Wednesday, 27 February 2019

Get ready for a new era of banking

The New Payments Platform and Open Banking will unlock growth opportunities, drive efficiencies and enable businesses to harness their data.

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Customer Service and HSBCnet Technical Support

John Scott

Country Head of Global Liquidity and Cash Management, HSBC Australia

The launch of the New Payments Platform (NPP) and the impending implementation of Open Banking are set to revolutionise banking in Australia. They will enable individuals and businesses to move their money and data seamlessly. It’s a milestone that we expect will unlock opportunities for Australian corporates to grow their businesses.

The NPP is a payments infrastructure that enables individuals and organisations to make and receive real-time and data-rich payments 24 hours a day, every day of the week. A key attribute is that participants can use the NPP’s capabilities to develop innovative platforms and overlay services, so they can create better payment solutions for organisations and their customers. The platform became available in 2018 and is being rolled out to newer participants in 2019.

The NPP has already started transforming banking by allowing real-time payments through Osko and PayID, for example. Osko is a payment platform that runs on existing banking apps. PayID is a service that lets customers use a simple identifier, like an email address or mobile number, for their accounts.

Equally game-changing will be the phased implementation of Open Banking from July 2019. Open Banking is all about unlocking your financial data so you can use it to your advantage, allowing you greater visibility of this data and greater control of who you choose to share it with.

APIs provide easier means to integrate between two or more online applications. APIs are used widely across technology providers and represent a universal/bank-agnostic standard.

Open Banking gives you greater control over your company’s data. You can use it, for example, to compare financial products and access services that are tailored to your needs.

What makes the NPP and Open Banking particularly powerful is that they are being rolled out at nearly the same time. Their convergence is bound to create significant changes for banking customers, most importantly the seamless movement of money and data.

For our corporate and institutional clients, we believe the freedom to move their money and information will deliver a slew of opportunities to grow their businesses:

Seamless movement of money

With fast, 24/7 payments now a reality, you can move your money without inconvenience. Gone are the days when businesses had to deal with payment cut-off times, the limit of five banking days and tiny amounts of remittance information. Your ability to make fast and data rich payments means you can manage treasury functions more actively, optimise working capital and increase efficiency.

Active treasury management

With the NPP, you can manage treasury more actively and make increasingly strategic payment decisions. By being able to send and receive money 24/7, you can use your funds more effectively. For example, you can decide whether to make a just-in-time payment to improve customer experience, or wait until late at night to optimise working capital.

The ability to send or receive funds instantaneously and access them immediately can also help you better manage finances. With a more precise control over your finances, you can potentially cut back your working capital requirements, helping you achieve positive cashflow to support business growth.

Operational efficiency

Achieving greater efficiency in your operations is easy with the NPP. By linking your business management and accounting software to the platform, you can facilitate fast, end-to-end payment and reconciliation to cut processing times for cash allocation.

Enhanced customer experience

With the NPP, your customers and suppliers can enjoy real-time payment and get their orders faster. Because the platform has an open-access design, we expect future overlay services to further enhance customer experience.

Seamless movement of data

The advent of Open Banking can deliver even bigger advantages to Australian corporates. This will be the case particularly to those that handle substantial consumer data, such as fast-moving consumer goods, utilities and insurance companies. Convenient access to all account and transactional information, speedier transactions and greater business intelligence are just a few of these gains.

Access to data from one platform

Connecting with your banks individually and accessing multiple bank accounts separately will soon be a thing of the past. In the medium to long term, the adoption of Open Banking will do away with bank-specific formats and replace them with universal standards.

With Open Banking, your banks will have to make account and transactional data available through APIs, and this data can potentially be integrated directly into your accounting platform. This means that you can have access to your multiple accounts and banking services from one place.

More choices of products and providers

By giving Open Banking-enabled banks access to your data, they can gain insights into your financial situation, money management, expenses and use of financial services. They can then develop products and services that are more cost-effective and tailored to your needs.

Harnessing the power of your data will eventually let you choose from a greater variety of products, compare those products, and work with your preferred providers.

Actionable insights from banks

Several businesses today operate in a low margin, high volume environment, and sell highly commoditised products. A major point of differentiation for these businesses is information asymmetry. Your banks can provide you with intelligence to help you develop better strategies and compete in today’s low-margin, high-volume business environment. Through access to responsible third parties, banks can collect data from your stakeholders and provide you with actionable insights.

Supporting your growth

Ensuring data privacy and security will be one of the biggest challenges to successfully implementing Open Banking. Questions such as who can use what data and for what purpose, and who will be liable when there’s fraud, will have to be addressed. With the rise of new payment services built to take advantage of the NPP, managing the risk of fraud and identity theft will be critical.

The Office of the Australian Information Commissioner is expected to provide clarity to data security issues. It is responsible for ensuring that financial institutions adhere to privacy protection measures within the Open Banking regime.

The Australian Payments Council is developing a digital identity framework that will also help minimise the risk of fraud. The Council has proposed creating a single digital identity for physical and virtual transactions, so that customers will no longer have to present multiple identity documents for various services. Ultimately, this will ease the administrative burden and reduce costs for corporates and other organisations.

HSBC is at the forefront of the new era in Australian banking and have full membership to the NPPA. At present, we are designing infrastructure and strategies to make the full power of the platform available to our corporate and institutional clients.

We are also developing our strategy to support Open Banking. HSBC has experience and expertise in open banking implementation, particularly in Europe where a directive to regulate payment services and providers has come into force. HSBC has also rolled out tools and services as part of the introduction of Open Banking in the UK. We will leverage this experience in Australia to help our clients gain maximum value from this groundbreaking development.

These platforms are currently not available at HSBC and HSBC is working through its launch strategy. We will update the industry as we get close to the implementation date.

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