Transferring money and getting paid just got a lot easier (and arguably riskier)! The New Payments Platform (NPP) is an open access infrastructure for fast payments in Australia which launched in February 2018. It is a collaboration of the financial services industry in an effort to update and improve the way we transfer and receive electronic bank transfers. This post will discuss what the changes are, how they will affect your business, the risks associated and how to minimise these risks.

What are the changes?

The way the new system works is that once a payer enters the payee’s unique PayID, the payee’s name will be displayed for an extra level of confirmation. Once the payor confirms that the payment is to be made to this payee, the banks of both parties will communicate across the NPP and the money will be transferred within a minute.

The purpose of the NPP is to provide Australians with a much simpler and faster way to send and receive money. This is done by the user creating a unique PayID, which is a combination of letters or numbers which are easy to remember, and linking it to their bank accounts. When a payment is to be made, instead of providing account and BSB numbers, users can now simply provide their PayID.

For example, if you just had dinner with your friends but the bill could not be split, you could simply transfer money to your friends by asking your friend for their PayID, which could be anything such as their mobile phone number or email. Once you enter their PayID, your friend’s name should appear, and once it does, you can confirm the transaction and your friend will receive the payment in their account in less than a minute.

Another benefit of this new system is that the transfers can be made in near real-time at any time of the day or week. This means that users will not have to wait the standard three days for bank transfers to clear.

How will these changes affect you?

The effect of these changes will be mainly positive for you and/or your business. As discussed above, your money transfers/payments will be processed in under a minute, can be done at any time and on any day. The new system also provides an extra level of protection by allowing the payer to confirm the name of the payee.

You can benefit from these changes by providing your PayID to your clients on your invoices, or maybe even to your employer.

This payment method is entirely optional, and it is entirely your choice if you want to set-up a PayID! If you want to set-up your PayID or pay someone through this system, you can find out which financial institutions are using the new payment method here.

Risks associated with the Changes

Payments being processed in near real-time can backfire as these changes will require financial institutions or payers to detect fraudulent activity in real time! As the 3 day processing period is done away with for PayID transactions, the banks will generally not have enough time to stop fraudulent transactions from being processed. For example, when faster payments were launched in the UK in 2008, fraud experts observed that online banking fraud increased by more than 132%.

Another risk is a payor getting the details of the payee wrong, or being induced to transferring funds to fraudsters. Even though there is an extra level of confirmation which was discussed above, in the event payers get the details of the payee wrong, or are fraudulently induced into consenting to the transaction being processed, the transaction will be a lot harder to be undone and the banks will usually have no liability for the loss.

Banks have confirmed that they have put in place a “new level of sophistication to detect the timing and nature of payments, analyse that in real time, and then take action in real time”. However, we do not know any further details of these measures.

What you can do to minimise falling victim to fraud?

There are a number of steps you can take to minimise the risk of being defrauded, including but not limited to:

  • When making payments, always check that the name that appears matches the owner of the PayID, and that this is the person, company or business you are attempting to pay;
  • Make sure your online banking channels are secure as the payments can only be authorised through there;
  • Make sure the person or company you are being asked to pay is the individual they claim to be, or from the company or department they claim to be from; and/or
  • If you sense something is not right, investigate!

Conclusion

The rollout of the new system is to make the way we do business simpler, faster and more effective around the clock. As the processes speed up, this necessitates our fraud detection to become even faster. This can give a more effective avenue for fraudsters to ‘scam’ people. There are a number of precautions you can take to minimise these risks. It is important to understand how the new system works, take relevant precautions, and to always be vigilant when making transfers.

What do you think about these changes? What steps will you be taking to best adapt to these changes? We would love to hear from you! Let us know your thoughts by tagging us #lawpath or @lawpath.

Mikail Mermi

Mikail is a Paralegal working in our content team, which aims to provide free legal guides to facilitate public access to legal resources. With a passion for increasing access to justice and how technology can enhance this, his research explores how the law is adapting to emerging technologies and how this affects consumers and businesses alike.