Australia’s New Payments Platform is demonstrating how a centralized approach can accelerate the adoption of real-time payments across a national banking system. With more than 100 financial institutions connected and a growing share of account-to-account payments moving through the network, the NPP is approaching the scale necessary to make real-time transactions a routine payment option. Its progress also provides an interesting comparison with the more decentralized development of real-time payments in the United States.
Australia’s New Payments Platform (NPP), which is that country’s centralized real time payments platform that launched in 2018, recently released some data on transaction volumes and revealed its product roadmap. It’s an interesting comparison to the rollout of real-time payments in the U.S., which is decentralized, and unlike Australia, is not mandated. Here are some of the key milestones NPP has achieved, as outlined in BankingDay:
Over 100 banks, credit unions, building societies and fintechs are connected to the NPP, eleven directly and over 90 indirectly.
That’s about 2/3rds of the financial institutions which creates the needed network effect and gets NPP close to the all-important point of ubiquity.
More than 20 per cent of account-to-account credit payments are now done via the NPP, many assumed to be B2B.
In the U.S., we see other channels like business-to-consumer disbursements taking center stage.
As transaction volumes grow, the NPP wholesale transaction cost “continues to decline” and is now below 10 cents.
This is around $0.07 USD per transaction and a little higher than The Clearing House RTP published rate of $0.045 per transfer.
The number of PayIDs registered now exceeds 5.4 million: “This number has increased by 36 per cent since the start of this year, with an average of 150,000 PayID registrations added every month.
PayIDs are a token or alias that represents an account number that is used across all payment types conducted on the NPP network. In the U.S. alias like mobile numbers and email addresses have been used by some networks to compile a directory, but there isn’t a single, national directory of account aliases.
So where does NPP go next? According to their roadmap, international transactions will be a focus:
We anticipate some financial institutions will join the international payments business service over the next 12 months.
In order to create the network effect required for the international payments capability to be useful, “all NPP participating financial institutions are obliged to join the international payments business service and receive inbound international payments via the NPP by December 2022 as part of the platform’s annual infrastructure release.
The continued growth of Australia’s New Payments Platform illustrates the importance of broad financial institution participation in creating a successful real-time payments ecosystem. With roughly two-thirds of the country’s financial institutions connected to the platform, the NPP is moving closer to the ubiquity needed to support a wide range of consumer and business payment use cases.
Transaction growth is also helping improve the economics of the network. As volumes rise, wholesale transaction costs continue to decline, making real-time payments increasingly practical for financial institutions and their customers. The expanding use of PayIDs provides another important advantage by allowing customers to use an alias rather than relying solely on traditional account information.
The platform’s next phase could significantly expand its role in the payments market. Bringing international transactions onto the NPP would extend its real-time capabilities beyond domestic account-to-account payments and provide financial institutions with another channel for receiving cross-border funds.
Requiring participating institutions to support inbound international payments should also help establish the network effect necessary for the service to become broadly useful. This coordinated approach differs significantly from the development of real-time payments in the United States, where multiple networks and voluntary participation create a different path toward widespread adoption.
As Australia’s New Payments Platform adds capabilities and increases transaction volume, it provides a valuable example of how centralized infrastructure, broad participation, and common services can help drive a national real-time payments strategy.
Overview by Sarah Grotta, Director, Merchant Services at Mercator Advisory Group
