Innovation in business-to-business payments has lagged consumer payments, but the introduction of the New Payments Platform will prompt a wave of investment and innovation in the area, KPMG says.

In recent years much of the innovation in payments has focused on better ways of making consumer payments, such as Apple Pay or Google Pay, says Brett Watson, a partner in KPMG’s Management Consulting group with a focus on financial services.

This has been of limited use to businesses because of their need to reconcile payments. As a result, many sectors of the economy such as government, insurance and superannuation still use cheques, because the reconciliation information can be physically attached to the payment. Alternatively, they send an electronic payment with a separate paper or email remittance.

However, when the New Payments Platform (NPP) is introduced from next year it will adopt the ISO20022 standard, which will give payers the ability to embed a lot more data within the core payment message itself, as well as attaching documents. It will be a huge step up from the maximum of 18 characters that can currently be attached to a payment.

“The problem is the payments and the data move separately, so you still end up with challenges trying to bring that back together and to reconcile payments,” Watson says.

“The data benefits of the NPP are twofold. You can transfer a lot more data with a payment and that means that you’re going to be able to drive innovation and solve new problems that you haven’t been able to before.”

The NPP will give businesses the ability to get rid of cheques, just as most consumers already have, because it removes the need to send separate data by mail or email.

Watson says the launch of NPP’s ‘request for payment’ function could facilitate e-invoicing in Australia.

E-invoicing is the sending, receipt and storage of invoices in electronic format without the use of paper-based invoices as tax originals. E-procurement will also be possible, where the process can start with the purchase order, meaning everything can be matched end-to-end.
You don’t have to get them to sign up to use another solution, they’re already using the payment system via their bank

Huge savings from e-invoicing

The Digital Business Council, whose members include the Australian Taxation Office and the Department of Finance along with several accounting bodies and software companies, is working on a unified set of standards to facilitate e-invoicing.

A report commissioned by The ATO in 2015 found a unified approach to e-invoicing could save the economy as much as $10 billion per year, and up to $3 billion for government agencies alone.

Watson says the NPP will be ubiquitous because all of the major banks have signed up to it, which will drive faster adoption of NPP-based payment systems by businesses. “You don’t have to get them to sign up to use another solution, they’re already using the payment system via their bank,” he says.

He expects the NPP to be especially useful where payments involved several parties and large amounts of data moving around, such as in the health sector or in insurance.

While banks have so far been mostly consumer-focussed in their payments innovation, they have invested large amounts of money in the NPP and so could be looking to recoup that investment from business customers. “They really want to see that investment pay off by bringing value to their business customers. And it’s business and government customers that pay for payments,” Watson says.

“With existing payments capabilities highly commoditised and prices and margins continuing to fall, the banks will look to work with their business and government customers and partners to find new ways to add value using the NPP.”

The New Payments Platform will be available from early next year with the first overlay service with Osko by BPAY. Osko will allow people to pay and get paid instantly and include a meaningful message (up to 280-character description) with their payment. Additional capabilities, like ‘Requests for Payment’ and ‘Document Attachments’ will also be added to Osko over time.

(KPMG has provided consultancy services to the project to build the New Payments Platform, but Watson has had no personal involvement in these services.)
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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