Published on the 22/02/2018 | Written by Jonathan Cotton

In an industry well overdue for some innovation, a new payment platform promises near-instant payments and huge innovations for the fin-tech sector…

According to New Payments Platform Australia (NPPA), the new payment infrastructure will let users transfer money instantly between accounts at different financial institutions, make payments any time of day or day of the year and (finally) let users see the name of the person they are transferring payment to before the transaction is made.

Built by the Reserve Bank of Australia in consultation with the ‘big four’ banks, approximately 60 banks, building societies and credit unions have signed up to use the platform already. The race to roll out new services that exploit the platform’s capabilities is on.

“The New Payments Platform has a unique layered ‘open access’ design which allows for different entities to leverage the Platform’s functionality in different ways,” said CEO of NPP Australia Adrian Lovney .

“Innovative organisations can choose to build upon the platform’s capabilities to develop and launch ‘overlay services’ on the Platform. These could be payments experiences, or they could be business applications that enable significant organisational efficiencies.”

“We know that Australians are frustrated about the amount of time it takes to move money between accounts at different banks, which can sometimes be as long as two to three days. We expect that over the next month or so, Australians will be able to transfer money instantly to each other through products like Osko by BPAY.”

Lovney says that while the platform is being welcomed as a solution to lengthy transfer time its potential goes well beyond that.

“For payments experiences, the Platform’s speed will be key, as well the convenience offered by the PayID addressing service and the data that can be transmitted alongside a payment.”

“We see the Platform’s data capability as a potential boon for future business applications. From simpler invoicing to automatic reconciliation across core business processes; as organisations continue to digitise their back offices we believe the New Payments Platform will provide an important building block for innovation.”

With unprecedented speed of transfers however comes unprecedented risks say critics. Research into the United Kingdom’s real-time payments solution, Faster Payments, shows that the platform is rife with scams and fraudulent behaviour, with banks struggling to keep abreast of the new threats.

“Before the New Payments Platform, numerous safeguards were built into Australia’s payment system that limited fraud and abuse,” said Steve Worthington, adjunct professor, Swinburne University of Technology.

“For instance, if you were planning to buy a car, you would likely go into your bank and ask for a bank cheque. This cheque would be made out to the name of the dealership or person selling the car.”

“A number of protections are built into this system. The money is guaranteed by your bank and will clear within three days once deposited. If someone with a different name tries to deposit the cheque, then the cheque will not be accepted and hence the payment will be revoked.”

“Under the terms and conditions issued by one of the participating banks, banks are not liable for losses that are a result of you giving the wrong account information. Furthermore, a transfer instruction given by you, once accepted by your bank, is irrevocable.”

“The problem will only get worse as the “cap” on transactions is lifted. This happened in the United Kingdom once the Faster Payments cap was raised to £250,000 in 2015.”

Risk or not, Australian financial institutions are rushing to back the new development. Expect lots of new innovation – and perhaps a couple of missteps – in the near future.