PayID and Osko

Article

PayID and Osko

What the 24/7 new payments platform can do for you

While real-time payments have been available for high-value commercial payments over a decade, Richard Miller, Michael Thomas and Jonathan Perkinson outline how new technologies have made it economical to introduce near real-time payments for consumers and smaller businesses.

The New Payments Platform (NPP) launched to the Australian public on 13 February is giving Australian consumers and businesses the capability to make and receive payments in near to real time. The NPP infrastructure that allows financial institutions to ‘instantly’ settle transactions between themselves, went live between employees at various financial institutions in November 2017 and is now open 24/7 to customers of participating financial institutions.

The first service offered through NPP is branded ‘Osko’ and will be managed by BPAY, providers of the billing service that was a world-first when it launched 20 years ago. Osko allows bank account holders to transfer funds to any other bank account with a guarantee that those funds will post to the recipient’s account in under 60 seconds. In addition to the immediacy of retail payments, the NPP means that funds transfers can be addresses to mobile numbers or email addressed that have been registered with an addressing service called PayID. Rather than having to use only BSB and account numbers. It will eventually also let you send a payment request and attach documents like receipts and invoices to the payment, which will be particularly useful for claims and government payments. A boon for Australia’s mobile small businesses.

The way it works

The basic infrastructure for clearing and settlement payments is comprised of a series of interconnected payments gateways at each participant, supported by a settlement service run by the Reserve Bank of Australia.

A unique aspect of NPP, which has led it to be described as the most advanced payments system in the world, is a flexible design that allows new, innovative services to be built on top of the basic infrastructure for clearing and settlement. These ‘overlay services’ can be created by banks or other players, and offered to everyone connected to the NPP.

The first of these overlay services is BPAY’s Osko service, which will enable:

  • Real-time transfers with funds available within one minute (live today)
  • Transfer of links to documents in a secure repository (in development)
  • The ability for consumers and businesses to request a real-time payment (in development). 

The NPP is designed as an open platform that will allow payment services providers to create new payment experiences and services over time.

Where to from here?

While the benefits of the NPP to Australia are manifest, this doesn’t take into account the costs of transitioning to the new system. The NPP’s development and implementation costs have been significant, but at a national level they are likely to be outweighed by the efficiency gains over time and the innovative services it can enable. At an individual institution level, continuing to implement the enhanced features of the NPP will be important to deliver future value-added services and revenue streams as well as to prevent losing momentum and critical subject matter expertise. It should also be noted that the NPP represents a successful collaboration across banks, payments service providers and regulators in the national interest on a project of great complexity. All participants should be applauded for their efforts in bringing NPP to fruition and encouraged to continue their work to realise its full potential.

This article was first published in Australian Banking & Finance.

Published: March 2018

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