After some delay and the failure of an earlier project Australia's New Payments Platform (NPP) is on track to go live sometime in 2017, as much as a year after its original goal.
The slow pace is due in part to the complex work required of banks, said Carlo Palmers, market infrastructures solution manager at SWIFT, which is building NPP along with Fiserv. "Many of these projects do take time," he said. "The main challenge is the technology."
The original deadline for NPP in Australia was the end of 2016, but some extra time was allotted for the migration. SWIFT hopes to have the details on the network finished by July, then it will begin building and implementing the system. The build will take up to nine months, and SWIFT also expects adjustments as the project unfolds.
About a dozen banks have signed up to use NPP, which will include a domestic messaging channel, a switch to settle and clear transactions and a service that allows mobile phone numbers or email addresses to be used to route payments. All of the country's banks are expected to participate either via a direct connection or through another bank.
"I'm not sure many thought 2016 was a viable option, most have said the second half of 2017 will be tough as it is," said Gareth Lodge, a senior analyst at Celent. "If every bank has to be connected, whether directly or indirectly, then every bank needs to be ready, technology-wise. Some banks are, CBA [Commonwealth Bank of Australia] for example, while others aren't."
And NPP is Australia's second bite at the apple. An earlier real-time payments initiative in Australia, called MAMBO, failed about five years ago because of concerns over escalating technology costs and IT project scope creep. The price estimate on MAMBO was about $500 million.
NPP is expected to cost as much as $1 billion. The guts of NPP's network will be a centralized hub that will replace the bi-lateral links between banks. This hub is supposed to make the network easier to repair and upgrade in the future.
SWIFT will use its existing telecommunication links and will install routers for transaction data. NPP is also using ISO 20022, the messaging standard behind a faster payment initiative in Singapore, to allow more transaction data to be included in real-time messages and serve as a potential model for other countries considering the structure of faster payment projects, such as the United States.
The stakes are high for SWIFT, which can pivot off of a successful Australian project to expand its model to other countries. But the project won't succeed if the banks aren't ready.
Banks have to switch from batch processing, in which a large number of transactions are collected and settled at scheduled times, to a system in which transactions are settled individually and rapidly. This newer method is better suited to accommodate advanced e-commerce transactions, medical insurance claims, payroll corrections or supply chain payments.
This requires substantial IT work, Palmers said, because changing when and how payments are settled affects almost all other banking systems in some way.
"It impacts banking systems to their very core [processing] systems, their ledger, their bookkeeping," Palmers said. "Everything has to be brought up to 24/7 operations and for every single transaction."
Australia's pace is not unusualthe slow march to faster payments has caused some to give up hope. The U.K.'s system took about a decade to finish, and the U.S. is still deciding what form its initiative will take and what role, if any, the government will play.
What makes NPP different from MAMBO is the wider participation and the fast maturation of mobile commerce, said David Brown, a senior vice president of global payments for Fundtech, a bank technology company that works with a number of financial institutions in Australia.
As opposed to the dozen institutions signed up for NPP, including foreign banks with operations in Australia, Brown said MAMBO was driven largely by just four major banks. Fundtech is not directly involved in NPP but would likely perform IT work during the migration.
"The main driver that most people are talking about now is the need for speed for mobile NFC and other new payments types," Brown said. "The second thing is the added information."