New Payments Platform launches – but why not available to all?

"Access to the NPP infrastructure is limited to existing financial services providers right now – why is this?" asks Senior Lecturer Rob Nicholls from the UNSW Business School. "This is controversial as there is often an 'access regime' associated with major monopoly infrastructure."

Australia has launching a real-time payments solution today called New Payments Platform, or NPP. It changes the process of "clearing" payments between banks from one which runs in batches to immediate settlement.

"This should make it much easier and quicker to transfer money," he says. "This means that when someone transfers money to your account via the platform, you will get it right away, and you can attach easily remembered identifiers, such as a mobile number or an email address, to your account."

However, access to the infrastructure is limited at launch to existing financial services providers. "With Treasury releasing its review into Open Banking in early February that promotes open access to bank infrastructure, the absence of an access regime looks a little odd."

"Designing access regimes for nationally important infrastructure is the bread and butter of the ACCC's regulatory work. In a week where the competition regulator was tasked with managing open banking, it's odd that it was not given the role of managing access to the New Payments Platform".

He suggests that the process of bank switching should be made easier by the introduction of the New Payments Platform. However, products that use the New Payments Platform will only begin to be available in 2018. "Although financial intermediaries will try to make comparison easier, the process is not automated. This means that only customers who are proactive enough to use open banking will get the benefits. To some extent, this also minimises risk to the banks. In practice, the likelihood of churn is higher than currently, but is not extreme."

Senior Lecturer Nicholls adds that the launch, just as the Royal Commission into banking is underway, may not be a coincidence, and just as the big four banks have accepted the inevitability of a Royal Commission, they have also accepted open banking.

"As open banking becomes more of a norm in the UK and the European Union, the arguments for delay will fall away. The Productivity Commission has argued strongly for open banking and similar data access in sectors such as utilities and telecommunications and Treasury has supported that consumer data right."

For further comment contact Rob Nicholls on 02 9385 3251 or r.nicholls@unsw.edu.au