September 20, 2018
Understanding Australia’s New Payments Platform
Posted June 7, 2017
The digital payments landscape is undergoing continuous transformation. The latest is in Australia with the New Payments Platform (NPP), which is expected to be operational in the second half of 2017.
The goal of NPP is to provide consumers, businesses and government departments with a secure and efficient platform on which to make fast, versatile and data-rich payments to meet the evolving needs of Australia’s digital economy.
If NPP is successfully implemented, it will change the way Australians transact. This new initiative allows near real-time payments to be made between financial institutions and their customers’ accounts – essentially turning card payments into cash equivalents due to the speed and accessibility of funds. The new infrastructure would make it possible for funds to be accessible almost as soon as payments are received, despite the accounts between payers and payees being at different financial institutions.
Authorized deposit-taking institutions (ADIs), who were encouraged by the Reserve Bank of Australia to build and fund the NPP, will need to ensure that their existing systems are able to securely process payments in accordance with the NPP or create safer, more efficient ones. Methods will need to be established for immediately resolving mistaken payments as well as assisting in the remediation of resulting disputes. ADIs will also need to make strategic decisions regarding payment or service offerings and may need to consider whether to enhance their customer reporting offerings, provide multiple channel access, and/or deliver value-added services to ensure differentiation.
In addition to real-time payments, the NPP will support various overlays that will allow ADIs to offer payment-related products or services to businesses and consumers in an effort to fuel innovation and promote competition. Anticipated benefits of the initial NPP include faster payment settlement, immediate availability of funds, data-enriched remittance information, and the ability to use simpler identifiers.
Over time, new overlay services will be developed that will yield additional features for consumers and new opportunities for ADIs, FinTechs and third-party providers. New ways to send and receive money will emerge, as well as new models, such as cross-bank cooperation. The possibilities in overlay development are endless, and such applications will have a direct impact on adoption rates, customer satisfaction, and brand loyalty.
As Australia prepares for the onset of the NPP, many will be observing and analyzing how effective it is at securely facilitating real-time payments and sparking innovation among ADIs, FinTechs, and others in the digital payments space. Understanding the true digital identity of the transacting consumer in real time is imperative as financial institutions look to build solutions to meet the faster payment requirements.
Most legacy fraud detection/transaction monitoring systems rely on the lag between the payment execution and receipt to detect fraudulent transactions. Without the safety net of time lags and manual reviews to further investigate high-risk payments, there is far greater emphasis on the ability to detect and block potentially fraudulent behavior in real time before a payment in processed. Meanwhile fraudsters will inevitably look to capitalize on this emerging shift — adapting their malware and capitalizing on the opportunity to move money between mule accounts in real time to avoid detection.
With the instant payment guarantee of the NPP and new entrants now becoming a part of the transaction flow, real-time context is going to be more important than ever, as well as the ability to understand the relationship between the payee and the sender in real time.
For learn more, download our New Payments Platform whitepaper.