Financial upheaval from new payment platform to test government

The research found that only 22 per cent of organisations surveyed had heard something about the NPP, and only 5 per cent had any real idea of what it was about.

This means that a wide range of public sector entities will have a protracted task in familiarisation with the system, both for their own executives and staff and with the range of private sector businesses and other bodies they routinely deal with.

One crucial need will be an enhanced effort to deal with electronic payments fraud, already a serious issue for Australian banks with massive leakages of Australian financial resources to overseas-based criminal organisations.

Faster clearing

Once it is fully in operation, the NPP will offer much faster clearing and finalisation of transactions, with funds clear for disposal by recipients in as little as a couple of hours, even between different back-end systems from different participants.

At the moment you can have some very quick transactions when you are dealing with a financial business that has individual arrangements for fast clearing, but a lot of payments can still take times from overnight or 24 hours to two or three days to be finalised.

Once the final layout of the NPP is determined and has come into full operation, over a period, you are more likely to be looking at a maximum of a couple of hours across the whole range of transactions before the funds transfer cannot be reversed.

This means fraud prevention systems and personnel will have a much more stringent task, without the window of reflection currently available.

"Financial institutions planning to make use of the new infrastructure will need to consider a number of key requirement," asserts a position paper put out by HCL.

Compatibility needed

"For example, messages used by each institution during payment transactions will have to be compatible with the NPP's central message format.

"This includes all messages between the gateway, clearing house and bank. Having the ability to trace messages and payment for transactions through various platforms and interfaces will be critical, as will the ability to provide a single, comprehensive view of payments.

"Access to alternative gateways will need to be offered and, given the real-time nature of clearing and settlement, the reversals and reconciliation process will need to be drastically streamlined," the paper said.

"Liquidity management and settlement will need to be constantly monitored to ensure parties have a clear understanding of their position at any point in time."

Another pressing issue arising from the imminence of the NPP will be that of privacy and the exact availability of financial information to various parties.

Many of the individual statements from participants emphasise the fact that the transactions data being handled on the new basic platform, being prepared by international payments organisation SWIFT, will be "data rich".

That means they will be a treasure trove for public sector agencies interested in data and metadata in areas such as funds laundering, proceeds of criminality, drug trade cash management, terror group funding, overseas tax minimisation and quite a lot of other areas.

Commenting on the NPP prospects Jason Hulme, general manager of Financial Services at Roy Morgan said: "Financial institutions and their customers will experience unprecedented levels of change over the next few years as new payment methods continue to emerge.

"Customers will continue to raise their expectations in terms of speed, convenience and security."