What will real-time payments look like in Australia in 2023?
According to research, 67% of Australians are expected to use new real-time payment solutions by 2023. The question is, what type of solutions?
A study by Visa into real-time payments in Australia has found that 78% of Australians thought it was important for a trusted payments brand to provide a service to facilitate fast payments. This was higher than those who thought it was important that the bank they use would provide the service (72%).
The news comes as all Big Four banks are now offering near-instant payments to most of their customers over the New Payments Platform (NPP), with the news that Westpac switched on the NPP for 3.6 million accounts. As reported by the Sydney Morning Herald, Westpac had only been offering faster payments to customers in smaller states but is now contributing a third of all payments processed on the NPP.
Visa's research – Visa Insights: Australia's Fast Future – which is based on research conducted by Telsyte, found that in 2018, 12% of people were using real-time payment solutions. This is expected to increase to 28% in 2019 and continue to increase to 67% by 2023. Real-time payment solutions include person-to-person payments, funds disbursements and merchant settlements and will equate to 3.1 billion transactions per year by 2023.
However, what these real-time payment solutions will look like when two-thirds of Australians are using them in 2023 remains to be seen.
The NPP provides a new payments infrastructure that allows for instant payments, among other payment innovations, for Australia's individuals and organisations. The platform launched in February 2018, and while it launched with a number of financial institutions from day one, many institutions delayed offering it to their customers.
Currently, financial institutions that offer instant payments through BPAY's Osko, an overlay service of the NPP, do not do so in the same way. For example, to make real-time payments using CommBank, customers have to register for a PayID. NAB confirmed to the Sydney Morning Herald that customers can use their PayID or their BSB and account number to make fast payments.
BPAY's Osko service allows financial institutions that offer the service to make their own decisions about whether to allow real-time payments using BSB and account numbers or requiring customers to registers for a PayID and also how much to allow per transfer. This has resulted in each bank offering varying solutions for real-time payments.
There are also other real-time payment solutions that have been developed. Beem It, for example, is a joint effort between CommBank, NAB and Westpac and allows users to make instant transfers to anyone else with the app as long as they have a debit card. It doesn't use the NPP to make these transfers but still makes them in real-time by using the Visa, Mastercard and EFTPOS rails.
Other neobanks, including Up and Xinja, have also announced innovative payment offerings. Up's payment app is a conversational payment interface similar to WhatsApp to help you track payments to your friends while Xinja allows you to split costs and bills with friends or request payments through Xinja me.
The NPP has also set up a fintech sandbox to allow fintechs to test the capabilities of the payments infrastructure and build payment solutions that can benefit Australians.
Visa head of product for Australia, New Zealand and South Pacific said real-time payment solutions will enable a new wave of experiences for Australians.
"As Australians, our lifestyles are changing. Many of us have family and friends living abroad, the way we work is evolving, and naturally our expectations are shifting too. We want secure, convenient and fast ways to pay and be paid, wherever we are," he said.
"Real-time payments solutions will enable a new wave of experiences. And it's important for businesses to take note, as these solutions will be increasingly critical to building and retaining loyalty from customers and employees."
There is a real opportunity for both financial institutions and fintechs to develop solutions for Australians. According to Visa's study, 42% of Australians haven't been paid back by friends or family after lending them money and 44% say they found it too awkward to follow up with friends after lending them money. However, almost half (48%) said they would pay their friends or family back immediately if they could do so via a messaging platform or app.
The research also shows Australians care about how they pay: 85% say that want to know that the service is secure and their data is being protected but that this shouldn't come at the cost of user experience while 81% say the service should be easy and intuitive to use.