A Cuscal payments technology expert yesterday delivered a fierce critique of the New Payment Platform’s PayTo service, arguing that the NPP's preoccupation with real time settlement is set to “complicate an already complex” system.
Payments industry veteran Mark Hesse, who currently works as Cuscal’s senior solutions architect, took aim at the soon-to-be-launched PayTo service in a LinkedIn post that triggered a wave of discussion across the domestic payments industry.
Hesse’s comments were significant as they appear to be inconsistent with the strategy of Cuscal’s management, including the head of product and emerging services, Nathan Churchward, who has steered the company’s integration with the NPP.
In the article Hesse raised concerns that PayTo might struggle to match the processing capability of the direct entry system, conducted through the Bulk Electronic Clearing System (BECS).
Hesse, who noted at the foot of the article that his views on PayTo differ from his employer, also questioned whether real time settlement is always necessary in the payments sector.
“NPP Australia has gone out of its way to eliminate every aspect of delayed payment processing from their real time offering,” he wrote.
“This desire to always process in real time even when it is not needed has complicated an already complex scheme.”
Cuscal yesterday moved to distance itself from the views canvassed in Hesse’s LinkedIn article.
“I would like to confirm that Cuscal was not aware of the article being written from a personal account or that it had been posted,” said a Cuscal spokesperson.
“The opinions expressed in the post are of the individual who wrote the article and are not reflective of the view of the Cuscal Board, Leadership Team or other senior members of Cuscal’s staff.
“Cuscal is proud of our history in enabling real time payments in Australia via our ongoing partnership with NPP Australia.
“We are excited to be part of the impending launch of the PayTo service which will enhance payment services, and further stimulate innovation and competition in payments.”
PayTo, which is earmarked to launch next month, is a centrepiece of the NPP’s business case.
It will enable Australian bank account holders to pre-authorise payments to billers and other service providers.
Through the PayTo service billers will be able to withdraw or “pull” money from customers’ accounts after they secure a standing authority or mandate to initiate such transactions.
Hesse argues that the processing capacity of Australia’s 120 banks and credit unions is likely to be challenged as the PayTo service matures because of the dual requirement to settle in real time with an infinite transaction capacity.
He indicated the collective cost to the banking industry of meeting such requirements could run into the billions of dollars.
“NPPA needs to rethink, pivot, compromise,” Hesse told LinkedIn users.
“Consider near real-time or as soon as possible.
“Forcing large capacity requirements on all institutions reduces competition.
“Small institutions are being forced to spend funds they don’t have on technical solutions that only the larger institutions can afford.”
A NPP Australia spokesperson said it was incorrect to suggest that the migration of payments activity from the BECS platform to PayTo was the sole purpose behind the latter’s design.
“The NPP was intended to be able to support a wide range of payment types including corporate payments currently submitted in bulk files.
‘It is anticipated that financial institutions will work with their corporate customers to move these payments onto the NPP in a phased manner.
“The migration of these bulk unattended payments will follow a gradual and carefully staged process, and NPP Australia remains committed to working closely with the industry, and in particular the sponsoring organisations of smaller players, to ensure this change effort is balanced effectively against the wider needs of the industry. “
As Banking Day entered production last night Hesse’s article appeared to have been removed from LinkedIn.