The advent of Open Banking and the evolution of banks’ relationship with fintechs will bring benefits for all parties. It will see financial institutions partnering with non-traditional players more than ever before, with each party bringing considerable assets to the table.
 

FST Media: How does NPP Australia foster a culture of innovation?

Lovney: The New Payments Platform was born because the industry recognised the need for infrastructure that would support the future of payments. Already the Australian public has embraced electronic payment methods – chip cards (particularly contactless or “wave and pay” technology), BPAY, direct entry – and new technologies such as smartphones. But for this evolution to continue, our basic payments infrastructure needed an upgrade to enable a shift to immediate payments.

The NPP has been designed as an open and flexible platform with two objectives in mind: encouraging diversity and competition in product development and improving the payment system’s efficiency. In a country of around 25 million people, we can’t afford to be duplicating our payment infrastructure every time we want to build a new product. The layered architecture means that members can work together to share the costs of the infrastructure and then they – along with others, such as fintechs – can use those common set of rails with broad reach to build new products and compete at the product level.

FST Media: How do you see banks and fintechs leveraging the NPP to drive innovation in payment services?

Lovney: When it comes to leveraging the capabilities of the New Payments Platform, there are a number of options for various types of organisations. Institutions that are Authorised Deposit-taking Institutions (ADIs) can connect directly to the Platform, enabling them to send and receive near real-time payments using an NPP ‘message’. Institutions that are not ADIs can connect via one of the directly connected participants, who can clear and settle NPP payments on their behalf. Many fintechs and other organisations will also be able to use existing message sets and functionality like PayID to help bring their product to life, simply by establishing one connection to one NPP participant.

At the same time, the Platform has been designed in a way that enables products and services to sit ‘on top’ of the infrastructure in what’s known as an Overlay Service. Overlay Services could be simple or complex and the developer or provider has the freedom to define the experience via rules that define the Platform’s messaging capability. 

When it comes to what those Overlay Services could look like, the possibilities are endless. Speed will be a key differentiator, as will the convenience offered by PayID, the platform’s Addressing Service that allows consumers to link financial accounts to easy-to-remember pieces of information, such as phone numbers and email addresses, as an easier way to send and receive payments.

It’s also likely that the transmission of data along with payments will mean that a key focus will be on business applications, as well as the opportunities in industry verticals, such as funds management, in and around the stock exchange, or in the insurance and superannuation industry. The New Payments Platform presents an opportunity to help solve some of the common pain points such as efficiency, improved customer service, and cost reduction.

FST Media: How have you sought to mitigate cybersecurity and fraud risk in the development of the NPP?

Lovney: The financial institutions bringing the New Payments Platform to life do not underestimate the ingenuity of fraudsters. All are committed to being collectively vigilant around the launch and ongoing use of the infrastructure through a range of activities that will be both visible and not visible to the public.

The New Payments Platform uses world-leading technology certified to the highest data security standards and monitored 24 hours a day, seven days a week. At the same time, all services offered via the New Payments Platform must meet strict interbank technical and operational requirements. This includes procedures for reducing and managing fraud, liability rules for mistaken payments, misdirected payments, and the use of PayID.  All Participants that connect to the platform must have the capability to detect and respond to fraudulent activity in a real-time environment.

Australian financial institutions have a long track record of collaborating effectively to reduce fraud in the payments system and this will continue via the New Payments Platform.

FST Media: What issues will banks and fintechs face in effectively utilising payment data gathered from the NPP?

Lovney: NPP essentially transports data between trusted intermediaries. The Platform won’t ‘gather’ or store a copy of the messages or data sent through the system, apart from the data requirements to enable PayID. It’s conceivable that in the future financial institutions might choose to use the transport layer within the NPP – or its ‘networking capabilities’ – to send copies of transaction data to other third parties who may be directly or indirectly connected to the infrastructure.  However, this is a matter for them.

FST Media: Following its expected launch at the end of 2017, what’s next on the cards for NPP Australia?

Lovney: The industry is in its final important stages of bringing the NPP to life. Subject to final industry testing, we are on track to make the Platform’s central infrastructure available by the end of 2017, with Participants launching services to their customers from early 2018 and further into the year. From that point, NPP Australia will continue its focus on growing the platform’s reach by increasing the number of Participants and increasing the platform’s functionality with new enhancements and new Overlay Services.

FST Media: Where do you predict digital payments will be in 18 months?

Lovney: From the NPP’s perspective, in 18 months’ time, the Platform’s reach will have increased. The first Overlay Service – Osko by BPAY – will have launched, offering a new experience for peer-to-peer, account-to-account, real-time payments with more information provided with a payment than ever before. More people will be using PayID to direct their payments to accounts via easy-to-remember identifiers like mobile phone numbers or email addresses, meaning there will be less reliance on cumbersome payments details like BSB and account numbers. Payments with attached documents, or the new ‘request to pay’ feature, will be commonplace.

Outside the Platform, there are a number of trends that will continue to shape – and quite possibly appear in – Overlay Services supported by the platform. The trend is towards frictionless or “invisible” payments, which will enable people to pursue their everyday activities without interrupting them to make a payment, or having to carry specific payment credentials. The relationship between banks and fintechs will also continue to evolve with each bringing to the table their relative strengths in capital and risk management, scale, and customer experience.

FST Media: What recent banking technology or innovation has most impressed you and why?

Most recently I’m addicted to Samsung Pay – slick, fast, great integration with loyalty and coupons, and I can use my ‘Big Bank’ card right alongside my credit union card in the same wallet.

FST Media: Where do you see traditional banking services in five years’ time?

The advent of Open Banking and the evolution of banks’ relationship with fintechs will bring benefits for all parties.  It will see financial institutions partnering with non-traditional players more than ever before, with each party bringing considerable assets to the table. For its part, the NPP will also provide a platform for innovation and growth, with a set of far-reaching rails that are fast, always-on, and with a data-standard that is built for the digital economy.
 

FST Media: What are you hoping to achieve from your presentation at FST’s Future of Financial Services conference?

Lovney: I’m looking forward to telling the New Payment’s Platform story. The benefits it brings not only to our financial services industry, but also the wider Australian economy as well. I’m keen for people to see that the Platform represents so much more than faster payments – the data capability and connectivity it presents is where I can see so many possibilities and so much potential in the future.

Adrian Lovney will be featured keynote speaker at FST’s Future of Financial Services conference, Sydney, on the 9-10 November, 2017.