New Payments Platform Arrives

By Mark Smith

The arrival of the New Payments Platform (NPP) will create ample opportunity for FSC members to create new products and services, be more efficient and realise cost savings.

The NPP is a significant upgrade to the nation’s payments infrastructure which shortens the processing of transactions from two or three days to just a matter of seconds.

Headlines have focused on the practical improvements real time payment processing will bring for end consumers. In the first instance, collecting money owed by friends for concert tickets and the like, paying tradespeople, buying a car and transferring funds between personal accounts held with different institutions will be made far easier. The NPP also means payments can be made outside of business hours, 24 hours a day and seven days a week. Soon other functionality will be added including the ability for people to request payments over the platform.

Customers will also be able to include more information with their payments, such as additional text, invoices and receipts. This simplified approach will help businesses to make payments quickly and efficiently, and let them get back to running their business.

While these improvements are certainly welcome, New Payments Platform CEO Adrian Lovney says the real benefits of the NPP will be seen at the business-to-business level. One of the advantages in the Australian context is that organisations that make or receive lots of payments through the infrastructure can tailor the data standard to set rules that support their industry. This is particularly important for superannuation funds, which will be able to define how they receive payments and what other information about the payee they can receive.

“The current direct entry batch system is pretty ordinary at integrating with back offices,” Lovney explained to an audience of financial service professionals at an NPP briefing hosted by the FSC in Sydney. “It doesn’t operate at night or weekends and isn’t very data friendly. What we’ve designed is a much more rich, business-friendly way of integrating between a business’s back office and a payment system than the current rails.”

Global financial messaging infrastructure provider SWIFT has been a key partner of the NPP as the upgrade has been constructed over several years. The company’s commercial director for securities, Kees Middendorp, says it will be up to industry leaders and representative bodies to articulate the value that could be achieved by streamlining payments processes to remove inefficiencies.

Harnessed creatively, the new system is going to drive efficiency for FSC members, whether that be in simplifying the process for broking clients to participate in IPOs or for shortening the claim time for insurance customers.

“The NPP has the potential to streamline the application process for managed funds and the ASX is thinking about using it to offer real-time or intra-day settlement for cash equities,” explained Middendorp, adding: “In the superannuation space the NPP could allow contributions to be invested much more quickly which will result in higher balances.

 “It’s really up to you,” Lovney added. “You have to ask what the limitations are in the current payments system that are impacting on your business processes, such as delays in receiving payments, cut-off times, and lack of data richness, and if you were to unlock those, what would you be able to achieve?”

The NPP has been collaboratively designed and built by 13 key Australian financial institutions, including the Reserve Bank of Australia and the major banks. Other financial institutions will be able to connect to the NPP directly or via an existing participant that offers connection services to smaller financial institutions, fintechs, or corporates.

Initially, around 60 banks, building societies and credit unions will be connected to the NPP, with more to connect over the coming months.

MORE INFORMATION

In the following video Adrian Lovney and Kees Middendorp tell Mark Smith how FSC members can benefit from the New Payments Platform.