Sunday, October 15, 2017

Standard gauge no more. How the Reserve Bank is about to make our money fly

Why is it so hard to move money?

In part, for the same reason our trains are the shape they are, and our cars, and perhaps even our space shuttles. Nothing gets designed from scratch.

In the US (and Australia) the standard rail gauge is 1435 mm, which was 4 feet 8.5 inches. It was copied from England, where it had been used for trams, whose designs were copied from horse-drawn wagons.

The wheels of the wagons were that distance apart in order to fit into the ruts that were first cut into long-distance roads by Roman chariots. The Romans made their chariots that width so that each could be pulled by two horses.

And the connection to space travel? Each space shuttle had two big booster rockets attached to the sides of its fuel tank. The shuttles were launched from the Kennedy Space Centre at Cape Canaveral in Florida. But the booster rockets were made in Utah, from where they had to travel to Florida by train. You can guess the rest.

The boosters could have been wider, but the train had to travel through a tunnel, the width of which was related to the width of the tracks, which were related to the width of the ruts made by chariots on British roads, which were related to the width of Roman horses.

It's the same for Twitter, whose (generally popular) limit of 140 characters was set in its early years as a service delivered by mobile phone texts that were limited to 160 characters. After setting aside 20 characters for the delivery address, Twitter offered 140 for the message.

The number 160 came from a German communications researcher who in 1985 sat at a typewriter tapping out random sentences to figure out just how small a message could reasonably be and still fit in the small amount of extra bandwidth allocated alongside the space for mobile phone calls by the emerging GSM global system for mobile communications.

It's the same with typewriters. Most of us type on a keyboard whose top row begins with QWERTY. It was set up that way in the late 1800s in order to separate the keys of the letters commonly typed together on manual typewriters in order to ensure they didn't jam (or perhaps because that was the best way to type Morse code, the stories differ).

Centuries on, we still use the inelegant QWERTY even though we don't need to, although for better or worse Twitter says we are about to get 280 characters.

Which brings us to money. Have you ever wondered why we can't transfer it in real time, and why internet banking limits you to a miserly 14 characters to identify the reason. It's because the system it is built on dates back an awfully long way, back to the days of computer punch cards. The message length was then 80 characters because that's how many holes there were in the punch cards. It got crunched to 14 as more of the holes got used for other things.

Until now. Adrian Lovney, chief of the new payments platform that will be rolled out from Australia Day describes it as an "entirely new set of rails". Built from the ground up it will allow us to use email addresses or phone numbers instead of BSBs and it will give us 280 characters rather than 14. Down the track it could give us more, if we need them. And it'll transfer money within seconds rather than overnight.

The company that's building it is owned by the Reserve Bank and the 12 biggest private banks, but it'll be used by the lot. Like microwave ovens and GPS tracking, we'll soon wonder how we ever lived without it, at least until a few decades down the track when it is baked into future products and holding us back.

In The Age and Sydney Morning Herald