New payments platform to launch in February

| January 19, 2018

Australia’s much anticipated New Payments Platform will go live next month, allowing people to transfer money to each other in near real-time, using an email address or mobile phone number, rather than the long established, but increasingly cumbersome, BSB or account number process.

Australian banks, building societies and credit unions have been testing the technology for some time by sending payments to each other by the platform, but the public must wait until the NPP is opened to business next month and financial institutions offer the option to their customers.

A coalition of 13 financial bodies currently comprise New Payments Platform Australia, the body given responsibility to oversee all transactions carried by the platform. This number includes 3 service providers for smaller institutions, meaning that around 50 smaller institutions will participate at its launch.

NPP Australia will charge a small transaction fee to fund itself, according to a statement by the Reserve Bank of Australia last October. The Reserve Bank, in consultation with the wider banking industry, compiled the settlements architecture underpinning the new system that will allow the payments to occur but, although its development has taken years, details regarding its operation have been lacking.

Australia’s banks have trumpeted the new system as a major advance in speed and convenience for consumers and other businesses. They are pinning their hopes on its success to protect their long standing, and highly profitable, oligopoly on financial transactions and see off the threat of Apple, Amazon, bitcoin and a host of digital payment alternatives.

The new platform will also offer the capacity to include more data with the payment, with up to 280 characters of information accompanying the transfer, in contrast to the mere 18 now offered by banks. The extra space will allow personal messages as well as information on goods and services tax, hyperlinks to documents or perhaps a field that triggers an overlay.

Dr Anthony Richards, head of the RBA’s Payments Policy Department, and David Emery, a senior manager within the same department, told the House of Representatives Standing Committee on Tax and Revenue in October that “Richer data will facilitate e-invoicing and straight-through processing, and is likely to offer enhanced functionality to government agencies.”

Addressing Security Concerns

Given the number and sophistication of cyber-attacks and fraudulent transactions bedevilling digital commerce today, fears have been expressed that the new instant payment platform will inevitably draw the attention of cyber-criminals, undermining public faith in the system.

Nick Savvides, Symantec CTO for Australia, New Zealand, and Japan, recently told ZDNet that the NPP would be an attractive target for attacks as it would allow them to move money quickly.

The current system sees money being transferred lodged in batches that pass through a clearing house before it is sent to recipients. The big four banks in Australia run their own batch clearing practice while an array of second-tier clearing houses also carry out transaction clearing.

While this system slows transfers down for several hours, it also protects users as the time allows batch analytics to be run to identify and block questionable transactions. By contrast, under the NPP, banks will have just 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.

“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.”

Robert Schwarz, the Australia and New Zealand managing director of speech software firm Nuance, sees an opportunity for his firm to offer voice biometrics to prevent identity theft and fraud in the new instant payments environment.

“Stopping fraud and unauthorised transactions upfront is going to be really important to banks,” Schwarz said last year. “Implementing voice biometrics is a much more secure method of identifying and authenticating the user or the account owner, and is certainly going to help mitigating more of that fraud as these new systems come in.”