Our Insights

Australia’s new payment platform

Consumers and financial industry welcome innovations

Australia's New Payments Platform (NPP) represents the country's concerted effort to build a modern system that can unleash fast-payment innovation and bring efficiencies for asset managers and investors, according to its developers, NPP Australia.1

On track to go live in October 2017, NPP is expected to drive the rapid adoption of realtime payments between institutions and investors, while offering financial managers opportunities to better service their clients through new and potentially lucrative data sources.

Key insights

  • NPP will usher in near-real-time clearance and settlements, enabling faster cash flow management and reconciliation
  • Data-rich payments and messaging could offer valuable market intelligence
  • Other jurisdictions are embracing the push towards global real-time payments

Innovation to hitch ride on NPP rails

Built by SWIFT, the global bank messaging network, and funded by 13 authorized deposit-taking institutions under the auspices of the Reserve Bank of Australia, the NPP's Basic Infrastructure will provide the payment rails that allow transactions to be cleared and settled within seconds.2

The platform will allow overlay services to ride on the rails, allowing companies to create their own payment services, either in competition or collaboration with banks or fintech startups. The intention is to foster innovation and competition for the benefit of end users.3 "The real value I think will come from its application to business verticals, that's the stock exchange, capital markets, superannuation and funds management," NPP Australia CEO Adrian Lovney said.

Working round the clock

Participants in the asset management sector stand to gain from the efficiencies that real-time payments will deliver in cash flow management. The days of traditional batch processing of payments, which take up to five days to settle, are expected to come to an end as banks and other financial institutions embrace the platform.

The intention is to foster innovation and competition for the benefit of end users

NPP also promises easier reconciliations due to the rich data that can be attached to payments. Most banks' legacy systems limit remittance information to 18 characters contained in Bank State Branch (BSB) and account numbers. The new technology will support 240 characters, and allow more user-friendly payment addresses such as phone numbers, email addresses, and Australian Business Numbers. Enhanced messaging technology will also provide for full invoice information and other electronic documents to be attached to payments, while also enabling request-to-pay instructions that will help institutions optimize liquidity.

The extra data attached to the payments and messaging is likely to become a valuable commodity for participants, as it will enable them to better understand their clients and tailor products to meet their needs. It may offer an advantage to Australia's incumbent banks, who have more client data and greater experience in using it than relatively new fintech companies. "What the banks lack in nimbleness they have in market intelligence, in a much greater way than fintechs do," said Cliff Richards, General Manager of Equity Post Trade Services at the Australian Stock Exchange.

Cutting the corporate action timetable

For share registries, custodians and fund managers, the back-office efficiencies in terms of faster settlements, dividend payments and other corporate actions through NPP could be anywhere from "modest to massive", said Richards.

The back-office efficiencies through NPP could be anywhere from "modest to massive"

Australia's current T+2 settlement cycle for equities trades could ultimately move to end-of-day or intra-day settlements, depending on market demand, which would stand to benefit traders hoping to land in a square position at the end of day, added Lovney.

Dividends and distributions can take three weeks in Australia, involve a surfeit of paperwork with greater potential for human error and leave funds idle as they route through multiple accounts. With banking details attached to shareholders' Security Reference Numbers or Holder Identification Numbers, and requests for payment pushed to investors' mobile phones, funds will have the ability to settle instantaneously.

The same is expected to apply for capital raisings and take-over considerations, dramatically reducing the corporate action timetable, while lowering credit and default risk inherent in longer settlement cycles.

Global modernization efforts

Australia is just one of a number of jurisdictions where regulators are driving real-time payments. In January 2017, the European Central Bank launched a market consultation for the development of a settlement service for real-time instant payments in central bank money, while the United States' Federal Reserve has also set up a taskforce to assess proposals for a faster payments system.4 In Canada, Payments Canada is undertaking a multi-year project to modernize Canada's payment system and develop a system into one that is fast, flexible, secure, and strengthens Canada's competitive position.5 As the technology race continues, other jurisdictions are expected to get on board.

"As the roster of countries adopting real-time payments grows, the pressure on other countries to lay the groundwork and support speedy payments is likely to increase," Deloitte said in a report.6 The real-time payments regime promised by NPP will be welcomed in a world where consumers demand immediacy.


  1. New Payments Platform Australia (2017) What is the new payments platform?
  2. Ibid.
  3. Australian Financial Review (Jan 23, 2017) New payments platform could create army of fintech innovation, says NPP boss
  4. Federal Reserve (May 25, 2017) About the faster payments taskforce
  5. Payments Canada (2017) A Vision for the Canadian payments ecosystem
  6. Deloitte (2015) Real-time payments are changing the reality of payments