FINANCE & BANKING

Getting Paid in Seven Seconds: A New Payments Platform Intrigues CFOs

Australia’s New Payments Platform (NPP) went live in February this year, enabling participating banks to send, clear and settle payments within the country in seven to 10 seconds. That capability has CFOs and businesses intrigued, although the transactions the platform is handling at the moment are only person-to-person payments.

“It can grow to P2B [person-to-business], B2B [business-to-business], G2P [government-to-person] and other various opportunities and use cases,” says Philippe Dirckx, Managing Director Asia Pacific at the banking cooperative SWIFT, which built NPP’s core infrastructure.

Creating a platform that is able to have an end-to-end process of a payment from the moment you send it to the moment it is received and acknowledged by the recipient in seven to ten seconds . . . It’s a very different ball game

Dirckx spoke to CFO Innovation’s Cesar Bacani about real-time payments in Australia and how other jurisdictions are looking to replicate its philosophy, SWIFT’s new gpi service, cybersecurity safeguards and other issues. Edited excerpts:

I know SWIFT as the provider of technology and infrastructure that allows member banks and corporates to send cross-border payment and other messages to each other in a secure way. The New Payments Platform (NPP) that SWIFT built for Australia seems like a very different product.

It's different without being different. It is similar in a sense that we have built an infrastructure that connects and delivers messages, so we have interfaces and messaging channels. What is different is that this is an infrastructure which is domestic, real-time and distributed.

Basically, participant institutions [in Australia] clear the transactions bilaterally before sending the settlement instructions down to the settlement engine. On top of that, we have incorporated an addressing database into the infrastructure.

The infrastructure has been built based on our core competencies, and based on what we've been doing over the past 40 years. But we have adapted our interfaces and messaging channels to cater for the requirements of the Australian community.

And this is a real-time payments system, right? Seven seconds . . .

We're working in real-time, and in that aspect, it is new to us. Creating a platform that is able to have an end-to-end process of a payment from the moment you send it to the moment it is received and acknowledged by the recipient in seven to ten seconds . . . It’s a very different ball game.

[The message] has to go to the addressing database for alias lookup, it has to go back from the addressing database, it needs to go to the receiving bank for clearing – i.e., verifying that the name linked to the alias [in the instruction] has indeed an account, that the account exists and that it can accept that amount of money – and then go back to the initiating bank saying okay all good, you can send the money.

And then when the instruction is sent, send it to the Fast Settlement System, which is run by the central bank, settle line-by-line in real time, send it back to the initiating bank and the receiving bank, and then confirm to the sending person that his/her payment has been sent and received by the beneficiary . . . That, overall, takes between seven to ten seconds.

I can see how a payments platform like the NPP will make life so much easier for CFOs and treasurers, because the payments they make to and receive from customers, suppliers and so on can be processed so much faster.

The early use case [in Australia] has been for P2P [person-to-person payments], but it can grow to P2B [person-to-business], B2B [business-to-business], G2P [government-to-person] and other various opportunities and use cases.

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