Digital real-time payments were boosted in Australia this month when Commonwealth Bank of Australia (CBA) became the first of the country’s ‘big four’ banks to enable PayTo payments. The system provides business and personal account holders with a digital means of authorising payments from their bank account and grants customers the ability to authorise recurring payments from within the banking app.
Developed by open access payments infrastructure platform NPP Australia, in collaboration with financial institutions, fintechs and payment service providers, PayTo can be used for in-app and e-commerce transactions, including one-off, ad hoc or account-on-file payments.
PayTo advantages
Crucially, the system is noted for its capacity to reduce fraud, as each new digital PayTo payment agreement is authorised through secure banking platforms such as CBA’s app or web portal. According to AusPayNet’s 2022 Payment Fraud Report, while card payments grew by 8.0% to A$865bn ($574bn) and online spending by 8.2% to A$53bn in 2021, the incidence of all card fraud also grew, but at a slower pace of 5.7% to A$495m. The rate of fraud on Australian card payments in 2021 was steady at 57.3 cents per A$1000 of spending, compared with 58.6 cents in 2020.
According to PayTo’s developers, the system allows business customers to reduce the costs and delays associated with failed payments, as well as improve cash flow and reconciliation. PayTo digital payment agreements allow for near real-time payment processing, contain more information and data than traditional direct debits and require payer customers to provide authorisation.
Customers may utilise the system to view, authorise, pause or cancel payment agreements via an online banking portal or mobile app. CBA’s initiative with PayTo also enables its business and retail customers to make one-off or secure recurring payment agreements.
Pending benefits for business
Looking to expand the system’s utility, CBA ran a trial earlier this month in which Australian telecoms company Telstra created a payment agreement on the PayTo system to enable a customer to make a bill payment. At the same time, the Shepherd Centre, a disability service provider, tested the platform by enabling a donor to make a donation.
As certain functions are still in the trial phase, PayTo for payee business customers is not yet widely available. CBA plans to expand its trials with Telstra, the Shepherd Centre and additional select CBA business customers who meet its eligibility requirements.
Ethan Teas, CBA executive general manager for payments, says the trial transactions undertaken so far illustrate the potential benefits to the broader business community.
PayTo is expected to revolutionise payments in Australia, says Mr Teas. “Unlike a card payment, you have the authentication and consent in a secure banking channel such as the CommBank app. That unlocks a lot of new ways to interact with payments.” It is important to keep customers at the centre, he adds. “We think it will be incredibly impactful for Australians – both consumers and businesses.”
[it] unlocks a lot of new ways to interact with payments
According to NPP Australia, businesses and corporates will also be able to use PayTo to authorise a third party to facilitate real-time payments on their behalf, such as payroll and accounts payable.
When fully launched by the bank, eligible CBA business customers will be able to establish PayTo payment agreements as an alternative to direct debit arrangements and third-party-initiated payments such as salary disbursements. CBA business customers may also be able to accept PayTo payments in e-commerce environments as an alternative to credit and debit card payments.
Growth
While the system is currently nascent, growth will snowball, according to Mr Teas. “Payments are inherently a network economy. As PayTo increases its reach across the industry, we’ll see a greater growth rate.” The system is yielding results already, according to the bank, by providing “considerable return for the customer” and simplifying businesses’ processes.
The goal is to make CBA a leader on both sides of this payment option. Mr Teas says: “We’d like to see usage grow in key areas where it makes sense for both payers and payees. We want to make sure that both parties can make informed choices, understanding underlying differences in convenience, features, security, and liability.”
Other major Australian banks are anticipated to follow CBA’s lead, with WestPac expected to adopt the payments system early next year. WestPac and other competitors aim to improve the payments environment for their customers while potentially helping to reduce banking fraud.
