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Australia’s national payment system, which enables consumers and businesses to transfer funds to each other in real time, was formally launched this week, bringing the country’s payment infrastructure up to speed with plans to grow its digital economy.
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Known as the New Payments Platform (NPP), the system was conceived by 13 members of Australia’s financial industry, including the four major banks and the Federal Reserve Bank of Australia. It was developed by Swift, the global provider of financial messaging services.
Using the NPP, consumers and businesses do not need to wait two to three days to move money between accounts at different banks, like before. Payments can be made through PayID, a service that uses a phone number, email address or Australian Business Number – rather than bank account numbers – to handle payments.
However, at launch, only the Commonwealth Bank has begun facilitating payments through the NPP. About 60 other banks, including ANZ, are expected to follow suit in line with their own timings and plans.
NPP Australia CEO Adrian Lovney said the NPP’s potential goes beyond supporting real-time payments. “The NPP has a unique layered ‘open access’ design which allows for different entities to leverage the platform’s functionality in different ways,” he said. “Innovative organisations can choose to build upon the platform’s capabilities to develop ‘overlay services’. These could be payment experiences, or business applications that enable significant organisational efficiencies.”
For example, Lovney said the NPP’s data capability could enable simpler invoicing and automatic reconciliation of payments across core business processes. “As organisations continue to digitise their back offices, we believe the NPP will provide an important building block for innovation,” he said.
In the consumer segment, Australian payment service provider Bpay is rolling out Osko, the first overlay service to ride on the NPP. Available online and through banking apps, Osko is a person-to-person service that enables consumers to send payments within the security safeguards provided by digital banking services.
NPP Australia’s Lovney said rolling out something as complex as real-time payments would not happen overnight and needed to be carefully planned. “We do expect that within a month after launch, around four in five Australian accounts will be connected to the platform, through a wide and diverse range of banks, building societies and credit unions,” he said.
Read more about digital payments in Australia
- Australia is making a conscious shift towards becoming a cashless society, thanks to the growing adoption of mobile payment systems.
- Australia’s four leading banks have had their application to collectively bargain with Apple and boycott the Apple Pay payment service denied by the country’s competition watchdog.
- Citibank has stopped handling cash at its six branches in Australia as digital channels reduce demand for cash transactions.
- The CEO of the Data61 digital research network said blockchain has the potential to reframe financial services.
The NPP roll-out comes at a time when cash and cheque usage is declining in Australia. According to a 2017 report by the Australian Payments Network, cheque use plunged by 20% in 2016 alone – the largest drop ever recorded. Over the last five years, cheque use has fallen by 56%.
Australia’s digital economy is also creating a less-cash society, with ATM withdrawals down in both volume and value, according to the report. In 2016, the number of ATM withdrawals dropped by 7.5% to 648.5 million, following a 5.5% fall in 2015 and 4.7% in 2014. ATM withdrawals have declined by 22% over the last five years.
The Australian Payments Network said in the same report that the NPP would “further accelerate the decline of cash and cheques” in Australia. .......................................... ...............................................................................................................................