Fast payments off to a slow start
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Fast payments off to a slow start

Over the coming weeks, expect to see plenty of ads spruiking a new $1 billion technology system that provides near-instant payments, and promises to make it much easier to send money to someone.

This whizz-bang piece of infrastructure, known as the new payments platform (NPP), is capable of moving money between accounts from different banks within seconds, rather than days.

The first service being offered on the NPP, called Osko, also removes the need to to enter BSB and account numbers, and use an email address or mobile number instead. That should make it much easier to reimburse a friend for dinner, say.

But if you're getting a sense of deja vu, that's because the system is not exactly "new" anymore. It actually launched in February. Since then, however, the NPP's take-off has been slower than hoped, because of delays from two large banks, in particular.

The new payments platform should make it easier to split bills between friends.

The new payments platform should make it easier to split bills between friends.

Photo: Shutterstock

The Reserve Bank, which pushed banks to invest in the platform, last month said it was "disappointing" some major banks were not ready to offer the service back in February, despite having years to prepare.

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It is only now that most – though not all – of the big four banks are offering the service to their customers. Hence the looming rush of ads on TV, as well as at cinemas and restaurants, where people might need to pay a friend.

Why does all this matter?

Because we'll only get the big gains in convenience and efficiency from the largest overhaul in our payments system in 20 years if everyone is using it.

In the jargon, networks like this need to be close to "ubiquitous." They will only be really useful – for things like paying a tradesperson, or splitting a bill – if everyone is capable of sending or receiving quick payments.

It's early days, but we are clearly not yet at that point.

The latest RBA figures show there were about 4.7 million NPP payments in July, which is about 2 per cent of the total number of "direct entry" payments.

What's behind the slow start? And how might usage pick up, to make this piece of infrastructure fulfil its potential?

Well, the laggard banks have been ANZ Bank and Westpac. ANZ started offering faster payments through Osko in the last month or so, though they are not yet working on its mobile banking app.

For Westpac, only customers in South Australia, Tasmania and Northern Territory can send and receive faster payments at the moment. Others can receive fast payments, but the bank's current offering is well short of the full suite of services the NPP allows.

To be fair, there is no suggestion the banks have deliberately dragged their feet in rolling out the NPP.

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Technical problems have caused the delays, with the banks taking the view it's better to be late than risk having security or other glitches with something as important as payments. Fair enough.

But in contrast, the RBA also praised a group of 50 smaller banks, credit unions and building societies that were ready to roll from day one. Commonwealth Bank was also ready when the new system launched, and National Australia Bank soon after.

Despite the RBA's disappointment, however, the business behind Osko, Bpay, expects a sharp increase in use of the NPP in months ahead as the system gets closer to reaching critical mass.

John Banfield, chief executive of BPay Group, says use of Osko is better than he anticipated, and growth is currently increasing "dramatically".

Consumers are making about 350,000 Osko payments a day, but Banfield says this should ramp up sharply by early next year as more people are offered the service. More than 80 per cent of the market will be covered within a few months, he says.

"Our expectation is we should be doing 1 million to 1.5 million [payments] a day. By the end of the first quarter of next year we should be in that position," Banfield says.

Osko will be most useful for replacing "pay anyone" transactions, and some banks are making it their default service in this area, so users won't have a choice. The main thing consumers will need to do is register for a "PayID," which allows you to link to you bank account to a mobile number or email address.

It's taken a while, but that should mean that soon enough, most consumers can stop having to deal with BSBs and account numbers.

Clancy Yeates writes on business specialising in financial services. Clancy is based in our Sydney newsroom.