NPP, payments and blockchain

James Riley
Editorial Director

Three weeks after the launch of the National Payments Platform (NPP), Commonwealth Bank says it is signing up consumers for its PayID service at the rate of 10,000 people a day.

Pay ID lets people use just their mobile phone number to trigger a payment. The bank has also floated the idea of letting people use their social media accounts as the front door to their bank accounts.

Meanwhile BPay, which launched the first NPP overlay service, called Osko, claims its service is notching up as many as 80,000 transactions a day. Osko is a person to person payments service, available round the clock with payments executed in less than a minute, and according to BPay chief executive John Banfield, is going to be rolled out by more than 50 financial institutions.

Michael Eidel: Commonwealth Bank looking at potential blockchain payments apps

“I expect this to be significantly bigger than BPay and we (BPay) do 1.5 million transactions a day,” he said. Rather than have to wait a day (or potentially three over the weekend) for funds to be transferred from one bank to an account held at another bank, NPP payments are completed in less than a minute.

According to Michael Eidel, Executive General Manager, Cash-flow and Transaction Services for the CBA, on Friday the bank broke through the quarter of a million Pay ID registrations mark. While he did not reveal how much people were prepared to pay using the system, he did acknowledge that “It is much higher than I expected.”

Mr Eidel stressed however that the usual Know Your Customer and Anti Money Laundering rules applied to the underlying bank account.

CBA is particularly sensitive about the issue after regulator AUSTRAC’s decision to launch proceedings against the bank last year over the alleged non-compliance of its intelligent deposit machines.

Speaking at an Australia-Israel Chamber of Commerce Event in Sydney Mr Eidel said that besides leveraging people’s mobile phone numbers to take friction out of the payments process, the bank was considering how it might be possible to let people use their Instagram or Facebook accounts to access the payment service.

Launched in February the network has been under construction since 2014 when SWIFT won a 12-year contract to build and operate the NPP.

The $1 billion cost of the NPP is being funded by a dozen financial services companies including the big four banks. For that investment the big banks get a major innovation leg up from a payments platform that has the potential to outFinTech the FinTechs.

Rachel Slade, executive general manager of deposits and transaction services for NAB, said that “By and large about 80 per cent of FinTechs figure out that they can do what they want to do by becoming a customer (of the NPP).”

That would not slow down innovation the panelists maintained, but it might reshape it. For example they suggested that ERP software companies might want to provide an NPP integration so that people could pay bills using the NPP from within their ERP.

There are also interesting use cases which could emerge from integrating the NPP with blockchain or distributed ledger technology according to speakers at the AICC event.

Leila Fourie, CEO of the Australian Payments Network, said that although the NPP was not able to process cryptocurrencies; “There are plausible opportunities for an infrastructure like the NPP to connect to distributed ledger technologies.”

Dr Fourie said that smart contracts constructed using blockchain could integrate with the NPP to allow instant payments with that data fed back to the blockchain.

Ms Slade said that cross border transactions was another area where it might be possible to integrate the NPP with blockchain technologies.

While much has been made of the speed of the NPP Ms Slade said that; “The fast bit is the least interesting.” Instead the system’s compliance with ISO 2022 means that there are 280 characters (including emojis) that can be attached to the payment – much richer than the 16 characters that have previously been possible.

In future there is no limitation on the sort of data that could accompany a payment, said Ms Slade. Mr Banfield said that created interesting possibilities for enterprise users which could make dividend payments and attach the documentation to the payment, similarly superannuation payments and statements could be integrated.

Research released last week by the Commonwealth Bank and KPMG said that the NPP might reduce the time take to transfer funds between super funds or top them up from days to minutes.

According to the research; “Based on a 3 per cent investment return, the switch to real-time payments from the average two-day lag could save members $19.2 million annually, as funds would be earning interest rather than sitting in transit between funds.”

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