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From real-time payment processing to seamless reconciliation, the New Payments Platform (NPP) will transform the way we transact and do business. Eric Tsang, Head of Group Payments Development at NAB, discusses the potential of this world-leading Australian initiative.
Real-time payments are on the way. When a customer authorises payment, the money will show in your account just 15 seconds later. And that’s just one way the New Payments Platform (NPP) is set to revolutionise Australian business.
“The NPP will transform the process of making and receiving payments,” says Eric Tsang, Head of Group Payments Development at NAB. “And the overlay services the Australian market is developing to complement the NPP are more innovative and efficient, with more potential value for users than any other real-time payment system in the world.”
The NPP is the banking industry’s response to a call for action by the Reserve Bank of Australia (RBA).
“The RBA has the view that, in the context of a rapidly-changing digital environment, the existing payments infrastructure is inefficient,” says Tsang. “For example, when money is transferred from one bank to another, the banks must exchange files as part of a batching process, and this could happen overnight. Through the direct participants, the NPP infrastructure can connect all financial institutions in a standard way, which will enable them to process credit payments in real time 24/7, even when the payer and the payee are with different banks.”
Individual banks and financial institutions will be able to add their own so-called “overlay services” to the basic infrastructure of the NPP platform so that it will be versatile as well as fast.
“I use the analogy of a smartphone,” says Tsang. “The NPP basic infrastructure is like the operating system and the overlay services are the equivalent of apps. Just as apps are constantly being developed, banks will tailor overlay services to meet specific customer needs.
“This multi-layered approach will also satisfy the RBA’s requirement that any new system drives innovation and competition. And it will provide the scalability we need to keep pace with digital evolution.”
The NPP will use the global standard ISO 20022, which is being adopted as a vehicle for data-rich payments messaging by a growing number of countries around the world.
“The opportunity to collect a lot of data will add more significant benefits,” says Tsang. “For example, when a payment is received, the current system requires a great deal of behind-the-scenes work to reconcile that payment with the invoice, which is a pain point for many businesses. The NPP will make it easy to integrate reconciliation into the payment process seamlessly.
Universities are one example of the NPP’s potential.
“At the moment, invoicing, say, 10,000 students for their fees could involve printing 10,000 pieces of paper, putting them in envelopes and paying for them to be delivered,” he says. “With the NPP, someone in the university’s accounts department will be able to generate the requests automatically and shoot them off to the overlay service on every student’s mobile phone at the touch of a button. The students will then be able to authorise their payment from the same overlay service. The university will receive the money in real time, along with enough information from each student’s profile for the payment to be reconciled automatically.”
Another is a local council.
“One mobile app could bring together everything from rate demands to payments for council childcare facilities,” says Tsang. “Councils could benefit from improved efficiency and provide their ratepayers with an easier and more streamlined experience.”
The scheduled launch date for the NPP is the second half of 2017. An Initial Convenience Service that allows payees to receive payments in real time from payers will also launch with the NPP.
“From here, it will be a work in progress, with more overlay services being introduced over time as financial institutions develop their own offerings,” says Tsang.
NAB is already taking steps to ensure that, by the time the NPP is introduced, customers will be well placed to take advantage of the opportunities.
“We see this as a journey we’re making in partnership with our customers,” says Tsang. “Shaping the services that will best meet their wants and needs is an iterative process, so we’re continuously seeking and incorporating their feedback.NAB is very committed to helping our customers build their businesses. It’s very exciting that we will soon have a new way to help them add value for their customers.”
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