic resilience.

New Zealand’s banks and financial institutions have drawn criticism in recent years from organisations such as Consumer NZ for not moving fast enough to enable open banking, which allows third-party apps to use people’s banking data for bank-to-bank payment transfers.

The report also identified a lack of leadership on the payments issue, saying there was no entity with a strategic mandate to provide system-wide leadership.

The Reserve Bank will now seek submissions on possible changes to the system.

This will include looking at the technical and platform requirements needed to modernise the payments infrastructure, as well as what leadership changes are required across the sector.

The work is being done with the support of the finance minister.

The Reserve Bank is now inviting submissions on the issues paper.