Payments systems provide the means for people, businesses, and financial institutions to pay each other and play an important role in the economy and financial system. They are composed of various institutions, standards, rules, and procedures and involve a number of technologies.
The shape of New Zealand's payments system has been primarily defined by regulatory requirements and technological developments.
There are a number of participants involved in New Zealand's payments system which itself is part of the global payments system that enables cross-border payments.
Different kinds of payments involve different parties, either directly or indirectly. In addition to consumers, merchants, and banks, the payments system participants include payments service providers, financial institutions, governments, standards organisations, and so on.
Payments exist in a variety of forms such cash, cheques, bank transfers, and direct debits. Payment cards, which are a very common payment instrument in New Zealand, enable a variety of different payment methods such as contactless and online payments.
Domestic and international networks and schemes facilitate various types of payments.
New Zealand has two domestic EFTPOS switches that connect payment terminals, gateways, and New Zealand banks to each other: one operated by Paymark and one operated by Verifone. EFTPOS cards issued by New Zealand banks can not be used for online purchases or overseas.
International card schemes such as Visa and Mastercard connect New Zealand banks to each other and to all Visa and Mastercard members worldwide, allowing the cards issued by New Zealand banks to be used to pay merchants overseas.
Banks and other financial institutions "pay" each other with the help of clearing and settlement systems and arrangements.
Domestically, the flow of funds between New Zealand financial institutions is recorded within the Exchange Settlement Account System (ESAS) operated by the Reserve Bank of New Zealand (RBNZ). RBNZ is New Zealand's central bank and acts as a bank for New Zealand banks. Only approved financial institutions can open an exchange settlement account (ESA) at the Reserve Bank and participate in ESAS.
Cross-border payments are mediated by correspondent banks. New Zealand banks have correspondent banking partners in other countries.
New Zealand's payments system comprises a number of layers all of which facilitate the flow of funds domestically and internationally. As payments play an important role in New Zealand's economy and the global financial system, it is important to understand the operation and key components of the payments system.