In discussion with New Zealand’s central bank: payments Modernization in New Zealand

Published: June 17

Canada and New Zealand share more than a few commonalities, including the sovereign whose face is featured on our respective twenty dollar bills, and the fact that we both print our bank notes in Canada. We’re also both on a payments Modernization journey.  For more on that we asked Mike Wolyncewicz, Assistant Governor and Chief Financial Officer for the Reserve Bank of New Zealand, about his country’s new payments systems and the importance of standardization and industry collaboration in bringing payments Modernization to life.

As a starter, can you explain what the Reserve Bank of New Zealand is and its core areas of responsibility?

The Reserve Bank of New Zealand (RBNZ) is a ‘full service’ central bank with a wide mandate that spans monetary policy, cash operations and financial stability with the latter focused on financial policy making and the supervision of banks, non-bank deposit-takers and insurers to deter and detect money laundering. The Bank’s mandate also includes the oversight and operation of New Zealand’s (N.Z.) financial markets infrastructures, including the N.Z. Dollar Real Time Gross Settlement (RTGS) system which handles 12,000 payments a day, and the principal central securities depository for New Zealand which handles close to 2,000 equity and fixed interest transactions a day.

I understand New Zealand recently introduced a new payments system. Can you share more details? 

Like many jurisdictions, we wanted to enhance our payments systems’ resilience and establish a more modern and secure platform for future development. We also desired an off-the-shelf software solution so we could benefit from the development efforts of a global community of users. With these drivers in mind, we conducted an extensive strategic review of our existing payments systems and consulted with our system’s users before procuring a ready-made solution.  This led to replacing our aging infrastructure – our two previous payments platforms which were becoming increasingly difficult to support – and going live simultaneously with separate replacement systems for both, in February 2020.  

The new systems – the RTGS and Central Securities Depository (CSD) – were provided by the SIA-Perago Group.

Canada’s payments Modernization efforts are being driven by ecosystem collaboration.  What role did collaboration play in introducing New Zealand’s new systems?

Given how mission critical these systems are to the workings of the entire economy and the cascading impact of change on users’ own systems and customer interfaces, we took great care to collaborate closely with our payments systems’ users, keeping them involved in the project throughout. For instance, we made sure they were fully informed when key decisions were being made, as well as during the training, testing and go-live phases.

Communication was well planned and thorough. We were also generous with our face time and meticulous in resolving customers’ questions and issues. So much so, that we consider this to be one of the main reasons our go-live went relatively smoothly.

In addition, we spent a great deal of time fostering an effective working partnership with our application vendor, SIA-Perago, and our infrastructure provider, Datacom.

Canada’s modern payments systems will use the global payments message standard, ISO 20022.  What role is ISO 20022 and other aspects of standardization playing within New Zealand’s payments landscape?

Like other jurisdictions, conversion to ISO 20022 is looming as a major project for our industry. We are firm believers in the benefits of standardization and the need to minimize local bespoke solutions to service legacy processes.

Conversion to ISO 20022 will be relatively easy for RBNZ because our payments system’s software is already used in many first world jurisdictions around the globe, all of which have the same needs as us. Knowing this, we will all be able to leverage the same packaged solution and realize efficiencies and time savings through reduced development cost. Also, the software quality will benefit from many users’ testing.