In a recent major occurrence financial messaging network Swift has landed the contract to build a 'New Payments Platform (NPP)' for Australia. This is a significant development which will transform the payments landscape in Australia by providing real-time payments with enriched data.
What is NPP?
As per Australian Payments Clearing Association (APCA)’s website, “The New Payments Platform (NPP) is new infrastructure for Australia's low-value payments. It will provide Australian businesses and consumers with a fast, versatile, data-rich payments system for making their everyday payments.”
The current payment system in Australia is old and may not cater to the demands of new devices & digital users in this ever changing connected world. With this in mind Reserve Bank of Australia (RBA) conducted a strategic review of the Australian payments systems and found some major lags in terms of ability to make individual real-time payments, to make payments outside banking business hours, ability to make payment to an individual’s phone number/e-mail/fingerprint and send detailed information with business payments.
RBA determined that it would be better for Australia to build a real time payments hub in terms of a New Payments Platform as opposed to having multiple bilateral links. NPP will have a basic infrastructure to which all the financial institutions will connect. This will enable faster payments for the financial institutions and their customers. NPP will further facilitate funds to be accessible real-time (in seconds) as soon as a payment is received irrespective of the banks in which the payer and payee have their accounts. Right now if you are not making online payment between accounts in the same bank, it can take 2-3 days to get there.
How will NPP benefit Banks in Australia?
NPP’s basic infrastructure will support various “overlay” services – special payment schemes or tailored services which a bank may choose to offer its customers. This layered concept will actively encourage competition and innovation in payments space. NPP will keep basic infrastructure separate from customer focused products & services thus allowing banks to come up with new payment innovations which can be unique to them. They key is that they need not worry about the basic infrastructure and its upkeep as it will be industry owned. They can focus all their efforts on customer focused payment innovation.
With the advent of PayPal, NFC, mobile wallets, crypto currencies and ApplePay it becomes imperative for the banks to make use of this opportunity to meet expectations of the new age digital users. According to a recent research, customers still consider banks the most trusted provider of payments. Banks need to extend this to the mobile world as well to enable the real-time payments experience. Faster cross-border remittances, real time transaction processing for businesses, Instant P2P payments are just some of the examples.
Challenges for Banks
Every transition brings along with opportunities, a set of challenges that need to be addressed.
Key challenges which Banks will face in the implementation of NPP are:
- What is to become of the current heavy investment in their legacy & bilateral systems? What will be the impact?
- Banks who are still using overnight batch processing may face considerable challenge to fit into a 24*7 demanding world of payments
- Will NPP really create a level playing field against the new age non-bank payment competitors?
- What changes will the banks need to make in their current systems & business processes to integrate smoothly with NPP?
Role of the Technology Services Partners
IT partners can help the banks adapt and evolve in this transformation on the following main ways:
- Retrofitting Bank’s current systems & business processes to the demands of NPP initiative
- Modernizing Bank’s legacy payment infrastructure
- Assisting banks in designing overlay services on NPP to come out with innovative and value add services
All in all NPP is a great initiative to promote innovation and real success will depend upon the collaboration between its participants. It will go a long way in ensuring payments leadership and customer satisfaction down under.
About the Author:
Mayank Sharma is part of TechM’s BFSI Client Relationship team for strategic accounts. He has been involved in providing business & technology driven solutions to various BFSI customers for the last 12 years.