Understanding Instant Banking & What it Means for Consumers

"Understanding Instant Banking

You’re probably familiar with internet banking – between mobile banking apps and cardless cash it’s hard to imagine life without it. But have you heard of instant banking? It may sound like a similar concept but in practice, it offers something different.

Instant banking is a new payment method that’s being touted as the ultimate solution to processing payments quickly online. The Reserve Bank of Australia introduced instant banking to Aussie consumers through the launch of it’s New Payments Platform (NPP) last year. So, how does it work and what kind of impact is it having?

In this article, Jacaranda investigates the impact of instant banking and what it could mean for your everyday banking.

Introducing: The New Payments Platform (NPP)

On February 13, 2018, the Reserve Bank of Australia and its Payments System Board (PSB) publicly launched the NPP. The goal of the NPP is to support efficient payment experiences for Australian consumers, businesses, and government agencies. It’s mutually owned by 13 different organisations and came about after a review of the Australian payments system. The report found Australia’s payment system lagged behind even less developed nations, such as Mexico.

Since its launch, around 60 banks, credit unions and building societies have begun rolling out services to their customers. But what exactly does the NPP do?

How Does it Work?

The New Payments Platform effectively redefines the way you transfer money. Payments can still be directed to BSB and account numbers, but now individuals and businesses can create other identifiers, known as “PayID” to simplify the process. PayID utilises information such as phone numbers or email addresses as a form of identification when transferring payments. The platform is also open for business 24/7, removing old banking delays caused by weekends and public holidays.

The NPP even allows other overlay services to sit on top of the platform and offer more tailored payment services or processes, like BPAY’s Osko.

Key Features of NPP

The concept of the NPP can be quite confusing, especially since it has multiple applications. Ultimately, it’s best to look at the NPP as an innovative tool that banks and other institutions are integrating into their systems to make your life easier. In terms of how, well, there’s really just three key features that will impact how you do your banking.

1. Instant Transfers

Most of us have experienced the annoyance of delayed payment transfers between banks and other providers at some point.

That’s why perhaps the most important feature of the NPP is the ability for consumers and businesses alike to make ‘real-time’ transfers. With NPP-enabled transfers, you can kiss goodbye to waiting up to 3 business days for the cash to hit your account. If you shout your mate a trip to the movies and their bank has partnered with the NPP, then they could transfer you the money instantly. Any time, on any day of the week.

This effectively brings the Australian banking system up to par with the speed of the online world, where transactions are happening at all times of the day. If you’re wondering how these real-time transfers are happening, they are facilitated by the RBA-owned Fast Settlement Service. Basically, the service allows immediate settlement of transactions made by individuals and businesses through the NPP.

2. Simplified IDs

We’re all familiar with the typical formalities of transferring money. If you can’t remember your BSB and account number off the top of your head, then chances are you have them saved somewhere on your phone for easy access. You’ve got to have them ready to send out to your friends whenever you foot the bill for a meal or event.

Well, not any more!

The introduction of the NPP does away with the need for your bank numbers, by making identification more convenient with PayID. We’ve touched on PayID a little already, but we’ll go into more detail further down. For now, just remember that it’s a single, alternative form of banking ID that’s far easier to remember!

3. Longer Transfer Descriptions

Sometimes, it can be tricky to fit your transaction description into less than 30 characters – especially from a business perspective. Fortunately, the NPP generously increase the character limit for transfer descriptions. Now, you could use up to 280 characters (including emojis) to describe your transfers. It’s a small change, but it’s the one you’re still likely to utilise more than you think.

Understanding PayID

The key thing to remember when it comes to PayID is that it doesn’t replace your BSB or account number. In a nutshell, PayID is just NPP’s addressing service. So, say you head out to dinner with a group of friends. When it comes time to pay, you decide to pay the bill and everyone can just transfer you their share. Traditionally, you would have had to hunt down your banking details and shared them with everyone. PayID takes away that hassle!

Once you’ve set up your PayID, you will just need to provide your friends with the one form of identification for the transfer. Even better, you’ll receive payments in real-time without the typical transfer delays.

How Do You Set Up PayID?

Most of the time, you can create your PayID through your participating financial institution’s mobile or online banking service. However, you should refer to their website or contact them directly if you’re unsure how to go about setting it up.

In terms of what form of identification you can use for your PayID, you’re spoilt for choice! Most will probably go with their email address or phone number, as these are super convenient. That said, if you run your own business you could also use your:

  • ABN (Australian Business Number);
  • Australian Company Number (ACN);
  • Australian Registered Body Number (ARBN); or,
  • Australian Registered Scheme Number (ARSN).

In the instance you have a few accounts with different financial providers, you can only link one account to one PayID. So, you would need to set up multiple PayIDs for your multiple accounts. For example, say you have an everyday account with ANZ and a savings account with ING, you could use your email address as the PayID for your ANZ account and your mobile number as the PayID for your ING account.

Is it Safe to Use?

Of course, there is always some risk of fraud and abuse when it comes to online payments. That said, PayIDs can only be created through your financial institution’s online banking platforms. So, your PayID is protected by the same security as your internet banking details. Additionally, the only way someone can use your PayID is to put money into your account not remove it. If you’re concerned, it’s best to consult your financial provider directly for advice.

What is Osko?

Osko is the first overlay service to utilise the NPP since it launched. Developed by the creators of BPAY, Osko allows you to make transfers to friends and family in real-time. Just as BPAY is integrated with many bank accounts, so too will Osko. You’ll be able to select the ‘Osko’ option when making transfers to utilise the benefits of instant transfers and PayID. For more information on their services, check out their website here.

Participating Banks

A range of Australian banks and financial institutions offer NPP services, including:

  • ANZ
  • Bankwest
  • Commonwealth Bank
  • Citi Bank
  • HSBC
  • ING
  • Macquarie Bank
  • NAB
  • Suncorp

This is by no means a comprehensive list! To see if your bank offers NPP-enabled payments and services, you can search for your institution here on the NPP’s official website. It may also be worth checking your bank’s website directly, as many are still in the process of rolling out NPP services.

Cash in 60 Seconds With Jacaranda

Thanks to the NPP, Jacaranda Finance could now also provide cash to your bank account in just 60 seconds! Jacaranda Finance is an online private lender that offers personal loans between $300 to $10,000. So, if you’re approved for a loan with us and your bank is NPP compatible, then you could get your cash in real-time!

Instant banking is just another way Jacaranda is making it easier for you to get the cash you need when you need it. We don’t think a personal loan should be complicated. So, if you’ve been considering an application, what are you waiting for? You could have an outcome from our team in just 60 minutes and, if successful, the cash in your account in just 60 seconds. Talk about easy!

Learn More About Finance

For more information on personal finance check out our blog for the latest in money and lifestyle tips. Whether it’s prepping for the next semester of uni or learning how to whip your credit score into shape – we’ve got the insights!

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