Why businesses must ride the real-time payments wave

As the pace of change in Australia’s payments system speeds up, businesses that are embracing emerging real-time payment capabilities are gaining competitive advantage.

5 June 2024

As the pace of change in Australia's payments system speeds up, businesses that are embracing emerging real-time payment capabilities are gaining competitive advantage.

Emerging technologies have incrementally transformed Australia's payment landscape over the past decades, but few have had the seismic effect as the New Payments Platform (©NPP).

Launched in 2018, the ©NPP is a national infrastructure to support real-time, data-rich digital payments, 24-hours a day, every day. While the NPP's obvious benefit is its always-on availability1 that's critical to meet the immediacy demanded by today's economy, it has several other attributes that have radically improved the precision, transparency and security of payments. 

The creation of an array of new real-time capabilities, such as PayID® and PayTo®, will revolutionise the way consumers and businesses make and receive payments.

The scene is now set for a swathe of additional innovative payment use cases to emerge.

real-time payments infographic

Crosshead: Early adopters are getting an edge

For businesses that have jumped at the chance to adopt these modern payment capabilities, the benefits are material. Beyond giving their customers the joy of fast, frictionless payment experiences, the new capabilities have also reduced the time and effort traditionally required for payment reconciliation and verification, made liquidity and cashflow management more precise, and helped curb fraud and scams. 

"The richer data and the near-instant clearing and settlement associated with real-time payments enables businesses to work payables and receivables more efficiently," says CommBank's general manager of real-time payments, Alison Chang.

PayTo® is set to replace the traditional direct debit system customers use to pay for services such as bills and subscriptions. It gives consumers the ability to view and manage payment agreements securely from within their banking app, while businesses benefit from instant customer and account verification, real-time receipt-of-funds and access to cash flow and effortless reconciliation. 

Real-time payments require a real-time way of integrating and exchanging information with the bank to make and receive payments.

"Businesses that are ready to integrate using APIs [application programming interfaces] will be able to seamlessly curate an exceptional bank account payment experience in their digital channels," says Chang.

Early adopters, she adds, are not only at the forefront of the wave of new use cases, they're also well placed for the wind-down of Australia's legacy payments system – Bulk Electronic Clearing System (BECS). The RBA has described BECS as "a low-cost and reliable workhorse of the Australian payments system for decades, processing salary and welfare payments, recurring payments to merchants and other account-to-account transfers" 2.  The target end-date for BECS is June 2030, with further consultation by Treasury in the coming months to support the retirement.(3).

Crosshead: Momentum is building in modern migration  

The number of payments processed by the NPP has grown exponentially since launch, now exceeding 100 million3 payments each month, which are worth about $110 billion. And one in three account-to-account credit transfers are processed via the NPP, for the customers of more than 110 financial institutions nationwide. 

Chang says that while consumers have been quick to adopt the new features, the migration of large businesses from legacy payment systems, such as Direct Entry payments, has not been so swift.

"Like any major system change, some businesses may be finding it difficult to let go of deeply ingrained back-office ‘direct entry' processes," she says. "Others are opting to wait for a greater suite of feature-rich capabilities to be available, and others still are simply unsure about the best way to uplift their technology to take advantage of the evolution." 

Solutions are at hand to help business leaders confront this inflection point and enjoy an advantage over those who wait, she says.

"We're seeing a convergence of powerful technologies and global standards – including APIs and the adoption of the universal payments language of ISO 20022 – which are enabling all businesses, regardless of size, to leverage seamless, data-rich payments across the modern technology landscape." 

Crosshead: Combating frauds and scams is a priority

Despite all the benefits of digital payments, faster payments come with some risks. Having confidence in who a business is paying is key to reducing false billing and mistaken payments.

One of NPP's earliest developments, PayID® – which enables account holders to register a mobile number, email address or ABN – helps payers confirm they're paying the right person or business by displaying the payee's name for confirmation. To date, some 18.5 million PayIDs® have been registered, up 45 per cent from 2022, including a growing number of small businesses.

Not only does PayID® enable payment receipt immediately, it's an effective way to reduce payment errors and invoice fraud, because a PayID® is more recognisable, traceable and harder to impersonate than BSB and account numbers.

"Businesses that take the simple step of replacing their bank account details with their PayID® on invoices can go a long way in protecting both themselves and their customers," says Chang.

CommBank also offers its customers NameCheck on the CommBank app, Netbank and CommBiz banking channels, which indicates whether the name and account details entered for payment appear to be correct.

Since launch, NameCheck has helped its customers prevent ~$20 million scam payments and reduced mistaken payments by ~$180 million.

CommBank has now created secure API capability to enable their industry-leading NameCheck technology is available to other organisations such as Bendigo Bank and fraud monitoring company Satori. Taking this whole-of-ecosystem national approach can help to make payments safer and more reliable and aid further in scams and fraud prevention.

Mark Bookatz, Satori's executive director of growth, says NameCheck has become an essential service for many of its corporate customers.

"Australian institutions have recognised the high costs stemming from errors, non-compliance and fraud in their financial processes. We are excited to extend the NameCheck service to our corporate customer base to complement the existing AI-driven financial controls monitoring service, driving operational efficiency and preventing fraud," says Bookatz.

Crosshead: Getting ready to catch the real-time wave

To embark on the payments evolution, Robert Djurovitch, CommBank's executive director of transaction banking, says businesses typically need to start with a process map.

"It's important to set out the business's unique end-to-end payment journey and customer experience, from the point of invoice data capture and authorisation to payment and reconciliation, to find areas of improvement," says Djurovitch.

"This helps leaders prioritise short-term tactical improvements while building a longer-term strategic roadmap to leverage richer capabilities as they emerge. CommBank can help with this process and provide capabilities to support the transition."  

APIs will be used to enable businesses to access real-time payment capabilities within their own native operating model or technology stack, or through smarter, smoother integration with their Enterprise Resource Planning platforms and Treasury Management Systems, he says.

"Through our Payments-as-a-Service platform, CommBank will soon offer a suite of real-time payment APIs and continues to invest in and advocate for richer capabilities."

Among the additional developments to benefit businesses on the near horizon, Djurovitch flags work is under way at CommBank to:

  • Deliver NameCheck for file-based payments up to 50.
  • Scale PayTo® for business.
  • Scale dynamic PayID® for business.
  • Launch file-based NPP fast payments
  • Enable incoming cross-border payments to be settled through the real-time rails.
  • Offer overlays to enable fully digital structured remittance to be issued with payments.

"And these are just the beginning," he says.

"For any business keen to gain competitive advantage, riding this wave of payment transformation should be a priority as we transform to a real-time payments world."

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Things you should know

  • This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information. The information in this article and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its publication but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this article.

    © 2024 NPP Australia Limited. ABN 68 601 428 737 All rights reserved.

    PayID® and PayTo® are registered trademarks of NPP Australia Limited. CommBank.

    1NPP, The Platform.

    2RBA (2023), Modernising Australia’s Payments System.

    3NPP Australia Roadmap 2023.