Australia’s payments landscape is undergoing an unprecedented transformation as the country plans for the windup of the Bulk Electronic Clearing System (BECS) moving onto the New Payments Platform (NPP). This shift marks a fundamental evolution in how payments are processed, enabling businesses, financial institutions, and consumers to benefit from faster, more efficient, and data-rich transactions.
Following the announcement by AusPayNet of 2030 as the target date for decommissioning BECS, along with plans to wind down the cheques system, this is a once-in-a-generation opportunity to modernize Australia’s payments infrastructure. (Australian Payments Plus, “An Update on the move to NPP”, 31 July 2024)
The Move to NPP: A Transformational Opportunity
The transition from BECS to NPP is about more than adopting new technology. It’s about rethinking the core of Australia’s payments system, which has been reliant on batch processing, fixed banking hours, and limited data exchanges. While BECS has served the country well for over 30 years, it struggles to meet the evolving needs of modern businesses and consumers. In contrast, the NPP was designed to support real-time payments and facilitate richer, more detailed data exchanges that businesses need to stay competitive in the digital economy.
For businesses, the shift to NPP promises greater efficiency, improved fraud protection, and more accurate reconciliation of payments. The move to a modern, future-ready payments system will streamline payment processes, boost productivity, and improve cash flow management. The NPP has also enabled services like PayID and PayTo, which simplify payment identification and enhance security for both businesses and consumers.
The Growing Adoption of NPP (by businesses and consumers)
Since its launch in 2018, the NPP has already made a significant impact, processing over 1.39 billion transactions in 2023 alone, with a daily payment value exceeding $5 billion. Transaction volumes on the platform grew by 20% in 2023 and continue to increase by over 20% each month.
As of today, more than one-third of all account-to-account payments are now processed through NPP.
Whilst NPP transactions growth is positive, there is still much work to be done to ensure a successful and sustainable transition from BECS to NPP. Australian Payments Plus (AP+), in collaboration with NPP participants and the wider industry, is working to ensure that the system is fully scaled and ready for the 2030 deadline when BECS will be decommissioned. This is a multi-year journey that involves not just the technical migration of payment volumes but also educating businesses and consumers about the benefits and new processes associated with NPP.
The Role of PayID and PayTo in the NPP Ecosystem
A key innovation driving this transition is PayID, which allows businesses and consumers to link their bank accounts to a simple, user-friendly identifier such as a phone number, email address, or Australian Business Number (ABN) rather than the traditional BSB and account numbers. PayID makes payments faster, reduces errors, and enhances security, which is especially valuable for businesses that require real-time payments.
Another important feature of the NPP is PayTo, which is designed to replace the traditional (often paper based and manual setup) direct debit process and system. PayTo allows consumers to agree in real-time (via banking app) to a single or recurring debit for a specified merchant for a specified amount and time giving them more control and visibility of all direct debit arrangements in place.
For businesses, this provides opportunity for more efficient payment collection, improved cash flow management, enhanced digital customer engagement and payment experience and further options for brand loyalty / reward program integration.
Dynamic PayID: A Smart Solution for High-Volume Billers and Payments
For businesses dealing with high volumes of customer accounts, transactions and invoices, managing payment processes can be complex. This is where Dynamic PayID, pioneered and available now from several payment Fintechs, offers an innovative highly cost-effective solution. Dynamic PayID enables businesses (via APIs) to access and generate temporary, unique (email) PayIDs for specific customers, bills, invoices or transactions, allowing for streamlining of large-scale payment processes.
For example, businesses with millions of customer or vendor accounts, such as telcos, utilities and retailers, can generate a Dynamic PayID for each unique payer or transaction (invoices, bills and at point of sale). Once the payment is made, the one-time Dynamic PayID can then be deactivated, reducing risks of duplicate payments whilst enjoying the benefit of instant auto-reconciliation in knowing exactly who has paid and for what.
