Australian businesses ignorant on arrival of NPP: HCL Tech

A majority of Australian businesses are unprepared for the introduction of the New Payment Platform (NPP), a research study by HCL Technologies has found.

The Business Attitudes to Electronics Payments Systems study, conducted by Roy Morgan Research, has shown that a majority of Australian businesses in the report were not able to say whether the NPP reforms would affect them, mainly because 73 percent of businesses admitted to being unaware of the reforms.

Due be operational by 2017, the NPP will be a national platform designed to facilitate real-time electronic payments between businesses and consumers, which will mean funds will be available within seconds of the payment, instead of a few days.

Recently, the Australian Payments Clearing Association predicted that the NPP would cost the local financial services industry in excess of AU$1 billion to have infrastructure ready to support the new system.

While there is still some way to go before it is fully implemented, Mitchell Green, HCL Technologies payments principal, warned that it is necessary for the Australian financial services to be prepared.

"A lot of the work HCL has been doing has been reviewing payments architecture of large financial institutions to ensure they can support NPP. Payment systems in the financial sector are quite complex, and are often disparate systems. The issue mainly is payments reside in silos," he said.

"You have issuing cards in one place, direct entry in another, and then possibly debit cards in another, so we have a lot of work to do to consolidate their systems and to make it more efficient."

The research also revealed that while two thirds of Australian businesses agree that electronic payments are "extremely" or "very" critical to business, only 45 percent of all Australian businesses accept electronic payments.

Electronic payments were defined in the research as debit and credit card payments, as well as PayPal and digital wallets.

The study also showed the retail sector, accommodation and food service industries, and organisations with an annual turnover in excess of AU$1 million or with more than 20 employees were the most frequent recipients of electronic payments.

Jason Hulme, Roy Morgan general manager of financial services, said there is a clear hunger in the Australian market to adopt new payment technologies, and it's a matter of teamwork.

"We're looking at a three-factor industry, and unless we have an alignment between the merchant, the banks, and the consumers, change just won't happen. But we are at a position where that is starting to happen," he said.

"It's mainly because Australia is a micro-climate for innovative payment solutions. We have four major banks and two major retailers, and if we have an alignment and agreement on that front, and with the technology penetration, that change can happen quite quickly."

Another issue the report highlighted was whether imposing a minimum level of spend on electronic payment transactions was necessary. The report showed that 17 percent of businesses currently impose minimum spend limits ranging from AU$5 to greater than AU$20, and the main reason for that is to reduce fees and processing workload.

However, Hulme said that to process cash transactions can be just as, if not more, costly to process as electronic payments.

"There is a view of the cost of 'my time', particularly with sole traders. I don't think people look at time of processing, the time of invoices, the times of chasing payments; they don't put a dollar value to that. But a percentage on top [of processing an electronic payment] it's very clear, because they see it as money out of their pocket, rather than an efficient way to conduct business," he said.

When looking at future ways in which customers are demanding to transact with business, PayPal was rated as the number one option by 26 percent of respondents. Meanwhile, digital wallets rated at only 0.4 percent. However, Green said this was before the release of the Apple Watch, and he therefore expects demand for digital wallets to change in the future.