The second real-time gross settlement system built by Massachusetts- based Intranet Inc. for a foreign bank has gone into full operation, in Australia.
The multimillion-dollar system, created for Commonwealth Bank of Australia, is the country's first real-time gross settlement system. Start- up tests began in December, after a year of installation, and the system went live in March; Intranet set up a Sydney office to provide on-site support.
Australia's central bank has mandated immediate settlement of time- critical payments by mid-1998. Clearing now takes place overnight, but as in other parts of the world, real-time settlement is seen as an improvement in efficiency and risk management.
Commonwealth Bank, with assets equivalent to $60 billion, is seeking a competitive advantage by moving quickly and fully integrating its payment and liquidity management systems.
"We are the only bank that has gone out and built a new system," said Fraser Bone, senior project manager in the institutional banking division in Sydney. "Other banks looked at their systems and did some tinkering. We felt any tinkering could have had negative implications to the other services we provide."
The bank is using Intranet's Money Transfer System for inter-bank transaction processing, predominantly between it and the other three of Australia's top four-Australia and New Zealand Banking Group, National Australia Bank, and Westpac-as well as some 30 smaller banks in the country.
"We've seen it as a opportunity to reengineer our processes and our payments business, to achieve a best-practice payment system and generate revenues," said Mr. Bone. "This will help us have a more flexible system and be receptive to our individual client requirements."
On an average day the bank handles the U.S.-dollar equivalent of about $8.6 billion of funds transfers, not including securities settlements, which will be put on the Money Transfer System this month.
Intranet's first international installation was at the Bank of Bermuda. The company has more experience processing for the international divisions of its U.S. customers, as opposed to installing its system.
Commonwealth Bank is its first system integration project in the Pacific Rim region.
"It is very significant for us," said Paul Morris, director of sales and marketing at Newton, Mass.-based Intranet. "It proves our goal of expanding internationally as well as our capability to support a customer 12,000 miles away."
Rather than "put a Band-Aid" on its systems, Mr. Morris said, "Commonwealth Bank put together a strategy to become the premier payment system group in Australia, New Zealand, and the Asia-Pacific region."
On future international contracts Intranet will be working with the London-based payment systems division of International Business Machines Corp. Under an October 1996 agreement, IBM will represent Intranet internationally.
Mr. Morris expects the next major customer to be a bank in the United Kingdom, followed by another in Australia and perhaps one in Japan.
Given the international movement toward real-time gross settlement, "Unless Asia-Pacific moved ahead, it would have been left out in the cold," Mr. Morris said.
