Payments Before the New Payment Platform

The New Payment Platform officially went live in February 2018 with a quiet launch of the first service – BPAY’s OSKO credit transfer. 18 months later we now have over 60 banks and financial institutions in Australia active.^*

We are still getting used to being able to send Faster Payments in Australia. We are also waiting for many banks to turn on the service for all their account holders.  Check out www.osko.com.au/osko-your-bank to find out if / when your Bank supports the OSKO Faster Payment service.

Suffice to say, you need both Banks on either end of the Payment to make a Faster Payment.

Australia’s Direct Entry Service

If you were sending payments before the New Payment Platform launch or your bank still doesn’t quite support the OSKO service yet, you are probably using Australia’s Direct Entry Service.

The Direct Entry service has been around for a long time in Australia, back to a time when exchanges between the banks used to be done with tape reels once a day, on the back of motorbikes. There have been many improvements to the service since then, with payments being exchanged electronically and with multiple exchanges per day (10:00am, 1.00pm, 4:00pm, 6:30pm, 8:45pm & 10:30pm)^%

Direct Entry, also known as BECS (Bulk Electronic Clearing System) carries more than $15 trillion of value per year and it still handles  the bulk of Australia’s Payment payment volume.

In fact most businesses and government still use Direct Entry exclusively for making payments. Direct Entry is how we get our pay and how companies pay their (Domestic) Creditors.

What makes NPP^# or Faster Payments so Fast

Well it basically comes down to a real-time message for NPP vs a delayed batch process for Direct Entry . More on that later ..

When you send a Direct Entry payment you will see something like “Payment will be Received the next business day if made before the payment cut off”.

Depending on your bank (and what state you live in) that cut off could be anywhere from 7:00pm down to 3:00pm. This  means that you need to make that payment by the cut off if you expect the person receiving the funds to get it by the next business day.

If you make an NPP payment, the beneficiary will receive the payment (in most cases) in under a minute.

Capability	NPP	Direct Entry
Open for business	Payments can be made 7 days a week 24 hours a day	5 Days - Monday to Friday (excluding national public holidays). 10:00am to 8:45pm
Average time to send a payment	Under a minute	If sent on a work day, quickest time is about three hours. (Due to the batching and verification processes, many banks take at least an hour and a half before and after each batch exchange to get the payment ready and process the payment)
Average time for the beneficiary to receive the payment	Under a minute	The short answer - Next Business Day. The long answer - some banks will post the payment the same day it is received - so the beneficiary can get your payment the same day (within a few hours). However a lot of banks will only deliver the payment the next business day.
Services Offered	OSKO Credit Transfer. (sending payments). Other services are in the pipeline, including a Request for Payment	Direct Credit Direct Debit
What happens if I send a payment on a weekend or public holiday	Payment is still sent and is received by the beneficiary	The bank will debit your account and hold the payment until the next business day when the Direct Entry Service is available again.

So When is NPP going to replace Direct Entry

Short Answer: Not for some time. Longer answer .. read on ..

We will start to see a shift in payment volumes coming out of Direct Entry into the New Payment Platform. There is however a huge bulk of payments that will take some time to migrate across.

So what will be going fast and what will be staying the same?

Person to Person Payments

Person to Person payments are certainly the easiest to convert over to NPP. With the first service – BPAY OSKO, we now have the convenience of sending a payment for a shared meal or a purchase off Gumtree. The payment is sent directly to someone’s phone number or email address. Transaction complete, great!

Person to Company Payments

Person to Company use cases open up some great opportunities for companies, but will take longer to implement. Companies can get paid faster and release goods quicker.

To take advantage of this many companies will need to establish new business processes. More agile companies will certainly have an advantage in this space.

Payroll Payments

The bulk of Payroll payments will take a long time (if ever) to move away from Direct Entry to NPP. A well orgainised corporate will have their payroll ready to go a few days before payday and schedule it with the bank for processing.

Many of the systems they use that produce Payroll payments are already pre-programmed to produce the Direct Entry file formats needed to send to the bank. Making changes to these systems is usually not easy or cheap.

Company AP Payments

Accounts Payable (AP) within companies already have processes in place with their ERP systems that are pre-wired to produce Direct Entry Files they can pass to the bank.

The sad fact is that the Company making the payment will not be overly concerned if the beneficiary gets their payment in a minute after the payment is released or the next day. As long as they are making the payment on time (and they can release the payment as late as possible to gain the interest advantage or minimise cost of funds).

There is always a need for those “Urgent” type payments that could use NPP, however. For the short term we will continue to see the bulk of these payments going though Direct Entry.

Direct Debit / Request to Pay

NPP currently only has the OSKO Credit Service, so there is not currently a capability to replace the Direct Entry – Direct Debit service.

There are plans to offer a “Request for Payment” OSKO service which hopefully we will start to hear about in the coming months.

* source: www.osko.com.au
# The New Payments Platform
% www.auspaynet.com.au