The New Payments Platform: 24/7 financial plumbing for the economy of the future
It’s a sunny Sydney Sunday afternoon. The BBQ is burning, drinks are the flowing and someone has just taken a cracking catch in the backyard cricket game. And then, inevitably, someone, let’s call him Nathan, will ask what you do for a living?
People regularly ask me what I do. And just as regularly people respond with confusion when I say I work in management consulting. What actually is management consulting? When I go on to say that I work in payments, the questions and queries flow through even more.
So what is payments? Anytime you pay for anything, send or receive money, that’s a payment. Unless you have a home loan, really the only reason you have a bank account is to facilitate payments.
The pennies start to drop. “How awesome is tap-and-go?” he says, “what do you think about apple pay?” Someone else, let’s call her Jenny, overhears and joins in… “Why does transferring money between people take so long?”
Payments is a hot topic at the moment, and despite what people may realise, it is impacting everyone. It is an industry facing massive disruption – fintechs, cross-channel offerings and new technologies such as apple pay are just the start.
The New Payments Platform (NPP) is a massive part of this disruption. Ensue the next round of questions…
“That’s about banking technology, right?” Nathan will ask? “Won’t we be able to send payments in real time?” “Or to a mobile number?” All of these things are correct, and that is no surprise – the NPP has received a fair bit of coverage in the press. It is quite a complicated beast, but fundamentally, it is about saving time, and saving money. Something that should be quite enticing to all Australians, including Nathan and Jenny.
But one thing no one comments on, is comparing the NPP to the bathroom. The bathroom? Yes, it is one of my favourite analogies for explaining the NPP.
Because the NPP is the financial plumbing of the economy of the future. It is the fundamental infrastructure for Australia’s future payments system.
To continue this analogy, when your plumbing blows up, it’s an absolute disaster, and the same is the case for the payments system. It is fundamental at all levels of the economy.
So, say your plumbing does blow up. You call your plumber and he will book a time, inevitably from 12pm-6pm; will likely still not turn up; and will find it impossible to fix out of hours.
And this is exactly what our current payments system is like. It’s antiquated. It’s inflexible. And it doesn’t put the customer at the centre. Over the long term, it also frays the confidence and trust you have in the service and the relationship.
That is where the NPP comes in – it’s essentially 24/7 plumbing. It’s a payments infrastructure that allows money to be transferred in near real time, around the clock.
The Australian economy is evolving from paper, through computerisation and mobile, and the payments system has to proactively adapt. Customers have begun to demand instant gratification, and are quickly embracing innovative payments apps like Hey You and Uber. A number of other countries have, or are planning to, introduce real time payments, and in order to remain internationally competitive, so do we.
The Reserve Bank has recognised this, and strongly encouraged the industry to get on board. From this support, the New Payments Platform was born in 2013.
The NPP is a major industry wide collaboration, with 13 authorised deposit taking institutions working together to develop a new payments infrastructure. Once the NPP goes live, we will have built four key innovations:
- When you transfer money, it will be in your account in near real time.
- 24/7. You can do this around the clock, even on the weekend
- Data rich. The capacity to attach more information and remittance to your payment
- Simply sending money to someone’s mobile, or even maybe email instead of their full BSB and account number.
Now, what does this mean for Australia? The NPP will touch every part of the economy and revolutionise the way corporations, governments and people interact with their finances – even Nathan and Jenny at the BBQ.
Any views expressed in this presentation are the views of the writer and are based on proprietary material and/or publicly available information. These views are independent of New Payments Platform Australia Limited, the Australian Payments Clearing Association, individual payment system participants, or the PMSO provided by KPMG.