Australia’s payments regulator is proposing an overhaul of the country’s real-time payments system that  includes direct access for non-banks, in response to claims by payment service providers (PSPs) and fintechs that it should be cheaper and more accessible.

The Reserve Bank of Australia (RBA) published a series of recommendations for improving access to and the functionality of the New Payments Platform (NPP), which launched in February 2018 as the open access infrastructure for fast payments in Australia.

Last October the RBA, with the support of the Australian Competition and Consumer Commission (ACCC), launched a consultation on the functionality of the NPP.

The regulator believes that poor perceptions of the scheme to date is largely due to banks, which have made only slow progress in rolling out key functionalities of the NPP initiative. The RBA is threatening to impose heavy fines on the banks by the end of this year if they continue to stall on plugging in real-time and data-rich functionality.

Wider participation

Among its recommendations, the RBA is calling for access to the platform to be broadened to a range of PSPs.

Currently, participation in the NPP requires an ADI (authorised deposit-taking institution) licence. However, the RBA wants the platform’s operator — NPP Australia Limited (NPPA), which is owned by 13 financial institutions including the RBA — to cast the net wider for NPP participants.

“There may be entities that are ineligible to become ADIs because of the nature of their business (e.g. because they are specialised payment providers and do not take deposits or make loans),” the RBA commented “However, they might still be able to meet reasonable and relevant technical, operational and risk management requirements to participate in the NPP.”

It added that several stakeholders, particularly some fintechs, had indicated to the bank that the ADI requirement was an “excessive and unnecessary barrier to entry that undermines competition”. By the end of October, the regulator wants the NPPA to come up with options for broadening participation in the platform, with a view to implementing new rules by March 2020.

The RBA also said NPPA should introduce a sanctions regime for financial institutions that are NPP participants but don’t support core capabilities of the system. It is concerned about slow uptake of the platform – including its PayID feature, which allows an email address, phone number or other form of identity to be used as an alternative to a bank state branch (BSB and account number when making payments.

The RBA report outlining its conclusions from the consultation process recommends that by December NPPA should introduce a power for its board to mandate that “core capabilities” of the NPP are supported by platform participants within a specified timeframe. Failure to meet those obligations should be met with sanctions, including possible financial penalties.

“While the major banks have now largely completed the roll-out of NPP services to their retail customers, the roll-outs to business and corporate customers are ongoing and some banks have yet to provide NPP services to their subsidiary brands,” the report concluded.