Unpacking the NPP: it's time to get ready

I confess. I’m a payments nerd.

Yes, handing over a note or paying a bill may be pretty mundane, particularly the latter. Few would dispute that, myself included, as the many bills on my fridge would attest. But underneath, technological advances and developments are occurring so rapidly that the future of payments is getting harder to predict, exciting trends that are set to be turbocharged in coming years.

After a five-year journey, Australians will next year have access to a brand new 21st century, real time, data-rich payments system known as the New Payments Platform (NPP). It will enable consumers, businesses and governments to make payments 24/7 between bank accounts almost instantly on a world-class platform that is separate to credit card networks. Rather than having to remember BSB and account numbers, the NPP opens up a new world of “PayIDs”, such as mobile phone numbers and ABNs, to be linked to bank accounts.

It’s exciting and the biggest development in Australia’s payments market in decades.

What’s world-leading about the NPP is that it’s been built to evolve and be flexible to changing consumers’ and businesses’ needs over time, including via so-called “overlay services”. The first to be rolled out will be Osko by BPAY, a super-fast payment option available via digital banking channels 24/7, 365 days a year that will result in cash being transferred, visible online and available almost instantly.  Australian consumers, businesses and governments will derive value from these services. (For example, governments can make quick emergency payments to citizens affected by natural disasters.)

Osko’s next functionality rolled out may be “request to pay”, potentially ending my days of paying bills all at once. Instead, I may receive a request to pay notification on my phone from my electricity provider (or a friend for Saturday night’s dinner), which I can instantly review and pay on the spot with one click, a great experience for both corporates and consumers.

Osko has also flagged “payment with a document” functionality, a great value proposition from a business to consumer and business to business perspective by replacing the sending of paper remittance advices with digital notifications. The imagination runs wild about the potential benefits for consumers.

But one of the powerful propositions of the NPP is replacing the inefficiencies in B2B.

Ahead of the official public launch of the NPP early next year, we are discussing with customers how they are thinking about and preparing for the introduction of Osko. Where do the opportunities lie for them, which customer pain points can they solve for and how are they planning on navigating the challenges of such a dramatic change in the payments landscape?

Think of car dealerships, where people typically pay with bank cheques or credit cards. All of a sudden, do they need to hire account receivable clerks on weekends to confirm payments outside of traditional working hours? Or a utility company – how will they handle the situation of someone paying their bill just before midnight when penalties were due to kick in or the power cut off? Are their back end systems set up to accept, register and fulfil their services for an Osko payment?

There’s also lots of upside, such as if PayID adoption takes off. Given businesses and governments may not have consumers’ bank account details but do know their mobile number, refunds become so much simpler – an efficiency saving for the payer and better experience for payee.

As we know, consumers’ expectations can change rapidly as technology advances, and businesses with many complex systems need to think about these sorts of issues and get ready.

The reality is, the NPP is coming.

And as a bank, we know the challenges of dealing with technological change well. Take this project for example, a large, multi-year exercise being overseen by NPP Australia, the body owned by the 13 financial institutions behind the NPP.  We are inserting a 21st century platform into an ecosystem that has evolved over time and wasn’t necessarily set up for super-fast, real time, data-rich payments. And the industry is arguably in the most challenging part of the project as we turn the infrastructure on and test.

That’s to be expected given the importance of payments in the economy.

From day one, we’ve taken the view of a disciplined, risk-based approach which has served us well. Westpac will be launching its NPP capability to a controlled group of customers before adding volume and scale once stability is assured

While banks are working together to bring the NPP to life, it’s important to get the foundational infrastructure right so that we can build onto it in years to come.  

Personally, that’s one of the most exciting and interesting parts – how the NPP is actually used by consumers, businesses, banks and fintechs – and then evolves – over time.

There’s every chance certain sectors of the economy will find specific uses and leverage the capabilities to solve pain points and inefficiencies, such as using paper and cheques. And how will point of sale payments for everyday shopping and offerings such as credit card reward points evolve over time as incumbent companies and newer fintechs respond to NPP adoption and usage?

My feeling is credit cards won’t disappear or be replaced given the benefits, international acceptance and easy access to unsecured credit they offer. On the other hand, the decline in the use of cheques and cash could accelerate which will significantly reduce cost and manual processing. More broadly, what is certain is that the NPP launch is nearing fast and has been built for flexibility over time.

Given how quickly the economy is changing, that’s incredibly exciting for all.