Interview with Head of International Payments and Market Management, Westpac
Westpac, alongside other banks in the Australian market, launched NPP in early 2018. How are you seeing instant payments taking off in Australia?
In February 2019, one year after the NPP’s launch – 75 banks, credit unions and building societies were rolling out real-time payments on the platform. In that time, more than 90 million transactions worth in excess of AUD 75 billion had been made. This is a low base and compares with the AUD 1 trillion per month that moves through the existing “direct entry” payments system and has been in use for decades.
The uptake of real-time payments is only moving in one direction and in 2019, it is early days for what will be the next revolution in payments. Supported by new digital technologies and payments platforms, instant payments can be the catalyst for a next generation of applications that can not only save time and money, but also leverage rich data to create new value-added products. As examples:
- NPP infrastructure harnessed with the potential for data-sharing through the early 2020 launch of open banking, along with API solutions and the ISO 20022 payments standards will foster a wave of innovation where the real-time payment will be only one enabling factor
- Convergence of open banking with real-time payments through the NPP is expected to transform the timeliness of bill payments in sectors such as utilities, mortgage payments and government. The game-changer will take the form of a ‘Request to Pay’ overlay service on the NPP slated to start in late 2020, in which a biller can initiate an electronic request allowing customers to respond instantly with a mobile payment
The Reserve Bank of Australia has called for access to the New Payments Platform to be broadened to a wider range of PSPs. What are your thoughts on this?
Connecting to any payment clearing stream can be a significant investment and takes time to implement. If a broader range of participants want immediate access then indirect connectivity models through Tier 1 members may need to be considered, these are starting to be offered and explored. Building the network of participants is going to take some time.
NPP has successfully been involved in the SWIFT gpi pilot with other international real time payments systems – what are the next steps for making a global market solution for linking gpi to cross border to domestic payments infrastructures?
The SWIFT trials across the globe in markets that have real time payments has shown that real time connectivity is achievable. Extending the reach of cross border payments to domestic instant payments can mean cross border payments are credited in seconds helping to facilitate a globally connected world. For this to be a reality there are other elements to consider other than the technology which include compliance to regulatory reporting, operating hours, liquidity and fx management. These are being considered in Australia as the banks work toward executing instant crediting of accounts through NPP.
How can some of the operational and regulatory challenges such as opening hours, compliance etc be overcome?
The operating environment for such payments in the domestic market needs collaboration from the banks in the markets along with SWIFT, key principles can be set by the market regarding operating hours, payment thresholds and regulatory reporting rules. In Australia banks are becoming more experienced in operating in a real time environment which has meant that lessons learned executing domestic payments are helping ensure the right operational considerations are being assessed for instant cross border payments.
Open Banking is coming to Australia, how is this shaping up?
Westpac is focusing on creating a trusted open banking regime that is secure, flexible and easy to use for all Australians. We are taking part in a pilot program that will lay initial foundations to test the performance, reliability and security of the system before any personal consumer data is shared. It will also give software developers and fintechs a network of financial institution’s data to build and improve financial services.
Open banking is intended to give customers more options to assess and manage their finances, while stimulating more innovation and competition across the banking sector. With greater transparency and more personalised services, consumers will have more ways to find, compare and choose products that are best suited to their individual needs. Data is driving change and transformation across all sectors of our economy, and this will only accelerate. Realising the benefits of open banking will depend on the level of confidence that customers have in the platform, and the readiness of businesses to grasp the opportunities it creates.
We are very supportive of the regime and see it as an exciting opportunity to give our customers more choice and delight them with better banking experiences.
Danielle Johnson, Head of International Payments and Market Management, Westpac