UPDATE: First Lessons Learned From Massive Australian Payment Outage

November 30, 2022
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In a recently published incident report, the Reserve Bank of Australia reveals further details of the mid-October widespread outage that crippled the country’s instant payment system and promises to take action to avoid such incidents from happening again.

In a recently published incident report, the Reserve Bank of Australia (RBA) reveals further details of the mid-October widespread outage that crippled the country’s instant payment system and promises to take action to avoid such incidents from happening again.

On Monday (November 28), the RBA released an incident report setting out a number of actions it intends to undertake to prevent widespread disruptions to the country’s central payment infrastructure.

This follows a major system outage at Australia’s central bank on October 12 that lasted five and half hours, preventing users from sending instant and high-value payments.

According to the report, the outage delayed around half a million unique payments on Australia’s instant payment service called New Payments Platform (NPP), which accounted for 17 percent of the daily average volume on that day.

It took the industry from four hours to five days to reconcile the payments that were delayed during the outage.

In addition to the instant payment service, low-value clearing services supporting the Reserve Bank Information and Transfer System (RITS), Australia's high-value settlement system, were also down for four hours, but most banks could clear the backlog on those transactions the following morning.

The report suggests that the impact of the outage could have been even larger had it not happened during the night when all other settlement services were closed for the day.

The RBA reiterated that the root cause was an operational error during a planned change, which applied an incorrect setting to the software that manages the RBA’s virtual servers and apologised again for the widespread fallout.

In addition, the report sets out seven actions that the central bank intends to take to prevent future outages, which include plans to undertake a review of the governance and control arrangements relevant to the incident and investigate improvements to broaden monitoring of end-to-end message flow for NPP’s settlement service.

Original story: Payments Outage Cripples Australian Banks (October 14, 2022)

Commonwealth Bank (CommBank), Westpac, ANZ and NAB are among the banks affected by an industry-wide outage at Australia’s payment system.

Millions of Australians have been affected by a major outage after the country’s Fast Settlement Service (FSS) and the Low Value Clearing and Settlement Services (LVCS and LVSS) went down for four hours on Wednesday night (October 12).

The Reserve Bank of Australia (RBA) acknowledged the outage saying it “sincerely apologise[s] to industry participants and customers for the inconvenience and disruption caused”.

“I want to assure people that the bank takes the stability of the payments infrastructure very seriously and will double its effort to ensure this does not happen again,” Michele Bullock, deputy governor of the RBA, said.

The multiple systems were down between 7pm and half past midnight due to an issue that affected both the low-value system and the FSS.

The first error occurred during a planned change to the software that manages the reserve bank’s virtual servers, which disrupted a number of production servers. As a result, the RBA was unable to send or receive LVCS or LVSS files.

In addition, the settlement notifications that are normally sent to New Payments Platform (NPP) participants by the FSS immediately following settlement of those transactions were either delayed or not sent.

These affected the services of internet and mobile app Osko, which launched as the first NPP overlay service in 2018.

According to news reports, the blackout affected more than 85 Australian banks.

The RBA assured that the services are now restored and the reserve bank is working with the affected banks to clear the backlog of payments.

ING Australia said on Twitter “the industry is working through the OSKO issue” and the processing of overnight payments is underway.

CommBank customers have expressed disappointment with the lengthy delay, with one customer writing: “it's been 26+ hours of waiting for my Osko payment to be processed.”

“Other banks have cleared their backlog, why are you taking so long?”

Payment system outages are becoming more frequent recently, shedding light on vulnerabilities in these systems.

In July, a massive outage at Canadian Telco Rogers caused widespread chaos to the country’s banking and payments system and prompted government actions.

Last week, the Chase UK banking app suffered a range of disruptions across multiple functions, while building society Nationwide registered three outages during the last winter holiday season, leaving its customers without money at a crucial time.

Although these disruptions spread across various jurisdictions, they may have an impact on the extent to which people rely on public payment systems.

The Guardian quoted Brad Kelly, the managing director of consultancy firm Payment Services, as saying this case is “a whopper”, which “should give the industry pause about the push towards the NPP and away from traditional services like BPAY or direct debit”.

As reported by VIXIO on Thursday (October 13), the surge in growth of NPP since its launch in 2018 looks set to continue as plans are put in place to migrate payments from legacy systems to the platform.

Trust is “a critical ingredient” in achieving a better payment system, as Loretta Mester of the Cleveland Federal Reserve pointed out recently at the Chicago Payments Symposium.

“[I]t is important to remember that the foundation of a successful payment system is the public’s confidence in it: confidence that it will be available whenever the customer needs it; confidence that it will efficiently route and settle payments; confidence that it will be resilient against cyber attacks and fraudulent actors; and confidence that it can be relied upon without having to know the intricacies of the infrastructure behind it.”

Although today people in most countries have confidence in the payment services offered by their central bank, this cannot be taken for granted, Mester warned, emphasising that “innovations aimed at efficiency must also be designed for security and resiliency”.

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