Plato, the famous Greek philosopher, once remarked, “To suffer the penalty of too much haste, which is too little speed.” The quote seems perfect for this harp on real-time payments.
Real-time payments are a reality. Consumers today instantly pay Uber rides or split a restaurant bill with buddies through e-wallets. Financial institutions need to gear up for real-time transactions immediately or risk falling behind. Over 20 countries have adopted faster payment systems and the New Payment Platform (NPP).
The right infrastructure is vital for real-time payments. As it stands, this infrastructure is not economical for all players. This is where banking aggregators, with their Lego-like value proposition, step in. Their core strength is the operating model. Through the collective participation of customers, they combine buying power to deliver a shared infrastructure. This allows mid to small-sized financial institutions to remain competitive without significant investments.
Australian banking aggregators provide customers access to capital markets, payment systems, card systems, and inter-institutional settlement arrangements. Aggregators are cashing in on this mandate to switch to NPP. They have the means to take advantage of NPP and the associated overlay services, with their existing infrastructure and resources.
However, the journey towards NPP compliance is not easy. NPP Australia has put in place stringent deadlines and SLAs. Below are a few key points aggregators need to be aware of to achieve compliance and deliver a seamless user experience.
Manage Scale: Systems need to be scalable and quickly configurable to accommodate the surge in NPP transaction volumes. Data needs to be stored securely for future audits, which is a compliance requirement. Aggregators should develop strong data management (data retention and masking) and reporting capabilities to comply with the guidelines mandated by APCA.
Mitigate Risk and Compliance: NPP provides a faster way to complete payments, with channels forming an integral part of this solution. Irrevocable payments made in real-time increase the aggregator’s exposure to credit risks. Aggregators need to apply extra due diligence, strengthen KYC processes and incorporate real-time fraud and AML analysis now more than ever into their electronic payment channels.
Strengthen Governance: NPP throws up a host of innovative solutions. Layered overlay services demand a robust governance structure. Customer privacy, data security, data storage and management, and clearing and settlement mechanism are drastically different from traditional processes. Aggregators should employ a modular approach to strengthen individual operations.
Optimize Technology: Legacy systems fall woefully short in meeting expectations of real-time payment processing. Most legacy systems do not support ISO20022, the message standard adopted by NPP. Faster processing, larger transaction volume, real-time screening, real-time notifications, and better remittance information are all a call for modernizing the legacy systems.
NPP is a blessing for aggregators. It will revolutionize transactions in Australia. For an aggregator, it brings opportunities to improve the customer experience and profitability. The clock is ticking, and aggregators must adapt quickly to achieve sustainable outcomes.