Fintech interest in the New Payments Platform (NPP) has picked up steam ahead of the October 'go live' date when start-ups can boost competition in the banking system by launching new overlay services.
For their part the big banks are viewing the NPP as a massive opportunity to work with their customers to remove costs out of back office processes and build better customer relationships.
The NPP - which will allow money and data to move between bank accounts instantaneously - has been a long time coming. Five years ago, the major banks pulled the plug on an similar scheme for fear of being disadvantaged.
But, with the rollout of NPP now imminent, disrupters, funds, insurers and banks are all eyeing the opportunities that will arise from a system that moves and settles unlimited amounts of money and data in real time, according to NPP Australia chief executive, Adrian Lovney.
And according to the new chief executive, there are some serious advantages in coming to the market late.
“We don’t see ourselves competing with the UK but by the time we go live the UK service will be eight-years old, which in technology terms is a long time," he said. “By launching NPP ten years later we have had the opportunity to incorporate some of the learnings from the UK payments system.”
Set of rails
From where Lovney sits, the Australian solution is viewed as having some exciting features by the global payments industry. Importantly, he argued, NPP has a range of leading edge capabilities that are not available in the UK such as its data standard, settlement capability and openness.
In short, he said, NPP will provide a set of rails and let the market decide how best to use them.
“The great thing about our system is that it doesn’t require everyone to agree on a service so innovation can occur at the edges. “This will drive decentralised innovation as opposed to the centralised innovation that occurred in the UK," Lovney told AB+F.
This is partly to do with having extremely flexible overlay service rules.
“For instance, you can have three or four participants and a fintech agreement to stand up a solution and they don’t have to gain the agreement of the whole market to bring that solution to life," he said.
Critically, Australia’s data standard makes the NPP more attractive to businesses – much more so than the UK’s predominantly person-to-person solutions such as Zapp and PayM.
“Plus, our settlement model can transmit unlimited amounts of funds which will be settled instantaneously in central bank money so there is no liquidity risk or settlement risk."
To Lovney, the new platform will provide a myriad of different ways for firms to benefit if they want to send a fast payment over the rails. Asked where the greatest demand for new services lay and how quickly new services might come to market, he acknowledged it was hard to tell.
This is partly because the rules and regulations for overlay services have still to be approved by the Australian Competition and Consumer Commission, although the process is nearly finished.
From day one, BPay, an overlay service, will allow consumers to transfer funds to an email account or mobile phone number. Soon after that, new BPay services will spring up - including a payment plus documentation service and a ‘request to pay’ feature.
Looking forward, Lovney said future services might involve a group of participants agreeing to include a particular data field that’s not part of the NPP’s initial messaging, addressing and settlement service.
For example, he said, stockbrokers could automate data and funds processes and settlement relating to equities using a "holder identification number" for equities.
In his view, there are a whole swag of business processes that are currently linked to the existing ‘batch’ payment cycle and clearly offer up opportunities - from invoicing, funds management and superannuation to single-touch payroll and insurance - anywhere there is money and data moving in real time.
Lovney strongly refuted the idea that banks will control access and pricing, explaining that the secondary connectivity is a competitive market and there are plenty of different ways of connecting to NPP.
“And if the banks don’t make it easy, then someone new will come along become a participant before sponsoring a whole bunch of other people onto the platform," he said.
Currently there are 13 participants on the NPP including the big four banks.