Real-time reporting (and return API messaging) is also available to confirm receipt of funds for each PayID payment with options for individual or batch settlement to the specified bank accounts intraday or overnight.
NPP: Building Capacity and Reducing Costs
As NPP transaction volumes continue to grow, it’s important to address scalability and cost considerations. The NPP has already demonstrated its ability to support more than double the current (NPP) payment volumes, and AP+ is working proactively to increase capacity as needed. One of the key advantages of the NPP is its ability to continue to drive down transaction costs as payment volumes increase and according to AP+ (Australian Payments Plus, “An Update on the move to NPP”, 31 July 2024):
The cost of processing payments through the NPP has already decreased significantly, from an average of $0.39 per transaction in 2019 to an expected $0.04 by 2025.
The NPP’s higher upfront cost per transaction, relative to BECS, must also be weighed against the efficiency savings it delivers. These include reduced manual reconciliation, fewer failed payments, and the ability to process payments instantly. For businesses that depend on fast payments, such as those in high-volume or subscription-based sectors, the value of these benefits far outweighs the added transaction cost.
Additional NPP Technical Infrastructure Enhancements
To support the growing demands of real-time payments, AP+ has also been working on significant upgrades to the technical infrastructure of the NPP. One key initiative is the migration to the ISO 20022 messaging standard, which will allow the NPP to accommodate a wider range of data fields and improve operational resilience. Additionally, the NPP is enabling cloud-based infrastructure to help participants reduce costs and improve efficiency.
The Path Forward: What Businesses Can Expect
As the 2030 BECS deadline approaches, businesses will need to prepare for the full migration to NPP. This involves ensuring their ERP and payment systems are capable of handling real-time payments and adopting tools like PayID and PayTo for efficient real-time payment processing. AP+ industry consultation is underway with Financial Institutions, Fintechs, PSPs, Accounting and ERP providers to understand, assess and support ongoing adoption and integration of NPP solutions into their existing payment services and infrastructures.
For enterprises managing large volumes of payments, there will be opportunities to work with financial institutions and payments Fintechs to “debulk” payment files, migrate to APIs, and automate payment processes with some early adopters already on that journey.
As we progress toward “BECSit2030” AusPayNet (as custodians of the BECS framework), working closely with AP+, have said that they will continue to regularly engage with the Reserve Bank of Australia and Treasury to monitor progress and risks in validity of the target decommission date.
Conclusion: Embracing the Future of Payments
The transition from BECS to NPP is an essential step in modernising Australia’s payments infrastructure, and it represents a pivotal moment for businesses across the country. While the shift may present challenges, it offers immense opportunities for improved operational efficiency, enhanced payments security, and better cash flow management.
Adopting real-time payments and leveraging services like PayID and PayTo, businesses will be better positioned to thrive in an increasingly digital economy. The NPP not only meets the needs of today’s economy but also ensures that Australia’s payments system is future-ready. This includes everything from faster Government remittances, real time / on demand salary and superannuation disbursements, 24/7 365 payments and funds access whilst also enabling reduced reconciliation and failed payments management costs.
With ongoing efforts from AP+ and the industry, Australia’s shift from BECS to NPP is well underway. The future of payments in Australia is evolving and exciting, and businesses that embrace these changes early have opportunity to take a leading position in an evolving digital payments landscape.
Whilst there is much talk and question at present on will BECSit 2030 actually happen, and with the reality of much work to do across multiple Australian payments industry participants, there is certainly a strong drive coming from the Reserve Bank and others to make it happen.
I do recall and quite liked an RBA spokesperson comment from a past NPP Summit (and to paraphrase):
“the 2030 target has been set for a reason, to bring focus to what needs to be done … and I think it is much more beneficial for us all to be thinking, acting and preparing for the case that it will happen … and we will review progress accordingly”.
So, considering a scenario now of not if but when; what impacts and opportunities do you potentially see for your business or organisation and more importantly where and when does that now sit your own business strategy, risk and technology roadmap?
Let's talk. artipi.com.au
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