Disruption is streaming through the arteries of Australia’s financial institutions as they attempt to ward off new payments giants like Apple, adapt to FinTech athleticism and a new open banking regime, and serve up a long awaited instantaneous payment project.
This month, the New Payments Platform (NPP) – which was proclaimed way back in mid-2013 – rolls out with bank customers already getting notifications from their financial institutions, including the Big Four, to sign up for the PayID that enables the system.
The NPP allows customers with a PayID to instantly transfer money, without the traditional three day settlement period.
To muddy the waters and ward off the Apple Pay mobile money system, the NAB, Westpac and the Commonwealth (ANZ is notably absent) are launching a mobile payments system this year called Beem. The Beem initiative is separate from the NPP.
The Beem app works on Android and Apple smartphones and can instantly transfer money from one account to another – splitting a bill at a restaurant is a typical use case, just as it is for NPP.
Users don’t have to be customers of NAB, Westpac or the Commonwealth bank and the banks claim fraud protection happens in real time.
Meanwhile, the NPP does many of the payment services that FinTechs believed they could sell to traditional banks, and which was a response to a Reserve Bank review into payments innovation in 2012.
The NPP has flown mostly under the radar, so much so, that Fintech interested VCs have been turning away pitches.
Danny Gilligan, the co-founder and managing director of FinTech investor Reinventure Group, has had to give some pitches the thumbs down after learning they would only duplicate functions of the NPP.
“We have seen quite a few startups over the last few years doing stuff with payments and most of them have been largely unaware of the NPP and what it’s capable of doing.
“I think there is a very low level of awareness in the FinTech community of what NPP is, what capabilities it has, and how to best exploit it,” says Mr Gilligan.
“So what we have is this piece of innovation infrastructure which no-one knows how to use yet,” says Mr Gilligan, who believes the day will come when NPP opportunities do get onto FinTech radars.
By contrast, Mr Gilligan sees FinTech awareness of the coming open banking regime, which gained traction last week with the release of the Federal Government’s 158 page Review into Open Banking report, as very high.
The NPP is mentioned briefly in the review. In a section dealing with an open banking regime moving from read access for FinTech players to full read/write access to bank held data, the report mentions the customer data shifting potential of the NPP.
“If write access was created before Open Banking was fully bedded down, that may put its success at risk. Further, while write access has significant benefits, it may take some time for customers to feel comfortable with third parties acting on their behalf,” the report says.
“In addition, the NPP will enable real time person-to-person payments in addition to more data being able to be included in payment information,” it says.
“Customer experience and take up of real time person-to-person payments using the NPP infrastructure should also be taken into account in considering implementing write access.”
The NPP was built for a collaborative group of local finance institutions and the Australian Payments Network by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which started work on the project in 2015.
SWIFT is headquartered in Belgium and has been around since the end of WW2. It handles most of the globe’s interbank messaging of more than 15 million messages a day, including the crucial payments orders, although SWIFT does not enable funds transfer – that is handled by the banks themselves.