Westpac’s institutional and commercial customers can now set up PayTo payment arrangements with their customers, following the bank’s move to join ANZ in offering a PayTo service to large business customers.
PayTo was developed by NPP Australia, a subsidiary of Australian Payments Plus, as an up-to-date and more user-friendly version of consumer direct debits. It gives retail customers better oversight and control of their recurring payments.
When it was launched in 2022, it was touted as a payment service that would have a wide range of consumer and corporate applications. It was also presented as a way of reducing errors and fraud.
Judging by the rollout so far, what is emerging is a service offered by large banks to allow a relatively small number of big billers to streamline payment arrangements with their retail customers.
Westpac launched a PayTo capability for its retail customers last year to meet a Reserve Bank deadline for provision of the service.
What those customers did with the service is anyone’s guess. They could only use it if a company or merchant offered a PayTo option.
Westpac managing director of global transaction services, Jeff Byrne, said in a statement that it is the introduction of the biller functionality that will allow the benefits of PayTo to be realised.
Byrne said the bank is offering the capability to institutional and commercial payees initially, with other business customers to follow by the end of the year.
ANZ’s biller service, which was launched last November, is also designed for institutional clients and is part of the bank’s push to grow its institutional payments business.
A number of fintechs are offering PayTo services to smaller businesses. They include Zepto, Monoova, Paypa Plane and Azupay. They are not doing a lot of business, although Zepto is working with Woolworths’ payments division Wpay to develop a PayTo service.
Brad Kelly, the managing director of consultancy Payment Services, said: “Westpac is sending a very clear message about PayTo: unless you are an enterprise customer, institutional or corporate, then don’t bother.
“This reduces risk and is the glue that binds the broader banking relationship together. It also provides volume.”
Kelly said: “PayTo is not really about replacing the direct debit arrangement you might set up with your local gym. It was oversold when it was launched and now we are starting to see how banks will use it.”
Kelly said one of PayTo challenges is that it will not work easily as a B2B solution. That is because business customers usually requires more than one signatory on a bank account – a problem that may never be overcome.