The New Payments platform is a complete revamp of the Australian payment clearing process - catering for faster 'near real-time' payment clearance, new methods of requesting and making payments, and enhanced information on payment transactions. The catch phrase is 'faster, simpler, smarter'.
Technology is evolving so rapidly. Banking and personal transaction processing is changing at an amazing rate. Transaction processing is now being done by non-traditional, non-banking players, such as Fintechs, Paypal and the like. Transactions are occurring at speeds and in ways that were previously undreamed of. Customer and consumer expectations are higher than ever before. No longer will they tolerate assured payment using only bank-guaranteed cheques, and payments that take banks days to clear.
They expect immediate response using innovative, convenient payment methods, on mobile devices such as mobile phones and 'portable/wearable' devices. As an example of this, as recently as last month one of the leading bank launched a credit card in the form of a ceramic, waterproof ring that you wear and "swipe to pay" with ease.
Australia needed a payment platform to support these new and not-yet-thought-of transaction methods and the demand for higher speed of payment clearance. Back in 2012 a review of the payment platform was completed and in 2014 a consortium of the Reserve Bank, major interested banks and financial institutions joined together to deliver a new payment platform, capable of delivering enhanced, high speed payment transactions. NPP Australia Limited (New Payments Platform) was formed to oversee the development, operation and management of the new platform. Stage 1 of that platform, delivered by SWIFT, is due to be launched early this year. No exact dates are available at time of writing, and of course the banks and other parties still need to ramp up to take advantage of this, just as we do. Some offerings are ready to be delivered - such as BPay's Osko service. More will follow.
What functionality will NPP have?
It is important to remember that what is being launched this year is just the beginning of a longer journey. Financial institutions and other parties will be using the NPP and extending it with innovative offerings using the extensibility of the platform.
1. Near Real Time Payment Clearance
NPP's stated aim is to be able to clear a payment in 6 seconds or less, 365 days a year, 24 hours a day, 7 days of the week. This is a far cry from the "days" that it can take at the moment.
Of course any faster, online transaction processing introduces the increased risk of fraud and security concerns. The inevitable trade-off that comes with increased speed is that security risk increases. Security has been a paramount priority for the platform designers, and is non-negotiable. The UK has had their "Faster Payment Service" in place since 2008, and the NPP is based on ISO international standards, so there has been significant security experience and learning gained from other similar platforms.
2. Payment by PAY-ID, not BSB/Account
Instead of having to remember their bank account number, payers can nominate and pay using their 'PAY-ID'. This is a cross-convenient reference to actual bank account. And of course you are not having to distribute your actual bank account number when you pay. There are still all of the controls of authorisation of payment by the PAY-ID party, so security remains in place. For customers this PAY-ID could be their mobile number, their email address or something similar. For companies, the PAY-ID will most likely be the ABN Number. The PAY-ID will be transferable if the person or entity changes bank.
3. Enhanced Payment Information appearing on the Bank Statement (Overlay)
Payment Transactions can be made along with associated relevant information. Initially up to 280 characters can be used. This can be the PayID or more complete Payer information, but can be much more. Some examples of how this could be used are quoting an insurance policy number when making insurance payment. The payment information is also not limited to being just information. It could for example be an embedded web link to an online remittance advice document, or a signed contract, etc.
4. Faster, Convenient Payment 'shortcuts' for Request for Payment
The payment process can be driven more easily by the invoicer/originator. Along with the invoice details, the originator can send a convenient ''request for payment" with supporting descriptions. The payer can then simply click on the convenient link to make the payment.
What do each of these improvements mean for my business?
Faster, more frequent payment clearance
Most businesses clear their bank statement payments once per day. Does this meant that you need to re-consider how often you will process your bank statement receipts? Are you and your bank geared up to do this more often than you currently do? And what does this mean for downstream processes like stop-credit release, delivery of goods triggered by payment clearance, etc.
PAY-ID payment, not BSB and Account
Customers will be quoting their PAY-ID when they pay. You will need to be able to verify, store and use their PAY-ID. This PAY-ID therefore needs to be tracked and managed in your systems. If you are going to use the "Request for Payment" functionality, you will most likely need to quote this PAY-ID on that electronic payment request.
Enhanced Bank Statement Information
Receiving enhanced information will be incredibly useful when you are allocating payments to customers and invoices.
Customers will be using this enhanced description in multiple ways. You cannot always control what information customers put in their Payment References. Consider what you are going to ask your customers to include along with their payments. Consider how your allocation process will need to be able to process multiple types of information on that bank statement.
So what should I do next?
Do more research into this platform, to understand the impact it could have, and the business potential it will deliver to your business. Investigate how NPP could be used to improve your cash-flow and/or give you a competitive advantage.
Educate your management, staff, suppliers and customers to the impending change- share your knowledge and make sure they are looking for the potential.
Talk to fellow members at AICM gatherings, to hear what they are thinking and doing to be prepared.
Make sure you have conversations with your ERP/Financial system providers to understand how they will be reacting to and supporting NPP functionality.
If you are purchasing or upgrading financial software, make sure that the provider has good support for the NPP capabilities, and that you have included this impending requirement in your RFI/RFP.
Talk to your bank to see what functionality they will be supporting and supplying, and what additional cost there will be, if any, for the new services.
In terms of your internal processes …
Consider how and where you will need to obtain store and verify Customer and Supplier PAY-IDs.
Credit Application, Direct Debit and other forms may need to be amended to capture the PAY-ID information.
Consider what more frequent, more timely payments mean to you:
- will you need to review and process bank statements more frequently during the day?
- how will you and/or the bank identify transactions you have already processed that day?
- will you need to have other downstream processes happening more frequently as a result of more frequent receipting?
- now that there is enhanced bank statement information, what information will you be asking your customers to include with their payment?
- will you be able to process the enhanced payment information on your bank statement?
- can you make use of the embedded 'request for payment' capability, in order to speed up payment from your customers?
Please feel free to contact me to discuss what NPP means to you, and to see how Cosyn can help you with Collections systems and automated Cash Allocation that can help you take advantage of the NPP process enhanced frequency
1800 123 613