Open Banking-accredited fintech Zepto has become the first non-bank player to connect directly to Australia’s New Payments Platform (NPP), with the fintech set to launch a range of payments initiation services by mid-next year when the NPP’s PayTo feature (offering ‘write access’) goes live.
Previously known as Split Payments, the Byron Bay-based fintech said being a ‘connected institution’ (one of six pathways to access NPP infrastructure) will enable it to develop merchant offerings with “minimal links in the chain” and “less friction”.
Zepto’s technology will leverage the NPP’s PayTo for a few propositions, including instant funding of stored value accounts (such as for share trading, crypto exchanges, digital wallets, and gaming platforms), as well as facilitating instant “end-of-shift” wage payments for casual workers.
The fintech also aims to offer collection solutions that allow merchants to draw money directly from customers’ transaction accounts (with their explicit consent) while making it easier for consumers to view their debt information, in what it says would help to eliminate dishonours.
Zepto chief executive Chris Jewell, who previously served as an investment banker at Citi, Credit Suisse and Goldman Sachs for nearly two decades, said that direct access to the NPP, combined with the fintech’s open data prowess, presented a prime opportunity to “redefine” payments.
“Our approval for connected institution status supports our innovation agenda by positioning ourselves as close to the NPP payment rails as possible to deliver frictionless experiences that solidify trust,” Jewell said.
Under connected institution status, Zepto will be able to direct customers’ payment flows for instant transactions without needing to manage aspects of payments clearing or settlement; as a non-ADI, Zepto also does not hold its own funding accounts.
“These accreditations prove that you don’t need to be a traditional bank to bring enterprise-grade compliant and reliable instant payments solutions to Australian businesses,” Jewell added.
ACCC alignment and the future of payments initiation
To become a connected institution, a non-ADI must install a Payment Access Gateway in their own environment to initiate payments from a customer’s bank account; there are also technical connectivity and security requirements to be met.
NPP Australia (NPPA) has attempted to ease the participant accreditation process for fintechs by aligning certification and accreditation requirements for NPP-connected institutions with much of the ACCC’s Consumer Data Right (CDR) accreditation model.
Simply put, a CDR-accredited data recipient would have satisfied much of the required criteria to become a connected institution.
On the other hand, should a non-ADI opt not to become a connected institution, they will likely instead access the NPP as an ‘identified institution’, piggybacking off a directly connected NPP participant who has capabilities to clear and settle payments.
Yet, in correspondence with FST Media, an NPP Australia spokesperson confirmed that by directly connecting to the NPP infrastructure, the connected institution access pathway offers greater flexibility for organisations, making them less reliant on others for performance, availability, and reporting analytics.
A connected institution also pays wholesale transaction fees to NPPA, they said.
“NPPA welcomes Zepto to the NPP and looks forward to working closely with them as they undertake the various steps required to establish their technical connectivity,” the body said in a statement.
Citing a high level of interest in its forthcoming PayTo service – formerly known as the Mandated Payments Service – NPPA’s spokesperson anticipates that, in the year to come, more organisations (likely fintechs) will seek approval to become connected institutions.
Crucially, when PayTo goes live, direct debits and other payments can be facilitated on a cardless basis, signalling a marked shift in payments competition, with American card giants Mastercard and Visa set to lose some of their now-massive share of transaction fees.
The NPP, which went live in 2017, is co-owned fourteen organisations that facilitate clearing and settlement through the platform – this includes the big four banks (CBA, Westpac, ANZ, and NAB), several Tier 2 lenders, payments services providers, as well as the Reserve Bank.