By Bill Camarda
NPP provides next-generation 24/7 payments infrastructure throughout Australia. It enables real-time clearing and settlement for payment solutions, supporting payments between two entities or transactions involving many counterparties.1
NPP's proponents and participants say it will help businesses optimize working capital by letting them receive payments faster, while improving customers' experience and allowing for faster fulfillment of products and services.
As with other "faster payments" services emerging around the world, NPP can transmit richer information along with the payment itself, via standardized ISO 20022 formats. With this added information, counterparties can more effectively track and secure instant payments, and integrate them into automated business processes and systems. For accounts payable teams, this should mean fewer exceptions and less manual intervention, experts say.2,3
NPP's richer payment information is also expected to promote the development of innovative consumer and B2B applications (known as "overlay services") that require detailed data.4 At launch, the most widely-publicized overlay service was Osko from BPAY, which many Australian banks plan to use to integrate instant payments into their existing mobile and Internet banking services for consumers.5
NPP was built collaboratively by NPP Australia Ltd and 13 key financial institutions, including Australia's "Big Four" banks: National Australia Bank, Commonwealth Bank, ANZ, and Westpac.6,7 These 13 firms have direct connections to the platform, and other institutions that meet the same regulatory requirements can also connect directly if they choose to become NPP shareholders.8
Many other institutions plan to connect through "aggregators," which are organizations that have direct connections to NPP and provide access to others.9 All told, between 60 and 70 organizations have announced plans to participate, ranging from local member-owned credit unions to some of the world's largest global banks. However, some stakeholders are urging the NPP to do more to ensure equal access to all potential participants.10
At its February launch, only one of Australia's four largest banks was ready to offer NPP instant payment solutions to all of its customers, though many smaller banks did come online immediately or soon afterwards.11
Others are taking a more incremental approach. For example, Westpac announced that it would roll out several new NPP initiatives within six to 18 months, focusing first on making sure that NPP is as stable and secure as promised.12 Ensuring the safety of irrevocable real-time payments often requires banks to upgrade their anti-fraud systems, and banks will need to enforce rigorous identification and verification checks.13 According to the Financial Review, some major institutions are launching with limits on transaction volume, or will first roll out NPP to selected mobile devices, customers, products, or brands.14
So, too, financial institutions are assessing what, if anything, to charge for instant payment solutions; by one report, banks are more likely to charge fees to business customers than to consumers who expect free basic payment services.15
Despite the uncertainties, there are early signs that NPP is gaining traction. By early March, Commonwealth Bank reported that 10,000 consumers were signing up for PayID daily. Osko transactions had risen to 80,000 per day, and Osko's leaders expect usage to eventually outstrip the 1.5 million daily transactions now running through their preexisting payment service, BPAY.
NPP supports payment solutions within Australia, not payments across borders.16 Therefore, businesses and individuals that want to accept or send NPP instant payments need a relationship with a participating institution in Australia.
The next step is to request a PayID. Previous Australian direct payments solutions have required banking details such as a bank branch BSB code and account number that can be difficult to remember or transcribe accurately. With PayID, businesses can choose something easier to remember, such as a phone number, email address, or their 11-digit Australian Business Number (ABN). They register their PayIDs with a participating bank, which links it to an account they specify.
Payments to the business can then can simply be sent money to the PayID; many businesses are expected to include the PayID on their invoices.17,18 Once a customer sends a payment to the PayID, it will automatically be settled in real- or near-real-time (generally in much less than one minute). The payer sees the payee's business name during the confirmation process, helping to prevent money from going astray.19
As businesses become comfortable with NPP, they may begin publicizing it and encouraging its use by their trading partners, experts say.20 They may also explore opportunities to use the data accompanying NPP transactions in their own accounting and business management systems, potentially increasing automation and improving operations.21
Australia's NPP Faster Payments system has gone live, and institutions are incrementally introducing payment solutions based on it. Now that it's actually in use, companies that do business in Australia can more realistically assess its value in enhancing cash flow, improving customer experience, and streamlining operations.
Bill Camarda is a professional writer with more than 30 years’ experience focusing on business and technology. He is author or co-author of 19 books on information technology and has written for clients including American Express Private Bank, Ernst & Young, Financial Times Knowledge and IBM.
1. “What Is the New Payments Platform?” NPP Australia; https://www.nppa.com.au/the-platform/
2. “Introduction to the New Payments Platform,” NPP Australia; https://www.nppa.com.au/wp-content/uploads/2016/12/NPP-Webinar_July-2017-Publishing.pdf
3. “What’s the New Payments Platform?” Commonwealth Bank; https://www.commbank.com.au/digital-banking/pay-id/new-payments-platform.html?ei=gsa_generic_NPP
4. “Frequently Asked Questions,” NPP Australia; https://www.nppa.com.au/the-platform/frequently-asked-questions/
5. “How Could Osko Work for You?” Osko; https://www.osko.com.au/about-osko
6. “What Is the New Payments Platform?” NPP Australia; https://www.nppa.com.au/the-platform/
7. “Big Four: Banking,” Wikipedia; https://en.wikipedia.org/wiki/Big_Four_(banking)#Australia/New_Zealand
8. “New Payments Platform: balancing system integrity & access,” NPP Australia; https://www.nppa.com.au/wp-content/uploads/2018/03/New-Payments-Platform_Balancing-system-integrity-access.pdf
10. “Productivity Commission still banks on fintechs changing financial services,” ZDNet Australia; https://www.zdnet.com/article/productivity-commission-still-banks-on-fintechs-changing-financial-services/
11. “Westpac drives push for automatic green slip checks,” Sydney Morning Herald; https://www.smh.com.au/business/banking-and-finance/westpac-drives-push-for-automatic-green-slip-checks-20180221-p4z161.html
13. “Experts Respond To NPP Security Concerns,” Lifehacker; https://www.lifehacker.com.au/2018/02/npp-responds-to-security-concerns/
14. “New payment platform live as banks pressured to open up access,” Financial Review; http://www.afr.com/technology/new-payment-platform-live-as-banks-pressured-to-open-up-access-20180209-h0vuxr
15. “Australia’s New Payments Platform: what are the benefits?” GlobalData; https://www.globaldata.com/australia-npp-benefits/
16. “What you need to know about the New Payments Platform,” RateCity; https://www.ratecity.com.au/bank-accounts/news/need-know-new-payments-platform
17. “PayID Makes Payments Simple As,” PayID; https://payid.com.au/
18. “PayID for business,” PayID; https://payid.com.au/payid-for-business/
20. “What’s the New Payments Platform?” Commonwealth Bank; https://www.commbank.com.au/digital-banking/pay-id/new-payments-platform.html?ei=gsa_generic_NPP