How the New Payments Platform is changing the way we bank
The New Payments Platform (NPP) has significantly changed everyday banking over the last couple of years by speeding up the way we send and receive payments.
Mutually owned by 13 organisations including Australia's largest banks and the RBA, the NPP was launched in 2018 with an open access infrastructure giving users faster payments any day or hour of the year, simpler payment IDs, and more detailed transfer descriptions.
After its launch the platform was processing a daily average of more than 1.1 million payments, adding up to a whopping $1 billion by the end of January 2020. Today, there are approximately 85 Australian banking and financial providers that use the NPP.
The New Payments Platform was designed to support a 24/7 digital economy. Essentially, it works by moving value in real-time between bank accounts. This is in contrast to payments made between bank accounts using the Direct Entry system, where transfers are typically settled in batches, often several times a day or on the next business day.
The way you use NPP-enabled transfers is usually much the same as making transfers via your bank's mobile app or website. If your bank or financial provider has signed up for it, you can send and receive payments with the New Payments Platform using a BSB and account number or a PayID, such as an email address or mobile phone number.
For businesses, the PayID can also be an ABN/ACN or Organisation ID.
Initially, you could only transfer money to other bank accounts using a BSB and account number. These transfers would typically then take a few business days to hit the other bank account. Nowadays with NPP all you need is your email address or phone number to transfer money to another account and it will appear within minutes, regardless of the bank.
These NPPs have made it quick and easy to send money to our loved ones and pay for goods or services. Whether you need to split the bill, buy something off Gumtree or pay your fitness instructor, the NPP can allow you to automatically transfer funds between accounts within minutes.
Naturally, this has had a significant impact on improving payment experiences for companies, especially within the lending industry. One of the key features of NPP is that it facilitates faster, instant payments and the simple sharing of data between different bank accounts; all factors which, with the slow rollout of open banking, present a wealth of new opportunities for financial service providers.
Brisbane-based online lender Jacaranda Finance was one of the first non-bank personal loan providers to adopt the New Payments Platform. In a successful attempt to innovate and stay ahead of the curve, Jacaranda was able to win over new customers with its speedy cash transfers through the NPP.
Jacaranda Finance CEO and founder Daniel Wessels says the NPP has already fundamentally changed the company's small loans service offering.
"If a customer has a NPP-enabled bank account and we approve them for a loan, we can have the cash in their account and ready to use within sixty seconds of them signing their digital contract." says Wessels.
"This kind of speed is invaluable for many of our customers, who are typically coming to us in need of urgent cash to cover unexpected expenses."
On the surface level this may not seem like much of an improvement for financial service providers, yet Wessels notes NPP services are opening doors for lenders to work on their broader service offering.
"One of the biggest benefits is that it's helped further automate our processes, giving us the leverage to increase our customer reach and work on other features within our system to create an experience that is as seamless as possible for our customers," he adds.
In just two years, New Payment Platforms have revolutionised the way Australians do their everyday banking by providing faster, data-rich payments. Now, with open banking legislation set to see every bank offering access to product, account, and transaction data by July 2021 both consumers and businesses are likely to see even more benefits from the innovations to come.
The idea for Jacaranda Finance began when founder and CEO, Daniel Wessels, was working for a large personal finance company, setting up a UK-based arm of their online operations. During his time there, he saw rising demand for innovative, intuitive solutions among increasingly digitally-savvy consumers who wanted convenient, online micro-finance options.
At the start, it was nothing glamorous. He worked from his parent's basement and spent every moment of his free time researching new ways to perfect his vision for what personal finance could be. Fast forward to today and Jacaranda Finance has grown into an award-winning lender that prides itself on giving everyday Aussies a fair go at finance. There are around three million people in Australia who are deemed 'unbankable' by traditional financial institutions. Fintechs like Jacaranda are enabling a new era of financial inclusion.
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Business News Australia