The industry-wide New Payments Platform (NPP) has been designed to meet the evolving expectations of consumers in the digital age, by allowing for 24/7 real-time payments across the financial system.
Announced in July 2013 by the Real Time Payments Committee, and set up through the Australian Payments Clearing Association (now the Australian Payments Network), the initiative was conceived in response to a review by the Reserve Bank of Australia, which concluded that Australia’s system of payments was lagging even less developed nations.
When the NPP is introduced, fast, flexible and data-rich payments can be made quickly between financial institutions and their clients’ accounts, enabling funds to be accessible almost as soon as the payment is sent – even when the payer and payee have accounts at different financial institutions.
Efficiency and product innovation
For asset managers, the NPP will mean access to greater efficiency, risk reduction and huge potential for innovation.
Where currently most investor payments are processed at the end of each business day, real time payments will mean the investor’s money can be placed in market immediately, reducing the potential drag on performance.
NPP’s features mean it could replace more traditional payment methods such as cheques and direct debits, both of which require a clearance process of three business days.
This instant processing would be particularly useful during busy periods, such as end of year distributions.
In addition, the simpler reconciliation process allowed by better metadata, together with the improved management of cashflow, could reduce the potential for risks and errors when handling investor monies.
Over and above these changes, the NPP’s services capability promises transformational change for managed funds registry.
The choice of a highly flexible messaging format will initially allow access to additional functionality such as document delivery and payment requests, and pave the way for a large range of additional products and services.
Some examples include digital invoicing and the provision of investor information and ‘know your client’ documents with the initial application.
Seamless customer experience
From an investor perspective, communicating with banks and asset managers is about to get a whole lot easier.
Rich data fields with the ability to carry up to 280 characters for payment descriptions will allow customers to add detailed notes to their payment, creating a more seamless experience.
The NPP is also expected to reduce errors and administration time when communicating and recording investor bank details.
Smart bank account addressing using synonyms such as a mobile phone number will allow for instantaneous validation, further improving the customer experience.
Leading edge functionality
Looking to overseas markets can give us an indication of the potential take-up of NPP.
In the UK, the faster payments system is widely used, processing 135.7 million payments in June 2017, up 15 per cent on the previous year; while in Singapore, the nation’s Fast and Secure Transfers (FAST) system has been used since 2014, with 20 banks currently participating and more expected to join.
Australia’s NPP is hoped to surpass many real-time systems around the world because of the potential for future ‘overlay’ features, which will support tailored services such as requests for redemptions.
Overall, the introduction of the NPP in Australia will allow asset managers to respond to changing customer expectations.
The key to successful delivery will be to partner with companies that have the capability to deliver innovative digital services to support your business to make the transition.
Simon Wunder is the general manager of business development and strategy at Link Fund Solutions. Guy Feibish is the senior product manager within JP Morgan’s custody and fund services division.
