The New Payments Platform (NPP) is an industry wide payments platform designed to facilitate fast, flexible and data rich payments in Australia. It is owned mutually by 13 of the founding participants via a holding vehicle called NPP Australia Limited (NPPA). Launched in February 2018, the platform promises to spur innovation and competition within the Australian payments landscape by allowing overlay service providers to leverage the capabilities of the NPP to provide novel payment solution to their customers.
While the NPP has delivered on its promise of facilitating real-time payments in Australia, its roll out through the Australian banking sector has been slower than expected. While major banks have largely completed their retail roll-out, business customers are either still waiting for the roll-out or not receiving the full service. Many smaller financial institutions still appear to be some way off go-live. There has also been some concern that the ownership structure of NPPA creates inherent conflicts of interest and some smaller financial institutions, including fintechs have expressed some frustration with difficulty in access the NPP.
In response to public and government concerns the RBA’s Payment Systems Board has recently published the findings of its public consultation on the functionality and accessibility of the NPP (Report). The Report expresses the RBA’s concerns around the slow and haphazard roll-out of the NPP and suggests that underfunding and an inconsistent approach to implementation across financial institutions have exacerbated the delays. The Report recommends the introduction of a compliance framework which imposes penalties on financial institutions that fail to roll out the NPP to a set standard and within set timeframes. The Report charged NPPA with the task of developing minimum service levels and accessibility requirements for the NPP. The Report also provides a range of recommendations around access to the NPP. Importantly, the Report recommends that subject to solving for key risks and operational considerations, non-ADIs should be permitted to access and participate in the NPP. This is consistent with the RBA’s recent changes to its Exchange Settlement Account Policy which now permits certain non-ADIs to hold exchange settlement accounts. The Report also recommends that conflicts of interest which are inherent within the NPPA’s ownership structure should be tackled through the establishment of an independent evaluation panel which is tasked with making decisions regarding access to the NPP and that greater transparency should be built into the decision making process through regular reporting on applications for access and the outcomes of those applications.
The RBA and the financial industry will eagerly await the NPPA’s response to the Report. The RBA confirmed on 16 August 2019 that the NPPA would publish a roadmap for delivering new NPP functionality and that it has approved a compliance framework that would allow it to mandate certain core capability requirements for NPP participants. It remains to be seen when the new functionalities and the compliance framework will be implemented and whether appropriate sanctions will be imposed to incentivise compliance. It also remains to be seen whether NPPA will adopt the remainder of the Report’s recommendations around access and transparency.
Authors: Hannah Bragge, Kirish Kularajah and Michael Caplan