Five years ago, Australia’s New Payments Platform (NPP) went live with the launch of PayID (an addressing capability) and Osko (the first NPP overlay service, operated by BPAY), eftpos market share was taking a hit as more cardholders tapped which meant routing multi-network debit transactions to the international card schemes, only one acquirer offered least-cost routing (LCR) on card-present transactions, eftpos digital payments did not exist, no one used QR codes for payments, and we had no nationally adopted digital ID platform.
Three years ago, Australia still had three separate bank-owned domestic payment schemes (eftpos for debit card payments, BPAY for bill payment, and NPP for real-time account-to-account payments), all acquirers could support LCR on card present transactions, but more people were tapping mobile devices using digital wallets which did not support LCR, and COVID got all of us very familiar with using QR codes.
Then in September 2021, the ACCC authorised the amalgamation of BPAY Group, eftpos and NPP Australia to form Australian Payments Plus (AP+) under a single AP+ Board, which came together in February 2022. The objectives of the merger (supported by every shareholder of each organisation) were to enable the three payment schemes to coordinate investment, avoid inefficient duplicated spending, and increase the likelihood of the major banks and other shareholders investing in domestic payment services, to improve the competitive positioning of the combined entity relative to international schemes, for the benefit of consumers and businesses.
With wider scale roll-out of LCR on eftpos online, ConnectID, eQR, and PayTo, the combined entity is certainly stronger today and well positioned to take advantage of future changes to the Australian payments landscape.
In this article, Mangala Martinus, Managing Director at Payments Consulting Network and Adrian Lovney, Chief Payments & Schemes Officer of Australian Payments Plus, discuss AP+’s journey, strategic initiatives, achievements, its role in shaping the future of real-time payments and digital ID, the end of cheques and the Bulk Electronic Clearing System (BECS), and AP+’s extensive corporate social responsibility initiatives.
MM: It’s been 2 years since eftpos, New Payments Platform Australia and BPAY Group amalgamated into AP+. The vision was to create a more innovative and efficient entity that’s better able to compete against international card schemes and Big Tech. While it’s early days, how has AP+ been progressing towards achieving that vision?
AL: We are progressing well, but with much more to do to realise that promise.
We have structured the organisation to engage with the market efficiently, through a single commercial team that engages with our members and the market. We created a single Payments and Schemes team 12 months ago to bring together payments and schemes and leverage capabilities like business delivery, payment operations, scheme management and fraud prevention across all schemes.
Importantly, we have delivered all specific deliverables on our product roadmap that the applicants made in their undertaking to the ACCC.
Some other quick developments include:
- We have scaled eftpos online, live with 25 Gateways and Acquirers, and 36.4m CNP transactions in July 2023
- We have scaled PayTo, with 60 financial institutions live and 50m accounts enabled.
- Plans to enable eftpos mobile LCR are well on track, with Apple Pay back book migration and projects to enable Google support for dual network debit card underway.
- Increased PayID usage to reduce scams, with over 18m total registrations, around 30% growth in one year and nearly one in four NPP payments now addressed to a PayID.
We have kicked off work on a project to consolidate and harmonise all existing scheme rules within AP+, aiming to bring together all scheme rules and governance within a single set of harmonised rules. – Adrian Lovney, Chief Payments & Schemes Officer, Australian Payments Plus
MM: 5 years ago, eftpos faced many headwinds resulting in declining transactions – increasing contactless and mobile payments driving debit transactions to the international card schemes, low enablement of least-cost routing (LCR) by acquirers, even lower enablement of LCR by merchants, linked debit/credit strategic merchant rate agreements by competing card schemes inhibiting competition and the lack of an online eftpos option.
How has the landscape shifted and will the pending regulatory changes level the competitive playing field to allow eftpos to win back market share?
AL: We’ve seen a growth rate of 10% year-over-year for past 3 years. LCR volumes have steadily increased and now account for over 50% of eftpos volume. CNP volumes growing monthly with eftpos now having more than one-third market share of CNP transactions. Our plans to enable eftpos mobile LCR are well on track for delivery by end 2024 which will provide further growth in eftpos volumes.
MM: What are AP+’s key strategic initiatives for the next 2 years?
AL: We have elevated our focus on fraud and scams in our strategy, seeking to leverage existing fraud protection capabilities across all our rails, while ensuring that our networks remain resilient and secure.
