Published on the 04/12/2014 | Written by Newsdesk

A dozen institutions have committed to invest in a new payments ecosystem for Australia that when complete will cost upwards of $1 billion…

International financial messaging giant SWIFT has been awarded the contract to design and build, in association with Australia’s leading financial institutions, the new payments platform (NPP) that will allow real-time, mobile and data-rich payments when it is launched in 2017.

Paul Lahiff, steering chair of the NPP, described the network as the “financial plumbing for the economy of the future”.

A distributed network architecture has been selected which will make use of the ISO 20022 standard to connect participants over a network to perform each payment, with a copy sent to the Reserve Bank to facilitate settlement.

While the network itself won’t be that expensive to build, the bulk of the $1 billion estimated cost of the entire ecosystem will be invested to ensure that the connecting banks can integrate the NPP with their existing back office systems and also construct the overlay services that leverage the NPP, for example to allow smartphone or person to person payments.

According to Phil Chronican, CEO of ANZ Australia, which is one of the dozen companies involved in this phase of the NPP’s development, the infrastructure is required to keep up with customer expectation and allow traditional financial organisations to compete with payments upstarts.

“The best way of protecting yourself from competition is meeting the needs of your customers first,” he said, noting that peer to peer payment facilitation would be one of the first services to be launched, and adding that in the future it would also be possible to attach payments to different forms of information.

This signals a potential seismic shift for ERP users, and could in the future allow payments data to be integrated with procurement systems, for example.

Balaji Ram, vice president and head of financial services for HCL Australia Services, works closely with the financial sector, and said that the major benefits of the NPP would accrue to those organisations which moved beyond using it for simple payments compliance and developed innovative services that took advantage of the payments platform.

He said that it would be an area of focus for HCL in Australia over the next three to five years.

“Payments is under threat from the PayPals and the Apples. Our approach is to say if you don’t play a role in e-commerce then you will miss out on some upstream opportunities.

“This is an opportunity for ADIs (Australian Deposit-taking Institutions) to get in the value chain,” and to make use of the rich payments data that would be made available said Ram.