The New Payments Platform and Overlay Services – adding value in real-time

At its heart, the NPP provides a mechanism to exchange information and value between multiple parties in a secure and reliable manner. A series of messages are used to exchange information between trusted financial institutions and the RBA, allowing clearing and settlement to happen in near real-time.

The ability to make near real-time payments is fantastic and well overdue, but the banks and industry are not investing over $1bn on a platform just to make payments happen faster. The real value lies in business’ ability to combine this speed with extra data capabilities and security to provide other services that will help them get ahead of their competitors or save costs.

Conceptually, the NPP has two parts. The Basic Infrastructure is the high-speed rails upon which NPP messages run in near real-time. Overlay Services are the services which businesses can use to deliver a better customer experience. Overlay service providers have control over defining their service levels, commercial terms, branding, governance, processes and rules allowing the experience to be uniform across the industry.

The best way to show exactly how an overlay service might benefit both business and the consumer is to provide an instance where a process has enormous potential for streamlining; home-buying for example.

If you have purchased property, you will be all too familiar with the laborious and manual nature of the experience, not to mention the number of parties involved. The experience may look something like this:

The long house buying journey

With the advent of overlay services, banks or 3rd party providers have the opportunity to re-engineer this experience and align it with 21st century expectations.

Imagine if there was a service that gathered data from multiple banks for a pre-approval, managed the exchange and signing of contracts electronically along with the payment of deposit in real-time? Imagine if settlement could be completed without significant manual intervention and all axillary services such as stamp duty payment, transfer of title and the purchase of home insurance could be managed as part of one integrated experience? Call it blue sky thinking, but the NPP lays part of the foundations for all of this to occur.

There are two ways in which organisations can consider using overlay services. They may either develop a new overlay service or seek to use an existing one and integrate it within their environment.

If an organisation chooses to develop an entirely new service, the service would need to:

  • Involve the exchange of information between multiple financial institutions or government authorities,
  • Address a specific problem or pain point where the scope for efficiency improvement is substantive, and
  • Have a strong business case with commercial terms that make it financially viable to subscribers.

Building a new overlay service will not always be the right solution; in many instances, the ability to make use of an existing service will solve adequately address a business’ needs or solve their particular business problem.

One such example is requesting payments from customers. This service will allow businesses to request real-time payment, instead of requiring the payer to initiate the transaction. Consider this in the context of invoicing: a business sends a request to the mobile phone of a customer when payment is due, and the customer responds with minimal effort by accepting the request and payment is made in near real-time.  By providing businesses with the ability to send a request, which can be actioned on the spot by a customer, the likelihood of on-time payments and a generally smoother transaction process is greatly increased all while reducing operational costs associated with reconciliation.

These are just a couple of examples that demonstrate the potential of the NPP. The number of businesses and services that may benefit from similar efficiencies is enormous, however we should enter the age of the NPP with realistic expectations. Disruptive overlay services should not be expected on day one, they will take time for the market to understand and develop. But expect organisations to do exactly that, as they explore the opportunities this $1bn financial infrastructure investment will bring. New products and offerings will emerge as the NPP provides the building blocks for a new generation of service.

For additional information on the NPP, check out some of these other great Newsroom blogs.

The NPP is being implemented by 15 organisations, including 12 financial institutions, service providers and the Reserve Bank. Participating financial organisations can either connect directly to the network, or indirectly through aggregators & service providers. NPP will be an open access platform for participating members. It will offer the level of control and integrity required from a trusted payment system, while also opening the payment ecosystem up to non-traditional players to collaborate.


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