RBA chides major banks’ sluggish uptake of instant payments

The Reserve Bank of Australia (RBA) wants penalties imposed on Australia’s major banks if they fail to accelerate efforts to implement New Payments Platform (NPP) features, amid concerns the big four's dithering has hindered payments innovation across the financial sector.

The RBA attributes the major banks' delayed NPP adoption to the complexity of their internal systems, security and operational challenges of moving to a 24/7 payments infrastructure, as well as an underestimation of the investment needed to meet delivery timeframes.

“The slow rollout of NPP services by some larger banks has been disappointing,” the RBA said in a conclusions paper released following public consultations into the payments system, which was undertaken alongside the Australian Competition and Consumer Commission (ACCC).

According to the Reserve, while the big four had largely completed their rollouts for retail customers, corporate clients were still awaiting the platform’s implementation, while NPP features remain unavailable to the banks’ subsidiary brands.

Even where the major banks had enabled NPP services, “significant functionality gaps” were present, the RBA revealed, which were cited as obstacles to developing the platform’s planned ‘centralisation’ functionality, such as request-to-pay and payment-with-document overlay services – regarded as particularly useful for businesses and government.

As a result, the Reserve Bank has urged the NPPA, the 13-member body that owns the NPP, to introduce a mandate for participating institutions to support NPP core capabilities by a specified time or risk facing non-compliance penalties – just one among 12 other recommendations listed in the bank’s conclusion paper.

The RBA also recommended that the NPPA improve accessibility to the NPP by broadening direct access to a range of payments services providers, including those that are not Authorised Deposit-taking Institutions (ADIs).

According to Australia's central bank, several NPP stakeholders, particularly fintechs, viewed the current ADI requirement as an “excessive and unnecessary barrier to entry that undermines competition”, as some entities are ineligible to become ADIs due to the nature of their businesses.

“However, they might still be able to meet reasonable and relevant technical, operational and risk management requirements to participate in the NPP”, said the Central Bank, urging NPPA to revise participation requirements for non-ADIs.

Other notable recommendations in the report include a revision of NPP shareholding requirements for participants, NPPA governance structures, and access decisions, as well as transparency around NPP transaction fees.

Launched in February last year, the NPP facilitates round-the-clock, real-time payments using a convenient addressing system and support for overlay services that can utilise the platform. Currently, only one overlay service – BPAY's Osko – has been made available to consumers.

To date, 80 institutions are connected to the NPP – most, indirectly – using a direct participant’s NPP gateway. Meanwhile, the platform’s capabilities continue to grow, reflected by its recently launched API Framework and testing box and, more recently, an NPP QR Code Standard.

The NPPA is due to provide a comprehensive response to RBA’s recommendations by the end of July 2019.

RBA’s full conclusions paper can be accessed here.