Australia's New Payments Platform (NPP) finally went live on Tuesday, with a handful of financial services providers in the country already rolling out solutions that allow customers to make instant payments.
The new platform allows for the transfer of money from one person to another in near real-time, using an email address or phone number rather than the traditional BSB or account number process.
The New Payments Platform
The NPP is a new payments infrastructure for the Australian economy, giving consumers, businesses, and government a platform to make fast and data-rich payments.
It was built by the Reserve Bank of Australia (RBA) in consultation with the "big four" banks: The Commonwealth Bank of Australia (CBA), the National Australia Bank (NAB), the Australia and New Zealand Banking Group (ANZ), and Westpac, which hold around 95 percent market share of the entire Australian finance industry.
There are 13 participants in the NPP, including three entities that are service providers for smaller institutions: ANZ, Australian Settlements Limited (ASL), Bendigo and Adelaide Bank, Citigroup, CBA, Cuscal, HSBC Bank Australia, Indue, ING Australia, Macquarie Bank, NAB, the RBA, and Westpac.
The NPP enables customers of different participating financial institutions to make and receive real-time domestic payments between accounts.
With the new platform comes the ability to include much more data with the payment; up to 280 characters of information, as opposed to the 18 currently allowed by banks. The extra space is expected to allow for the adding of data such as goods and services tax (GST) information, hyperlinks to documents, and a field that triggers an overlay.
"It also brings potential for future payments innovation through its data capability, open-access design, and unique layered architecture, which can support multiple and competitive products or services," the NPP explained in a statement.
The initial launch of the NPP was in November, supporting since then the transfer of funds between employees at a number of banks, building societies, and credit unions.
Its public launch was 12.01am on February 13, 2018.
The NPP will sit alongside the existing method for funds transfer in Australia.
"It's important also to note that BSB and account numbers are not being replaced," NPP Australia said. "Instead, the PayID addressing service enables users to elect information that is easier to remember -- like a mobile phone number -- that can act as a pointer to their account."
To use the platform, customers require a PayID.
It is expected a PayID will become part of a financial institution's normal mobile or online banking process, allowing for payments to be made without any of the previously required banking information -- BSB and account number. A PayID is a unique, user-specific number registered with the customer's bank and linked to a nominated bank account.
A PayID can be a phone number, email address, or an Australian Business Number (ABN).
It can only be used to put money into an account, not to take money out, and, according to New Payments Platform Australia Limited (NPP Australia) -- the company charged with the oversight of all of the transactions moving through the system -- PayID payments will be protected by the same security as internet or mobile banking.
Although it will appear differently between financial institutions, the option to pay to a PayID will appear within a normal mobile or online banking form.
A PayID can only be linked to one account at any given time; however, users can have more than one PayID that are all linked to different accounts.
Participating banks, building societies, and credit unions in Australia will commence rolling out PayID via their online and mobile banking this week.
Once it's available, customers will be invited to create a PayID within their usual online or mobile banking app. CBA told ZDNet it has already seen over 140,000 PayID registrations as of Wednesday morning.
"In coming months, we expect about 50 banks, credit unions, and building societies will offer PayID to their customers, with more joining later in the year," NPP Australia added.
Osko by BPAY
Osko by BPAY is the first consumer payment service that will roll out from the NPP to use the PayID functionality.
NPP Australia said some financial institutions may require a customer to choose Osko if they wish to pay to a PayID.
"Imagine all the times you have had to run to an ATM, or were just a little short on cash in your wallet. Soon, as Osko becomes available through participating institutions' online or mobile banking, you will be able to transfer money on the spot on your phone," CEO of BPAY Group John Banfield said in a statement. "Paying the plumber in an emergency just got a whole lot easier. Before long, we won't even remember not being able to move our money in a flash."
Why the NPP?
Over the past few years, the banking industry has been developing the NPP, with the RBA building the underlying settlements architecture that allows the payments to occur.
The RBA kicked off the project in 2012, when a review of its internal innovation capabilities laid out "strategic objectives" for the Australian payments system.
These included the ability for users to make real-time payments; send more complete remittance information with payments; address payments in a relatively simple way; and make and receive payments outside of normal business hours.
The RBA then invited input from industry to determine the most effective way of delivering on those objectives.
In July 2015, the RBA published an expression of interest (EOI) for the provisioning and implementation of the solution. At the time, the bank said it wanted a complete overhaul to help it deliver an improved banking service for its customers with a more contemporary architecture and programming platform.
The EOI specified that the platform would be used to support payments systems that process in excess of 320 million payment and 25 million collection transactions per year.
In 2014, financial messaging service SWIFT was appointed to build the platform's basic infrastructure.
NPP Australia will be provided with only a single source of revenue, the RBA explained in October, which will be a small fee for a transaction. Adrian Lovney, who was with Cuscal from 2002 through 2016, is the CEO of NPP Australia.
"We are very excited to see the benefits of the New Payments Platform commence its rollout," NPP Australia told ZDNet.
Although instantaneous payments have been touted as great for consumers, Nick Savvides, Symantec CTO for Australia, New Zealand, and Japan, told ZDNet it is an even greater opportunity for attackers, as they will have the ability to move money quickly.
Currently, when money is transferred it gets lodged in batches that go through a clearing house, with the big four banks in Australia running their own batch clearing practice; there is also a collection of second-tier clearing houses that perform transaction clearing. These transactions are held for a number of hours to allow batch analytics to be run thoroughly and for time to isolate dodgy transactions.
Under the NPP, banks will have 30 seconds to clear the settlement and forward the funds.
"So now, all of that infrastructure that is built to do batch analytics doesn't exist anymore and they need to work in real-time, which means we now have to trust the authentication method," Savvides explained last month.
"One of the things I personally have been working on over the past two years is helping our customers move to stronger mobile apps to be able to facilitate NPP while reducing that risk because they know they can no longer do that batch analytics."
NPP Australia said the new platform has been built with security and fraud front of mind.
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