Real time payments overhaul coming in 2017 By Clancy Yeates December 26 2016 www.watoday.com.au/business/banking-and-finance/real-time-payments-overhaul-coming-in-2017-20161206-gt50sv
Sometime in 2017, a new system will be switched on that has the potential to transform how you pay for everything from second-hand goods on Gumtree.com to motorway tolls. It will remove the clumsy process that requires you to enter BSB and account numbers when wiring money to a friend or business. The person being paid will no longer have to wait up to three days day for money to arrive in their account. This $1 billion piece of infrastructure, with the uncatchy name of the New Payments Platform, goes live in the second half of the year. While it has received little public attention so far, the system's launch is a sign of Australia's system of digital money and payments finally catching up with, and surpassing that of many other countries. Australians have embraced electronic payments, but the infrastructure that sits behind some of these systems lags that of other countries. The RBA, which pushed the banks to develop and fund the NPP, said in 2012 that Australia's system of payments between bank accounts looked "a bit dated," lagging less developed nations such as Mexico. Once the new system is switched on, Australia will leapfrog other nations and join only Sweden and Mexico in having "real time" payments. "What people will notice from day one is the ability to move money between participating bank accounts in a matter of seconds, and that'll be 24/7, 365 days a year," the NPP's chief executive, Adrian Lovney, says. "There'll be no concept of a weekend or a public holiday, it'll work all the time." "Whether it's a $2.50 cup of coffee, or a $2.5 million property settlement, the money will move between banks ESA [exchange settlement accounts] accounts in real time," he says. But aside from greater speed, what will consumers notice? Here are three ways electronic payments could be overhauled the system being launched in the second half of this year. 1. You can forget about BSBs At the moment, sending someone cash electronically requires knowing their BSB number and account number. That can be a hassle and it's often simpler to use cash instead. Under the new system, BSB and account numbers will still exist, but you won't need to know them in order to send someone money. Instead, people can nominate some other "identifier" such as mobile number or email address. You'll only need that identifier to send money to a friend, pay a business, or have someone else pay you. Banks believe this change will remove "pain-points" in the payments model, which has had little change in the last 15 years. The goal is to make everyday payments more like a transaction with Uber - where paying the driver is taken care of automatically when you arrive at the destination. It's not what we get today when sending money to a friend - but that is what many of us would expect. "Despite expectations of an 'Uber-like' experience, Australians still face a payments landscape filled with friction and inefficiency," the executive general manager of NAB Labs, Jonathan Davey, said in a recent report. 2. Expect to see more time-saving apps Giving people one "identifier" for their payments opens up all sorts of possibilities to develop apps that can allow people to spend less time on hassles such as paying multiple bills. Developers will be able to invent these apps and on the NPP, even if they are not banks. Consider all the payments involved in owning a car, for instance. There is registration, tolls, parking, insurance, fuel and maintenance. Lovney says a savvy developer might invent a system could be arranged to automatically deduct payments when your car's number plate went through toll booths, or parking fees when you went into parking stations. Alan Shields, a payments expert at RFi Group, says the NPP could also streamline the various transactions customers make when buying a car. As well as buying the car itself, there's also often a need to buy insurance, get a loan, and if it's second-hand, conduct an online search to make sure a previous owner doesn't still owe money on the car. " You could feasibly have a service where all of these things happen seamlessly," Shields says. The first NPP service will also you to send "request to pay" notices - which can simply be agreed to by consumers, without having to agree to direct debits. 3. Voting with your feet will get easier The nuts and bolts of payments is not exactly a hot political topic. However, it is probably one reason why banking is less competitive than many politicians would like. Today's system makes splitting up with your bank complicated and messy. There is a service that transfers all of a transaction account's direct debits and credits, but it is only used by about 40 people a week and takes up to two weeks to complete the process. It does not affect payments on credit or debit cards, either. Under the NPP, if you want to change banks, you'll no longer have to notify all the billers about money coming out, and people you pay you about money coming in. That is because those payments would be linked to an "identifier" that won't change, such as a mobile number. That won't make it any easier to change direct debits from credit or debit cards, but is being touted as a step towards less "sticky" customers. However, there are limitations to its impact on competition. Shields points out that take-up of fast payment apps in the UK have been low, with only about 3 per cent of consumers bothering to use these services. Also, just because it becomes easier to switch banks it doesn't mean people will do it. Usage of a 2012 scheme to allow account switching (which admittedly had its problems) was minuscule. Customer inertia is a powerful reason why banks make such large returns, and technology has only had a limited impact on this so far. -- Cheers, Stephen _______________________________________________ Link mailing list [email protected] http://mailman.anu.edu.au/mailman/listinfo/link
