With an A$1bn ($785m) price tag for the banks involved in the New Payments Platform (NPP), return on investment will inevitably be in focus. While the impact of the new initiative will be visible in the short term, the most important financial impacts on banks are likely to come in the long run – mainly for the most innovative players in the market.
Real-time payment systems are being rolled out around the world in an effort to bring the customer experience in line with other sectors such as e-commerce and retail. Australia is poised to get its own version.
Arnie Cho, a senior analyst at GlobalData, explains: “This is a major move for participants in the payments market in Australia. The new infrastructure will no doubt improve the efficiency of the country’s payments system, drive innovation in the payments market, and improve the user experience for consumers, businesses, and the public sector.”
In the short run NPP is likely to drive significant growth in online credit transfers, P2P payments, and reoccurring payments. It will also lead to a further decline in the use of cash and cheques. “The NPP will facilitate fast growth in mobile payments and create an environment for the gradual removal of payment cards. The latter process might take a decade or more, but such change seems inevitable. The future of payments in Australia, and across the globe, is likely to be mobile payments linked to current accounts” added Cho.
The NPP project represents a major upgrade and investment in the country’s payments infrastructure, but not all banks will benefit from the new system in the same way. The most innovative banks are likely to benefit most from NPP through launching new products and services to serve consumers and corporate clients more effectively.
However, in the short- to medium-term the project is likely to have a limited return on investment for most banks. Banks will likely only be able to charge commercial clients for new payment services, as consumers are used to free basic payment services. The incumbents may end up looking towards Australia’s innovative upstarts to identify how to make the most of NPP.
By Arnie Cho, Senior Consumer Payments Analyst