The plan to enable real-time payment transfers between banks will be kicked into high gear after it was approved by the Reserve Bank of Australia (RBA) Payment System Board.

Today, funds transferred from one bank to another can take several days to clear. For example, if a Commonwealth Bank customer sent a small payment to a Westpac bank account, the recipient may not be able to access the money for several days.

The Australian Payments Clearing Association (APCA) formed the Real-Time Payments Committee in late 2012, which tendered a proposal on how to achieve the RBA's objective for real-time funds transfer between banks by 2016. The plan was recently approved by the Payment System Board.

Members of the committee include representatives from the big four banks, as well as from Citigroup, Bendigo Bank, and Adelaide Bank.

"Following the approval of this proposal by the Payment System Board at their February 2013 meeting, the real-time payments program will be launched as quickly as possible," the committee said in a statement.

The proposal details the business architecture that a real-time payments system will run on. A basic business infrastructure will connect all Australian deposit-taking institutions (ADIs) and payments will be settled by the RBA. The RBA is looking to pass payments through a centralised settlement hub called the Reserve Bank Information and Transfer System (RITS) .

"It's too early to say what the technology requirements are for the infrastructure, and getting more details on those requirements will be a big part of what we will be doing this year," Real-Time Payments Committee chair Dr Jennifer Fagg told ZDNet.

The basic infrastructure will be developed as a completely new system to minimise risk and impact to existing payment systems. Overlay services, which banks can use for differentiation to customers, can be added on top of the infrastructure.

At the core of the infrastructure is a central clearing utility, which will be owned and governed by a new neutral organisation that will have ADIs and wholesale payment service providers as members.

The clearing switch and network operators will be selected through a tender process.

"Moving towards a network wide real-time payments system is an important step for the industry and for our customers." NAB executive general manager David Gall said. "It will be a catalyst for increased competition between payment providers and foster greater innovation — in particular to mobile payments."

"Businesses will have access to more timely information, helping them better manage their business and cash flow. Ultimately, it'll provide businesses, as well as consumers, with a wider range of payment options best suited to their needs."

Funding for the clearing utility will initially come from APCA members. The new utility organisation will eventually charge a fee from participating banks.

The entire program is due to start this year and is expected to be completed in 2016.

A steering committee will be set up to coordinate communication between the Payment Systems Board and the banking industry, as well as manage the real-time payments project. The Real-Time Payments Committee will meet up next month to determine who will be part of the steering committee. According to Dr Fagg, it would most likely comprise of several RBA representatives, as well as representatives from the banks already involved in the Real-Time Payments Committee.

Facilitating real-time payments between banks was one of the main goals set by the RBA after its Strategic Review into the payments system in the country.