Banks slow to act on fast payments service: RBA’s Michele Bullock

The Reserve Bank has scolded the major banks for failing to connect some of their customers to fast payment services.

RBA assistant governor Michele Bullock. Picture: Nick Cubbin

The Reserve Bank has scolded the major banks for failing to connect some of their customers to fast payment services, in particular the new payments platform that went live in February last year.

In a speech to the ASIC annual forum in Sydney yesterday, assistant governor Michele Bullock said the positive network effects of the NPP had been held back because of the slow connection rate.

“With some big banks slow to complete NPP related changes to their internal systems, there remain large numbers of customers that do not have a full range of convenient options for initiating fast payments even if their accounts can be reached by incoming fast payments,” Ms Bullock said.

“There is also more work to be done on increasing the number of accounts that are reachable using the NPP.

“These gaps have made it very difficult for NPP participants to market the new service to their customers, so the value of the NPP to users is much lower than it could be if payment initiation and account reach were more progressed.”

While still small relative to the volumes that pass through other retail payment systems, the NPP is growing steadily and at least as quickly as comparable systems overseas.

In April, 16 million transactions worth $13 billion were processed through the NPP.

Ms Bullock highlighted the broad participation of many small financial institutions.

Customers of about 50 small banks, credit unions and building societies were able to make and receive fast payments since the first day, with the number since growing to nearly 70.

The NPP infrastructure enables instant payments to be made and received 24/7, with richer information and simpler addressing.

The project took about four years to complete from the industry’s initial commitment to proceed.

While Australia was not the first country to build a fast payments service, Ms Bullock highlighted the NPP’s ability to support competitive “overlay” services which give the system the flexibility to meet the future needs of users.

The major banks, she said, had all taken different approaches to the functionality they provided and the staged introduction of customers to the network.

“This is their prerogative — we know they have a lot on their plates and have large, complex information technology systems,” Ms Bullock said.

However, she warned the financial services industry that the regulator and the public in general expected the payments industry to deliver on the promise of the NPP.

In the light of concerns raised by various interest groups, the Reserve Bank and the competition watchdog had combined to undertake a public consultation on NPP access and functionality.

The conclusions and recommendations from the consultation would be released “in the coming weeks”.

Ms Bullock said the development of the NPP and recent work on addressing fraud in card payment systems were good examples of participants that were normally competitors working together to deliver better outcomes for consumers and merchants.

But the collaborative efforts were not without their challenges.