Dubbed the New Payments Platform (NPP), the process is being spruiked by the federal government and banking sector as a means of delivering faster, simpler payments transfers for businesses and their customers.
“Using the NPP, Australians will be able to transfer money to each other instantly, 24/7, on any day of the week, including weekends and public holidays. This overhaul of the payments system means Australians will no longer have to wait for bank transfers and payments to arrive in their account,” Treasurer Scott Morrison said.
“Gone will be the days of frustrating three-day waits for transfers between accounts of different banks. Customers will be able to securely pay businesses, split restaurant bills with their friends, and pay a tradesperson instantly.”
Australian Bankers’ Association CEO Anna Bligh claimed the new platform will see consumers and businesses “revel in the ability to make payments in real-time”.
“This is the biggest thing to happen in the industry since the inception of internet banking 10 years ago,” she said.
“The New Payments Platform is a $1 billion investment to deliver a better service to Australian customers, primarily funded and driven by banks.”
Ms Bligh added: “We are among the first nations in the world to have such a system, with ours learning from others to create cutting-edge technology.”
SMEs are expected to be a big winner of the NPP, allowing them to have immediate access to funds from sales.
“The NPP will help small businesses to be paid faster and therefore better manage cash flow. It can currently take several days for funds to leave the customer’s account and become available to the payee,” said Australian Invoice Finance managing director Greg Charlwood.
Another benefit for SMEs will be the ease with which businesses can change banks.
“The Pay ID will also allow businesses to change banks without having to notify suppliers or customers of new account numbers. The account number can simply be changed on the Pay ID without the counterparties even needing to know that the change has occurred,” he said.
However, he said the system isn’t without its concerns, chief among which is fraud detection.
“Under the NPP, financial institutions will no longer have one or two days to detect and stop fraudulent transactions as they currently do. Real-time transfers of funds mean they will need to become more vigilant around the prevention of fraud rather than reacting to fraudulent transactions,” Mr Charlwood said.
What is the NPP and how does it work?
According to Mr Morrison, the NPP is a centralised platform designed by 13 key financial institutions, including the Reserve Bank and the four other major firms. It first came online on 13 February 2018.
The NPP will effectively do away with complicated accounting inputs such as BSBs and instead rely on a new PayID code for identification.
As well as speeding up the processing side of things between financial institutions, which will deliver faster turnaround times, it is hoped the NPP will reduce the number of incorrect transfers made as the result of error inputs to account details.
Mr Charlwood said that customers of different banks will be able to perform real-time transfers 24-hours a day, 365 days a year. He said the NPP will replace Australia’s current RTGS (real-time gross settlement) system which is more than 40 years old and only operates during bank hours.