While the European payments industry is getting ready for the launch of the ’s Instant Credit Transfer in November, and is also working on the pan-European interoperability of Person-to-Person mobile payments, Australia is currently developing similar projects. The New Payments Platform (NPP) — the name of the industry initiative to provide a new payments platform to support the Australian economy — is however broader than instant payments. We interviewed Adrian Lovney, CEO of NPP Australia, to learn more about this major project that will definitely improve the way Australians pay.
Q. Can you briefly explain what Australia's New Payments Platform is?
The New Payments Platform is a major industry initiative to develop new infrastructure for Australian payments. It will provide Australian consumers, businesses and government a fast, versatile, data-rich payments system for making their everyday payments.
The platform has been designed as an open and flexible platform with two objectives in mind: encouraging diversity and competition in product development and improving the payment system’s efficiency. It works through three important parts:
The ‘Basic Infrastructure’
The Basic Infrastructure includes a network (which connects participants), a switch (which moves messages between participants via the network) and an Addressing Service which enables transaction accounts to be identified by a simpler payment address such as an email address, phone number or Australian Business Number (ABN). Other address types may be available in the future. The Basic Infrastructure will always be open for business, 24 hours a day, 365 days of the year.
- The Fast Settlement Service
The Fast Settlement Service (FSS) is provided by the Reserve Bank of Australia. This world-leading capability enables every single payment made on the platform, regardless of its size, to be settled in real-time in central bank funds, across each financial institution’s Exchange Settlement Account (ESA). This allows for completion of settlement between financial institutions prior to crediting of the payee’s bank account.
- Overlay Services
‘Overlay Service’ is the name given to the payments related products or services, and that can leverage the benefits of the Basic Infrastructure. These products or services could offer vastly different experiences, or similar experiences, and in many cases could compete with each other. This is where the New Payments Platform breathes life into innovation and competition. The first Overlay Service to go live on the platform will be offered by Australia’s leading bill payments organisation, BPAY.
Q. What challenges have you met in the implementation of your new payments system? What were the challenges faced by banks in implementing it?
The New Payments Platform was born from an industry that recognised the need for a plan to support the future of payments. Already the Australian public has embraced electronic payment methods – chip cards (particularly contactless or ‘wave and pay’ technology) and direct entry – and new technologies such as smartphones. But for this evolution to continue, our basic payments infrastructure needed an upgrade to enable a shift to immediate payments, and this could only be done through an industry approach.
That’s not to suggest that the work to bring the platform to life has been simple and straight-forward. It requires a delicate balance between the need for strategic coordination against the tensions that arise when preserving that sacred competitive space.
But these tensions are a good thing because they are exactly why we are all in this, and it’s in everyone’s interests to respect and safeguard that competitive energy. But payments players are well practiced competing with each other vigorously, while collaborating enough to achieve interoperability and positive network effects.
Q. The New Payments Platform entails a component focused on instant payments made on a mobile. This is particularly interesting for us, as it resonates with similar European initiatives. What approach was chosen in Australia to provide user-friendly mobile payment solutions?
Regarding channels, this is in the hands of the participants who will compete to offer customers access to the platform’s speed and capabilities via things like mobile apps, internet banking or telephone banking.
What is likely to appear as a key feature in these channels is the platform’s Addressing Service called PayID. It’s a function that allows registered users to link financial accounts to easy-to-remember pieces of information such as phone numbers and email addresses. It’s about simplifying the payments process by using information that is easier to remember than traditional branch sort codes and account numbers.
Registered users will be able to provide their PayID to people or organisations they wish to receive payments from. They will also be able to move their PayID between financial institutions in a relatively seamless process.
Consumers will be able to register for PayID with financial institutions connected to the New Payments Platform when it launches later this year. At the same time, organisations developing a service or product supported by the platform, may wish to use the PayID functionality as part of their service offering.
Q. The New Payments Platform uses the international standard ISO 20022 as the basis of financial messages. What lessons did you learn from the migration to ISO 20022?
The ISO 20022 standard was fully endorsed by the Australian industry for the New Payments Platform because it provides efficiency, greater information with payments as well as enabling future innovation.
Most of the lessons we have learned as we migrate to ISO 20022 relate to the use of the payment messages within a real-time environment, which includes a line-by-line settlement functionality.
ISO 20022 payment messages were originally developed with traditional batch/Automated Clearing House (ACH) payments in mind. Some changes were therefore required to the usage of existing data elements in the ISO 20022 payment messages to meet the platform’s requirements.
Our experience is a great opportunity to assist global efforts to enhance even further the ISO 20022 standard for real-time payments.
Q. When will the New Payments Platform be live and what payment service(s) will be supported first? What are the following steps?
The Australian payments industry has a complex and thorough testing regime to complete before a decision is made to make the New Payments Platform publicly available. We anticipate this to be from October 2017, with further confirmation made closer to that time.
The program is quite possibly the Australian financial services sector’s most significant collaboration. It’s a complex project requiring unique and complicated systems to be connected to empower real-time payments, subject to the highest standards possible.
Many participants will commence supporting payments on the platform immediately, and others will ramp-up gradually. It is likely that the platform’s reach will increase further during 2018, especially as we start to see more participants and overlay services connecting to the platform.
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