As a key plank of this strategy, Australian Payments Plus (AP+) has resolved to work with NPP Participants to deliver a Confirmation of Payee service for payments made using BSB and Account numbers. Confirmation of Payee will help reduce certain types of scams that involve misdirection of payment to an account that does not belong to the intended payee as well as avoid mistaken payments to incorrect account numbers.
We expect that a phased delivery approach could see existing Confirmation of Payee capability that exists today extended further during 2024, with a broad solution expected to be in place from early 2025.
Other key strategic initiatives include the following:
- Supporting the migration of volumes from BECS through a structured program of work to mobilise the industry.
- Enhancing eftpos products with a focus on further roll out of CNP processing and enablement of mobile LCR.
- Extending AP+ tokenisation capability to support enhanced propositions for merchants and support processing of eftpos transactions on dual network debit cards.
- Strengthening BPAY by enhancing the customer product proposition and determining the future technology foundations.
- Developing target state governance model for AP+ schemes and a single set of AP+ scheme rules.
- Launching ConnectID, our digital identity solution which reduces oversharing of data, giving customers greater control over what data is being shared and used and choice over which organisations they trust to store their personal information.
- Publication of an integrated AP+ product roadmap.
MM: Any significant industry wide change takes time to plan, obtain industry support, implement and achieve consumer/merchant adoption at scale. Looking longer term, what are AP+’s key 3–5-year strategic initiatives already underway?
AL: Many of the initiatives above are longer term initiatives – other long-term areas of focus involve simplifying our infrastructure and connectivity, as well as moving to the Advanced Encryption Standard as part of industry-wide changes.
MM: AP+ announced a strategic partnership with Coles on a new customer wallet for customers leveraging Beem technology. What are the timing and plans for a larger scale rollout of Beem to support a much wider range of merchants, including at an SME level?
AL: We see wallets as a pivotal way for merchants and banks to engage with their customers at the point of sale. We really see the future of the wallet space being driven by initiation at the point of sale, which is through QR currently, so working with merchants on how they can enable both pieces together for those richer experiences is key to getting large scale rollout. It’s great to be able to work off the foundations of Beem that we’ve built to enable that, and we’re working with several other merchants already on how they can utilise our wallet as a service technology, so the opportunity is already here.
In terms of leveraging Beem itself, the app continues to grow through the strong networks of users it has. It’s a great asset to test new experiences for other customers such as Subway, and for merchants of different sizes to see how they can create new experiences for their customers without needing to make a big upfront commitment.
MM: AP+ recently announced its partnership with Beyond Blue to improve mental health. Will doing more to support the broader community in the form of Corporate Social Responsibility initiatives be part of AP+’s remit going forward and what other initiatives are on the horizon?
AL: To make sure we are delivering on our purpose, our aspirational North Star, which we proudly defined in 2022, AP+ has created a “Positive Impact” stream.
Positive Impact (PI) is AP+’s approach to corporate social responsibility, or sustainability, in five core dimensions: governance, our customers, our people, our communities, and the planet.
We believe a formal approach is vital to keeping impact and purpose at the heart of AP+’s mission. This approach includes a defined roadmap, dedicated governance (an executive sponsor and a full-time resource dedicated to operational management), and accountability metrics.
Our Positive Impact Roadmap, endorsed by the Executive Leadership Team in the last quarter, lays out initiatives we want to tackle in all five dimensions, in the short, medium and long terms. This includes doing more for the broader community, beyond this amazing partnership with Beyond Blue.
Over the coming year, we plan to tackle 28 core initiatives. Some will be led by dedicated working groups composed of AP+ volunteers from across the business.
Our affinity groups – Pride, Empowher, and Reconciliation – will also continue their amazing efforts in raising awareness and advocating for diversity, equity and inclusion and representation of disadvantaged communities in the organisation. All throughout the year, the groups will organise events, talks, panels with external speakers, training and education initiatives and bring our people together to celebrate diversity and inclusion. Meanwhile, our Reconciliation group is rolling out a Reconciliation Action Plan with 13 dimensions focused on advancing and embedding reconciliation in our business.
