NPP, certainty & the hunger for data
Australia’s New Payments Platform has revolutionised the way payments work, right from consumer level up to large institutional transactions. And the way the system is designed means that innovation is limitless – an ongoing stream of new ideas which solve problems for the industry and its customers.
Ahead of the Sibos 2020 financial services conference, we sat down with Leigh Mahoney, Head of Wholesale Digital, Carolyn Young, Head of Domestic Payments & Receivables, and Jackie Kallman, Head of Payments Industry at ANZ, to pick apart the outlook for the NPP. Below is an edited section of that conversation. You can read the second part HERE.
They started by addressing the short-to-medium term outlook for the capability of the NPP.
LM: At ANZ, we've spent a lot of time building our customer proposition for the NPP. It might sound a little bit boring, but it's actually quite exciting to make a payment to somebody from a different financial group and then see it arrive in their account in 10 seconds, followed by a message and so forth.
I think that opens up a whole world of opportunity for businesses to not only improve their cash management and liquidity position, but integrate with a whole suite of other automation tools to make doing business easier.
Instead of having to put an invoice in to get payment, the system might just understand what has happened, and trigger a payment as a result. Then the money's in the recipient's account.
I think another use case talked about often is the move away from overnight to real-time payments. That's a big change across the industry, especially when you think of a use case like payroll. We've done it the same way for 50 years.
Moving from people being paid overnight to people being paid in 10 minutes is a fundamental leap in the way we interact with the financial system and how we engage with employees. It impacts the experience they have, as well as their ability to spend money and boost the economy.
CY: I agree with you in terms of the opportunity and how it helps address a lot of business challenges. The NPP is about accelerating cash flow, gaining visibility on funds coming inward and having certainty on their outward payments.
We know with our customers at ANZ, it helps transform a lot of the operational activity they have to deal with at a financial level, by moving existing payments from the direct entry system, including good old cheques and other payment forms that have been around for decades.
I think the possibilities are about creating uniformity in the way businesses make payments across a variety of purposes, whether it is for credit payments, payroll, customer payments such as refunds and the like. We've got the ability to really accelerate the process needed to make those payments. That also creates certainty.
The challenge we find with ANZ customers is legacy payment systems. It's really difficult to identify payments, what they are being used for, and to reconcile those transactions. Through the NPP, they can essentially automate this stuff around the clock and get the efficiencies from having those funds available as quickly as possible.
I think the possibilities of the NPP are really starting to evolve now. And I think we'll see that unfold quickly, particularly as the industry is driving for more innovation.
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JK: The NPP was developed initially as a retail real-time payments system but has evolved to help businesses and large institutions. For companies, the data richness of the platform is absolutely a key feature.
I think as we start to move towards open data and an open-data economy, we will begin to look at how that data richness can be used to drive further efficiencies.
International payments will be another step change for NPP. If we are moving across the world to market infrastructure that is real time, available 24/7 using similar standards, we end up working towards real-time global payments, which is really cool.
LM: It’s interesting you mention data. What we're seeing in our digital channels at the moment is for every payment made, there's probably an associated four pieces of de-identified data that come with it. And the hunger for data from our customers and the industry is just immense.
I think that is a really important lens to place across the opportunities NPP and faster payments can create, simply because of the level of data accessibility on payments that traverse the networks.
This data provides a huge opportunity to reveal insights and help solve problems for participants all the way along the line.
CY: The complexity of the data is also worth considering. At ANZ our customers typically make payments and send remittance information through separate channels, usually in the form of a piece of paper mailed in the post, email or even a fax. Sometimes it is through a portal or some other electronic document. The point is, with traditional payment structures, the payment and associated information travel on a completely separate set of rails.
The challenge is often getting that information from each set of rails and then identifying which payment goes with which remittance advice.
The fact each item is travelling on two separate rails is a problem to solve for, and one that the NPP aims to address.
At its most basic level, having the data travel with the payment is going to solve that very first problem – let alone what is actually being paid for. That’s a massive improvement on other payment types. It really solves quite a material issue.
LM: I recall doing a study a little while ago on receivables, around how much it costs to reconcile the payments that hit your account. It’s a bit old, but it found the cost was anywhere between $A35 or $A50 per payment.
I can recall at the time having to develop a heap of receivable-type solutions, just so we could work out who had paid us.
I think we underplay the importance to businesses of being able to receive cash in a timely manner and then deliver for their customers. This is a big problem for businesses, including ANZ customers, that the NPP has the potential to solve quite remarkably.
JK: I guess what we're working towards and aiming for with the NPP is sort of a minimum standard for customer experience, which we really don't have today.
Really, our payment systems today largely depend on how a bank does something. For the recipient, they don't really have control over that because they don't have control over the how the payment is made.
With the NPP, we have near real-time processing, and data that comes with which is rich and useful and applicable.
That then creates a significantly higher minimum standard of service for banks to compete around, which ultimately provides benefits for the businesses and customers that deal with them.
Arun Kayal is Associate Director, Communications & Shane White is Content Manager, ANZ Institutional
You can read the second part of this conversation HERE.
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