Real-time payments closer to a reality in Australia
The New Payments Platform is a landmark payments industry initiative in Australia. It heralds a new dawn for fast, flexible and data-rich domestic payments.
The New Payments Platform is a landmark payments industry initiative in Australia. It heralds a new dawn for fast, flexible and data-rich domestic payments. SWIFT designed, built and operates the infrastructure that powers the system. Here we consider some of the strategic benefits of the new real-time infrastructure.
An impatient world
Real-time payment solutions are being adopted around the world. Everyone wants to be able to pay who they want, when they want, increasingly while they are on the move. Real- time technology makes this possible. In practical terms, real-time payments are the link between the financial world and the 24/7 society; digital money is the new cash in terms of speed and certainty. But, a real-time infrastructure is about much more than payments processing: it is a catalyst for change and a strategic platform for innovation.
The UK was the first major economy to implement real-time payments more than eight years ago with the Payments Council’s Faster Payments Service. Since then, Faster Payments have enjoyed double-digit annual growth. But, just as importantly, Faster Payments have boosted innovation, with the arrival of new mobile payment services such as Paym and Barclays Pingit. Other countries have followed.
In 2014, Singapore implemented Fast and Secure Transfers (FAST) to facilitate immediate funds transfers between participating banks. Since launch, the service has been enhanced, with increased payment thresholds and several new participating banks. Singapore has also experienced rapid growth in innovation, with new services, such as DBS PayLah! and OCBC’s Pay Anyone being launched to simplify P2P transfers and P2B payments.
These two examples illustrate the transformational nature of real-time technology. In a hyper-connected digital world, faster payments can be cleared and settled in seconds and payments embedded in the context of where they are needed. Real-time payments initiatives are proliferating globally. All are at different stages of adoption but most share the common objectives of speed, certainty and convenience.
New Payments Platform – a new dawn for payments in Australia
The New Payments Platform (NPP) in Australia is the first of its kind. It is a payments platform that extends well beyond mobile payments to include consumers, corporates and public institutions, touching practically every part of the economy.
The core features of the system enable the fast transfer of value between accounts serviced by the Authorised Deposit-Taking Institutions (ADIs) who are participants of the NPP. These transfers are cleared, settled and posted to the recipient’s account in seconds. Transactions are settled on a ‘line-by-line’ basis within seconds, meaning there is no settlement risk between the participating ADIs.
According to NPP Australia’s CEO Adrian Lovney, fast clearing and settlement of payments is only the beginning of the story.
“For the first time ever, Australians will be able to make payments between individual or institutional accounts 24/7 and business will no longer need to wait several days to receive funds. This ‘always on’ capability will drive the weekend economy and reduce dependency on cash and cheques,” Adrian said.
For the first time ever, Australians will be able to make payments between individual or institutional accounts 24/7 and business will no longer need to wait several days to receive funds. This ‘always on’ capability will drive the weekend economy and reduce dependency on cash and cheques.
Adrian Lovney, CEO NPP Australia Ltd
An easier way to identify an account
Another significant change is the way in which individuals or corporates can direct inbound payments between their various accounts by registering an ‘identifier’ in the Addressing Service, within the NPP infrastructure. Instead of providing bank account details to a payee an individual can register a mobile phone number or other identifier against their primary transaction account and payment can be made via this identifier.
According to Adrian, not only will this make the process of making a payment easier, it will also give consumers more flexibility when it comes to switching payments to a different account.
“The identifier can be moved between accounts or financial institutions which will allow consumers to switch their NPP payments easily. Other types of identifiers include e-mail addresses or Australian Business Numbers (ABNs), and there is the expectation that there will be even more types of identifiers added over time,” Adrian said.
New infrastructure, new rules
Perhaps the most innovative part of the NPP is the overlay services framework it establishes. It allows a participant, or any organisation meeting minimum criteria, to develop and offer an overlay service or product, either on their own or in partnership with others, capitalising on the NPP’s 24/7 availability, rich ISO 20022 data, fast clearing and settlement of funds and simpler addressing.
According to Adrian, when it comes to these overlay products and services, the possibilities are in the imagination of the innovators who will use the platform to bring their ideas and propositions to life.
“It is likely that the transmission of data along with payments will mean business applications will be a key focus. As well as opportunities in industry verticals, such as funds management, in and around the stock exchange, or in the insurance and superannuation industry,” he said.
A SWIFT infrastructure, delivered on schedule
SWIFT is delivering the components of the basic infrastructure in phases. The second phase components were successfully delivered at the end of October 2016, on track with the initial schedule, and included new software released with Australian-based centralised connectivity infrastructure. The third phase is due for release in early 2017 and will introduce the Addressing Service. The final phase will be released in mid-2017.
According to Bill Doran, Head of Oceania at SWIFT, “Feedback from NPP participants has been extremely encouraging. The quality of the SWIFT deliverables has been very high, as has the services delivered by our Australian-based consultants who are managing the installation, configuration and training of the NPP participants”. According to Bill, “this commitment to quality was one of the main reasons SWIFT was selected to build and operate the NPP’s Basic Infrastructure”. Bill also points out that SWIFT is just one part of this industry-wide collaboration, “without the commitment of the participants, a strong program governance and project management (provided by KPMG), we would not be where we are today”, he said.
Feedback from NPP participants has been extremely encouraging. The quality of the SWIFT deliverables has been very high, as has the services delivered by our Australian-based consultants who are managing the installation, configuration and training of the NPP participants”. According to Bill, “this commitment to quality was one of the main reasons SWIFT was selected to build and operate the NPP’s Basic Infrastructure.
Bill Doran, Head of Oceania at SWIFT
Overall, there is a global regulatory drive for real-time payments. The European Central Bank (ECB) is championing instant payments in Europe and is currently assessing the feasibility of building a single system, or connecting multiple domestic systems throughout Europe.
Many other regulators in different jurisdictions are pursuing similar initiatives to ensure their domestic financial community is ready to address consumer expectations of instant funds transfers and to face the competition of new third-party payment service providers.
Whilst approaches can differ, the key requirements and desire is the same – to deliver instant value, increase payment efficiency and to boost innovation. The technology that SWIFT is currently building in Australia allows SWIFT members to re-use their own infrastructure. The harmonisation and standardisation of instant payment solutions across the globe, from a message flow, message standard and technology point of view, is a key commitment to our members.
A bright future
The delivery of Australia’s New Payments Platform meets SWIFT’s ambition to play a critical role in the development and delivery of future messaging solutions. Clearly, low latency, in-country peer-to-peer messaging, 24/7 availability, high throughput are messaging requirements that could be used by other Payment and Securities Market Infrastructures. We intend to offer this state-of-the-art technology to other SWIFT customers elsewhere over the coming years.
To learn more about SWIFT’s solutions for Market Infrastructures visit our dedicated web page.