Examples of our Project Impact roadmap initiatives:
- Leading a stakeholder mapping exercise to identify our stakeholders and how we deliver value to them;
- Implementing an ecosystem impact measurement framework, which will quantify the value we bring to the ecosystem, first and foremost to our members;
- Embedding responsible procurement principles in our procurement policies and practices (e.g. giving preference wherever possible to Indigenous-led businesses);
- Establishing an approach to sponsorships and donations aligned to our business priorities;
- Providing opportunities for our employees to use their 5 paid days of volunteering in the community;
- Establishing a Diversity, Equity & Inclusion strategy;
- Identifying under-served populations of our industry, a step towards understanding how we can better reach them with our core products and services;
- Measuring our carbon emissions;
- Implementing a plan to reduce waste in our operations and supply chain; and
- Exploring sustainability features in our products and services.
MM: With Treasury foreshadowing a deadline for the end of cheques and BECS, and AusPayNet also progressing towards that outcome – what do you see as some of the challenges and opportunities for NPPA and the industry to provide an economically viable solution to address the need for a bulk payments solution where the end-user requirements are basic functionality delivered at a very low cost?
AL: The NPP can enable payments across all end user segments, and for use cases where BECS is mainly used today. Different use cases will require different capability, and the NPP can add significant value real-time and data rich capability to many use cases, including those where bulk payments are made today. This is the case in many high-volume bulk payment use cases such as Superannuation, Tax, Payroll where having standardised and structured data can deliver significant benefits. AP+ sees NPP as a low-cost payment method, and this is reflected in the recent FY25 pricing model development.
The migration of volume to legacy payment systems to the NPP will require a whole of industry effort, with AP+ focus on ensuring that NPP is ready for that volume, and helping the wider ecosystem prepare effectively.
MM: What are the major use-case opportunities for ConnectID over the next few years?
AL: There’s a huge range of use cases for ConnectID. We see this as being applicable across the broader economy, including, retail, utilities, travel, social, FS, employment aid, and government.
The basic use case is for signing up to services, but it can expand into so much more. Not just who I am, but what I’m entitled to – e.g. you do need to know that the person buying these concert tickets is over 18, but you don’t need to know my date of birth or Drivers’ License number; or that the tradie arrived on your doorstep is really a licensed electrician, but not their name or where they live.
MM: The staggered rollout of the NPP and PayID by major banks led to slow consumer adoption and there is a risk of more of the same with PayTo. What is AP+ doing to help with faster adoption both by merchants and consumers of PayTo?
AL: A key focus in rolling out the PayTo service has been getting the right network effect in place. We’ve done this by making it a mandatory requirement for NPP participating organisations to enable their payer customers to authorise and manage PayTo agreements in their banking channels. We couldn’t necessarily expect everyone to be there at the same time but we were focused on having a critical mass of payer customer accounts enabled within a certain timeframe so payment initiators could start using the service.
We now have more than 60 organisations which have enabled PayTo for their payer customers, meaning that over 50m retail banking transaction accounts are reachable via the service. We have also worked closely with organisations wanting to use PayTo to initiate payments from customer’s accounts and supporting them in implementing the service. This work has included developing prototypes for the end-to-end customer experience under different use cases to bring the service to life.
We are also running a customer education campaign out in market to help introduce customers to the service and help educate them in how it works. We are already seeing several use cases live in market, for example in app marketplace purchases and for the payment of tuition fees, and we expect these use cases to continue to grow over the coming months.
MM: What role, if any, will AP+ play in supporting real-time cross border payments in the future?
AL: Globally there is growing interest in how cross-border payments can be supported by interlinking various real-time payment systems. The first step for AP+ is delivery of the NPP International Payments business service which will support an inbound cross-border payment being sent via the NPP for the final leg of the payment. This service went live for NPP Participants at the end of 2023, and by indirectly participating organisations by the end of April 2024.
We have been working with representatives across industry to think through what interlinking the NPP to other real-time payment systems will entail and how we are likely to see this evolve over time. The RBA is about to release the results of a study on this topic which will further guide our thinking.
MM: What other key industry changes do you see pending that AP+ may need to respond to in the future?
AL: In addition to the industry initiatives mentioned above around transitioning from legacy payment systems such as cheques and BECS, there are significant other regulatory developments in train currently. The introduction of a new payments service provider licensing framework will support the ability of non-banks to connect directly to the NPP or eftpos systems, if they wish to do so.
Author: Mangala Martinus, Managing Director, Payments Consulting Network
Mangala has over 30 years’ experience in the financial services and payments industries. He focuses on supporting clients with business strategy, payments optimisation, market expansion, and industry round tables. His clients include major financial institutions, retailers, e-commerce marketplaces, not-for-profits, ATM deployers, card schemes, and payment processors.
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