It’s going to be a massive year for the Payments & Schemes team within AP+ with support for migration of payments from BECS to the NPP, developing NPP Confirmation of Payee, BPAY Next Generation and eftpos Mobile Least Cost Routing just some of our key projects. 

The continued migration of payments from BECS to the NPP is one of most significant areas of focus.    

The BECS system was designed in another era and while relatively low-cost and reliable, it only processes payments in batches on business days, with limited ability to carry data. The NPP will support efficiency and innovation in business processes around payments, including better fraud and audit controls, rich data, and automated straight-through processing and reconciliation, 24/7.     

More than one third of account-to-account payments are processed today using the NPP so the migration from BECS to NPP has been occurring for some time. 

But there is still work to do to support ongoing migration, at the NPP infrastructure layer, with NPP Participants, and with the ecosystem of payment users.    

A target date of 2030 for the decommissioning of the legacy BECS framework will drive focus on this remaining work – just as when a date was set for the end of Australian analogue TV, in December 2013. 

Core areas of focus will include: 

Enabling sufficient capacity to process BECS payment volumes through the NPP:  In December 2023 we completed further uplift of capacity and the NPP can now support 50% of the current BECS volume while also allowing for future NPP growth from other payment types. We will continue to implement additional capacity uplifts well ahead of the scheduled BECS retirement date.  

Connecting relevant accounts that currently send and receive payments via BECS to the NPP: The NPP reaches 90% of all BECS-reachable accounts, with NPP Participants indicating firm plans to connect nearly all the remaining BECS reachable accounts well before the retirement of BECS (current plans have this at more than 97%). 

The cost of NPP transactions: The costs of operating the NPP are largely fixed.   As volumes on the NPP platform have grown, the wholesale (scheme level) NPP transaction cost has declined from around 39 cents in FY19 to an expected 4 cents in FY25.  As volumes continue to grow this cost is expected to fall further.  AP+ pricing for NPP services is published on our website. 

End user pricing for NPP services is determined by individual financial institutions and payment service providers, with more competition in this space expected to drive further reductions in the cost of transactions to end-users. The RBA have indicated that they plan to undertake a review of end-user costs of account-to-account payments through BECS and the NPP to provide greater transparency. 

Increasing the reliability of NPP services provided by financial institutions: The NPP was intentionally designed to be highly available, resilient infrastructure with distributed architecture and multiple production and back up sites. There has been no failure of central NPP infrastructure since the NPP went live in 2018.  However, from time to time, individual organisations connected to the NPP do experience planned and unplanned outages to their services (including the Fast Settlement Service operated by the RBA). Any outages are relatively short and NPP payments typically resume processing within relatively short timeframes. Issues impacting one financial institution do not impact on movement of funds between other banks and payments can continue to be processed as normal.   

NPP Participants must meet availability targets of no more than 2 minutes outage per month.   Consequences for failure to meet availability targets include non-compliance charges. AP+ continues to monitor the compliance of members to these requirements. Throughout 2023, nine NPP Participants faced more than 20 non-compliance charges for breaching NPP availability targets, with fines for the same Participant doubling on each subsequent occasion of non-compliance.   AP+ will continue to work with NPP Participants to drive improvements in resilience; and we expect the RBA will also focus on this through reporting of payment system uptime.   

Supporting the processing of all types of transactions over the NPP – in particular, payment files submitted in bulk: AusPayNet’s research indicates that there are 23 different types of BECS payment transactions. Existing NPP functionality can currently facilitate each of these except one, related to the settlement of BPAY transactions, which is an AP+ product and will be resolved in advance of the retirement date. 

The NPP was designed by industry to process single payments in real-time. Where payments are submitted in bulk files, individual financial institutions work with their corporate customers to support this by offering debulking/ file translation services (i.e. taking a file with a number of payments and ‘debulking’ them into individual NPP payments). AP+ will focus on associated operational processes such as bulk returns, and other opportunities to support processing of payments created in bulk files. 

Supporting end-user readiness:  A core focus for AP+, for NPP Participants and other payment service providers will be educating end-users on the benefits that can be unlocked and supporting their transition to this new system over time. We will continue to work closely with all market participants on supporting this transition as it ramps up in 2024 and beyond. 

Our other areas of focus for Payments & Schemes include:  

NPP Confirmation of Payee: since the announcement of an agreed industry design in late 2023, AP+ and NPP Participants conducted workshops in December 2023 to plan in detail the build and rollout of this capability in phases through 2024 and into 2025. 

BPAY Next Generation: we will focus in 2024 on work to support the evolution of one of Australia’s most loved and trusted payment brands. We will look to enhance the customer experience, seek to reduce or eliminate current pain points, and strengthen the product proposition by incorporating additional capabilities, to protect and grow BPAY for the next generation. 

eftpos Mobile Least Cost Routing: industry estimates suggest around half of transactions at point of sale occur using a mobile wallet. Accordingly, the RBA has set expectations that Least Cost Routing for mobile wallet transactions be supported by industry stakeholders by the end of 2024. AP+ is working with wallet providers to develop mobile LCR solutions and the first wallet is on track for issuer onboarding from early 2024 with a second wallet as a fast follower.     

eftpos Merchant Tokenisation: to ensure that increasing tokenisation of card numbers does not impact on merchants’ ability to route online transactions to the lowest cost scheme, the RBA expects AP+ to develop a solution to support core functionality of merchant tokenisation by March 2024, and to work with industry to integrate this solution by mid-2025. 

Payments Service Provider Licensing: the Australian Government continues to consult on the development of a modernised regulatory framework for payment service providers. The draft regulatory framework includes a new pathway for payment service providers (PSPs) to directly access payment systems such as those operated by AP+.   In 2024 we will continue to work with government as it finalises this package of reforms and ensures that our access frameworks are aligned with these developments. 

AP+ Scheme Harmonisation: we kicked off a project to harmonise aspects of the scheme rules that govern the NPP, eftpos and the BPAY payment schemes, to unlock the considerable value in ensuring our operational structures and rules are consistently, simply, and efficiently articulated and applied across each of the AP+ Schemes. This work will continue in 2024, with a goal of moving to a new set of harmonized rules from 2025. 

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