Databank Systems

The purpose of Databank was defined within a set of contractual obligations in the 1969 Processing Agreement. The Agreement was between the consortium members, and was essentially about the services and service levels to be provided by Databank, and the constraints that would exist to ensure that lead bank ownership of any new application/system, and bank competitiveness, were maintained.

The formation of Databank came at a time when computer systems were a scarce and expensive commodity in New Zealand, with the import of computers being restricted by the Second National Government (a conservative but highly regulatory government). Computers (like many items) could only be imported under licence. The executive management of the BNZ (Bank of New Zealand) wanted to obtain a computer and establish a computerised system to automate the processing of its banking transactions and customer accounting. Computerisation was deemed the only way to proceed if the increasing cheque transaction volumes were to be accommodated promptly. The other, smaller banks were approaching the point where they would face a similar situation. However, the NBNZ (National Bank of New Zealand) was the only one that happened to have a computer import licence.

Thus, the initial teaming-up was between the BNZ and NBNZ in 1966, and they set up Databank in 1967. The three other trading banks subsequently joined the consortium in 1968. Decimal currency was introduced in New Zealand on 10 July 1967.

A national computerised network was set up with overnight processing of transactions, initially on IBM System/360 Model 40 computers. Money Transfer Services (MTS) were introduced in February 1969, and all branches of the trading banks were converted to computer processing by November 1969. In 1974/75 chequing accounts were introduced by the Post Office Savings Bank and several trustee savings banks.[2]

In addition to processing for banks financial transactions, Databank also ran a service called Portran (Portable Fortran), with which school students could learn how to program a computer using punch cards.

The Fourth Labour Government elected in 1984 commenced a comprehensive restructuring of the New Zealand economy, including banking deregulation. Since Databank essentially owned the New Zealand payments system, which was operated through and by Databank, the existing clearing systems had to be opened up to new banks entering the market, to provide what was referred to as a "level playing field".

By 1988, Databank had become an increasingly large operational cost for the banks, who questioned whether they were continuing to receive value for money. A 1989 legal decision, that inter-company transactions (i.e., between Databank and the consortium members) must carry Goods and Services Tax[3] meant that the long-term cost-effectiveness of Databank was no longer likely, and that it had become a financial risk. The decision was thus eventually taken by the banks to split off the core and common payments system processing of Databank and put it under the ownership of a new all-bank forum called ISL (Interchange and Settlement Ltd), and plans were put in place to dismantle Databank and sell it.