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Payments Regulation in Asia
APM Case Study: PayTo and NPP
THE USE OF NPP
Aside from least cost routing, the RBA has quoted the National Payments Platform (NPP) under its current strategic priorities “to promote competitive, cost-effective and accessible electronic payments”. 74 NPP is Australia’s real-time, open-source payments system developed in response to a 2012 Reserve Bank of Australia (RBA) Inquiry by the Payments Systems Board. NPP IS COMPOSED OF 3 KEY PILLARS: • The NPP platform, a distributed switch of individual ‘Payment Access Gateways’ that route and exchange financial messages between each other. • The Fast Settlement Service, a solution provided by the RBA which enables every payment made on the platform to be settled in real-time in central bank funds between each financial institution’s exchange settlement account. • Business services, which are designed to meet different payment needs of users. This includes solutions like PayTo, covered below. In 2022, the wholesale cost of NPP was estimated to be around $0.061 per transaction. 75 However, this is the price for the participating financial institution, rather than the price for retailers accepting NPP transactions. As the retail price will vary depending on the merchant’s commercial arrangement with their processor, there are no public reports or data on average NPP costs of acceptance. That being said, NPPA indicates that NPP is designed to be a cost-effective and innovative solution for retailers to lower costs of acceptance. The RBA has emphasized the need for the payment service to be provided at the lowest resource cost to the system, with businesses leveraging the NPP benefiting from the true cost of service acceptance. The NPP cost is also expected to shrink as the volume grows. 76 This year, around 30% of account-to-account transfers have been migrated to NPP. A significant step of the NPP has been the introduction of the consumer-friendly addressing system, PayID, which allows A2A bank transfers to be addressed using mobile numbers, email address, or Australian Business Number (ABN). Consumer uptake of PayID has been slower than expected, with the highest share being consumers under the age of 50.
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https://www.rba.gov.au/speeches/2023/sp-gov-2023-12-12.html
75 https://fst.net.au/financial-services-news/rba-holds-out-on-mandating-npp-for-all-bank-accounts-for-now/#:~: - text=For%20financial%20year%202022%2C%20NPP,is%20around%20%240.061%20per%20transaction. 76 https://www.rba.gov.au/speeches/2023/sp-gov-2023-12-12.html
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