Major banks get more time to deliver new NPP functionality

Australia’s biggest banks have been given a nine-month reprieve to deliver delayed functionality to the new payments platform (NPP) that will enable third-party initiated payments.

Reserve Bank of Australia governor Philip Lowe has written to the major banks to seek reassurances that the functionality, known as PayTo, will be ready for launch no later than April 2023.

It comes after ANZ, NAB and Westpac indicated they would not be able to meet the July 2022 deadline, as reported by The Australian Financial Review.

PayTo – considered one of the most important updates to the real-time payments platform since its inception in 2018 – will allow businesses to initiate payments from their customer’s bank accounts.

The functionality will ensure the NPP is not just an “alternative for direct debit”, according to NPP Australia, by accommodating recurring or subscription-type payments, as well as corporate payroll.

Implementation had already been pushed back once before due to the pandemic, from early 2022 to mid-2022.

Speaking at the NPP Real Time Payments Summit in Sydney on Tuesday, the RBA’s head of payments policy Ellis Connolly said the new deadline applied “across the industry”.

“The industry had committed to launch the PayTo service in July this year, and the RBA’s expectation was that this commitment would be met,” he said.

“Unfortunately, several of the major banks have recently indicated that they will not be able to meet this timeline.”

Connolly said that while the RBA recognised the “considerable effort and investment required”, there was an expectation banks roll out the new service for customers.

“These delays will significantly limit the availability of PayTo and the realisation of the benefits for end users,” he told the summit.

“Given this, the governor has written to the CEOs of the relevant banks, seeking their assurance that they’ll be ready to launch PayTo no later than April 2023.

“To realise the full potential of PayTo, we expect the banks to make this service available for their entire customer base.”

All the major banks are said to have “responded to the governor and have indicated they are all targeting” that timeframe.

Reliability lagging other 24/7 services

Connolly also used his keynote to address the issue of reliability of NPP services, which he said was lagging other 24/7 services.

“In the second half of last year, three quarters of service providers reported unplanned outages affecting their NPP services, and many of these providers reported multiple outages,” he said.

RBA figures pegged unplanned downtime for NPP service providers at an average of almost seven hours – “considerably higher” than services like card payments.

A “substantial amount” of the NPP outages were also during the day “when consumer service demand is highest”.

“We think this indicates that some participants need to do a better job at delivering reliable NPP services to their customers,” Connolly said.

“The Payment System Board is closely monitoring the NPP provider reliability data because we think this will only become more important as the usage of the NPP grows.”

More than a billion transactions, worth more than a trillion dollars, were processed through the NPP over the past year.

Around $12 billion in Covid-related support and disaster relief payments from the government were included in this figure in the second half of 2021 alone.