NPP gets Fundtech's seal of approval

Global financial technology provider Fundtech has given Australia's New Payments Platform a big tick, saying the scheme, which is under development, includes a number of features that will encourage innovation in the payments industry.

Fundtech issued a research report on the NPP last week, saying: "The New Payments Platform shares the commitment to speed, availability, convenience and information-rich messages that is common among countries with 'immediate payments' schemes. It also has some unique characteristics and capabilities that create specific opportunities for financial institutions."

The NPP was launched in mid-2013 with the task of developing payments infrastructure that would allow for data-rich, real-time payments.

The NPP steering committee's goal is that by the second half of 2017 businesses and consumers will have the capacity to make payments in real time with "close to immediate" access for the recipient.

These payment functions will operate outside banking hours. Payments will include a lot more remittance information than is currently permitted and the system will allow for payments to non-bank account destinations, such as mobile phone numbers.

The NPP is building the core infrastructure, leaving the development of service overlays to the market.

Such schemes have been in operation or under development in South Africa since 2006, the United Kingdom since 2008 and Poland since 2012.

The Fundtech report says: "In designing Australia's NPP its developers have had the opportunity to examine other immediate payment schemes across the world in live market operation and learn lessons from them."

Fundtech highlighted what it considered the important difference between the NPP and other schemes:
•    Overlays. The most ground-breaking attribute of the NPP is its "layered model", where the NPP will provide basic infrastructure and invite industry to design service overlays. These overlays will be connected to the NPP, providing the opportunity for the development of innovative services.

•    Distributed clearing. Clearing is distributed around individual banks rather than being managed from a central location. Functionality will be built into banks' payment access gateways, leveraging their connection to the SWIFT network.

•    Simultaneous real-time clearing and settlement. The only other scheme that currently features real-time clearing and settlement is the Swedish system. With the NPP, clearing will be carried out first and then settlement with the Reserve Bank a few seconds later.

•    Continuous settlement, 24/7, 365 days a year. With most systems continuous clearing is not possible because of the need to maintain a net settlement figure between the banks. The Reserve Bank has committed to run the settlement service continuously. "This is a significant difference from the way most other schemes work," Fundtech said.

•    Transaction size. The NPP has not put a limit on individual transaction sizes.

•    Diversity. The NPP is expected to be open to all banks and other institutions that are eligible to use the local clearing system. This is a common feature of immediate payment schemes but the NPP is different in also being open to other certified partners in the payments system. These include third-party developers working with financial institutions.

•    Advanced messaging. NPP is planning to use the ISO 200022 industry messaging standard but, according to Fundtech, it might have the opportunity to launch with a later version of the standard, with much larger data fields. This will be important for service development.