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Non-bank lender says NPP will be ‘transformative’ for SMEs

by Staff reporter10 minute read
Non-bank lender says NPP will be 'transformative' for SMEs

The introduction of the New Payments Platform could transform the way SMEs conduct business in a number of key areas, according to the MD of a non-bank lender.

The NPP, a joint initiative between 13 financial institutions including the big four banks and the RBA, has been called a “new set of rails” for the Australian payments system.

It has been designed to enable the instant, cross-institutional transfer of funds.

Speaking of the roll-out, Greg Charlwood, managing director of Australian Invoice Finance, said that the greater velocity of payments could allow for “simpler and more reliable” cash flow management and reporting for SMEs and enable overnight payments to be released into the economy.


NPP Australia, the organisation established to oversee the development and operation of the platform, has said that within a year of the launch of the NPP, businesses will also be able to send payment requests to customers with payment information included.

Mr Charlwood welcomed the arrival of NPP, saying that he believed it would “help small businesses to be paid faster and therefore better manage cash flow”.

The platform will also help small businesses by offering more room to outline what payments are. Instead of just 18 characters, NPP will allow for a 280-character transaction description.

Mr Charlwood noted that there was also the potential to add information to transactions to enable compatibility with accounting systems such as MYOB.

“Payments could be automatically matched to invoices, for example,” the MD said.

“The consolidation of [user] information into one ID is sure to reduce accounting errors, further increasing the efficiency of the system.

“The PayID will also allow businesses to change banks without having to notify suppliers or customers of new account numbers. The account number can simply be changed on the PayID without the counterparties even needing to know that the change has occurred.”

However, Mr Charlwood echoed some concerns that the reduced transaction time could lead to more fraudulent banking activity, as experienced in the UK and Singapore after the launch of their real-time payments platforms.

“Under the NPP, financial institutions will no longer have one or two days to detect and stop fraudulent transactions as they currently do. Real-time transfers of funds mean they will need to become more vigilant around the prevention of fraud rather than reacting to fraudulent transactions,” Mr Charlwood said.

[Related:  ‘Insufficient attention’ being paid to improving SME loan risks]

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