Banks to be fined for limiting access to fast payments
By James Eyers for The Financial Review
The board of NPP Australia agreed in June it would levy "non-compliance charges" on banks after the Reserve Bank criticised banks for not providing access to the platform quickly enough, which it described as "disappointing". The major banks spent more than $1 billion to build the system under pressure from the RBA which wants payments opened up to more providers. The RBA sees the infrastructure as a defensive mechanism to crypto-systems like the one being proposed by Facebook.
NPP launched with peer-to-peer payments but the real value to the economy will come from companies sending data alongside a payment. For example, at the same time it pays staff a company could report to the Australian Taxation Office or pay super contributions. NPP Australia will publish a road map in October on its requirements for functionality and target implementation dates.
"That is where the benefits come for businesses," said Adrian Lovney, CEO of NPP Australia, which manages the "new payments platform".
NPP Australia will "designate requirements as mandatory and enforce compliance over time, according to the impact of non-compliance and the period of time," he said.
The charges range from $50,000 for small banks, to $0.5 million for large banks and these can be escalated and compound until access is provided.
The NPP's response comes after the Reserve Bank criticised a slower-than-expected rollout by banks which it said "appears to reflect the complexity of their systems and underestimation of the degree of investment needed to meet delivery time frames".
Over the six weeks since the RBA report was published, there has been a 20 per cent increase in average weekly volume to more than 5 million transactions a week.
Westpac’s regional brands, including St George and Suncorp are now live on the system after delays, while neobank's Up and 86400 are also on board. There are 80 companies connecting indirectly to the system with the number of fintechs continuing to grow.
ANZ, National Australia Bank and more recently Westpac have made the system available to business customers with Commonwealth Bank expected to do so soon.
The RBA warned in June that even where NPP services have been enabled, "some major banks still have significant functionality gaps in terms of the ways that payments can be initiated or the limits that are placed on payment amounts".
NPP Australia is also preparing to publish information to make it easier to assess pricing for using the infrastructure. It will report an "implied transaction price" by banks to the NPP, in an attempt to create more transparency around retail pricing, amid some concerns among fintechs that banks are seeking to profit excessively from providing access to the system.
The wholesale price transparency will "create a reasonable benchmark so people have a yardstick for prices being charged, to spur competition," Mr Lovney said.
NPPA has also changed its constitution to allow for a third independent director, and will review the criteria for new participants, which it plans to publish in a few months.