What you need to know about the New Payments Platform

What you need to know about the New Payments Platform

We’ve all wished bank transfers could instantly reach our account, whether we’re desperate to receive our monthly pay packet or we’re waiting to be reimbursed by a friend over a split bill.

Gone are the days of waiting for payments to reach your account. The New Payments Platform is set to transform the way Australians spend money.

What is the New Payments Platform?

The New Payments Platform (NPP) put simply is a new payment system in which Aussies will be able to send each other money in real time.

The NPP will allow real-time payments between two or multiple people, meaning you’ll never worry about weekends or holidays delaying payments again.

How does the NPP work?

According to the NPP website, the NPP works in three parts:

  1. The ‘Basic Infrastructure’

The Basic Infrastructure includes a network (which connects participants), a switch (which moves messages between participants via the network) and an Addressing Service which enables transaction accounts to be identified by a simpler payment address such as an email address, phone number or ABN number. Other address types may be available in the future. The Basic Infrastructure will always be open for business, 24 hours a day, 365 days of the year.

  1. The Fast Settlement Service

The Fast Settlement Service (FSS) is provided by the Reserve Bank of Australia. This world-leading capability enables every single payment made on the platform, regardless of its size, to be settled in real-time in central bank funds, across each financial institution’s Exchange Settlement Account (ESA).  This allows for completion of settlement between financial institutions prior to crediting of the payee’s bank account.

  1. Overlay Services

‘Overlay Service’ is the name the industry has given to the payments related products or services, and that can leverage the benefits of the Basic Infrastructure. These products or services could offer vastly different experiences, or similar experiences, and in many cases could compete with each other.

This technical explanation simply means that the infrastructure of NPP allows for real-time payments between two or multiple people in under a minute. It is active “24 hours a day, 365 days of the year”, and backed by the Reserve Bank of Australia (RBA), so the platform is fast and secure.

It’s no secret that most of us can’t remember their BSB and account details off by heart, making the transferring of money a longer process when you have to go hunting for these details. This is where PayID comes in.

What is PayID

Forget remembering pesky BSB and account details, now when you want someone to send you money you can give them your PayID instead. 

Your PayID is something easy to remember that you will register, such as your:

  • Email address
  • Mobile number
  • Australian Business Number (ABN)
  • Australian Company Number (ACN)
  • Australian Registered Body Number (ARBN)
  • Australian Registered Scheme Number (ARSN)

This will be securely linked to your bank, credit union or building society account.

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How does PayID work?

Once the NPP and PayID is rolled out, this is how the process will work:

  1. Register – when the NPP is rolled out you will be prompted to register through your bank, credit union or building society.
  2. Choose your PayID – you will choose your easy to remember PayID linked to this account.
  3. Pay – You will now be able to give someone this PayID and they will pay you in real time.

According to the PayID website, the registration process will require a number of identification and verification steps to confirm you are the rightful owner of that mobile number and/or email address etc. This also means PayID will make fraud more difficult as a stranger will not easily be able to create a PayID using your personal details.

A PayID can only be linked to one account at any given time. You can, however,  create as many PayIDs as you’d like “as long as you can prove to your bank, credit union or building society that you are the rightful owner of that information (such as the phone number or email address) you’d like to use”.

Can I use it for international transfers?

Unfortunately, the NPP only applies for national payments. Moving forward, hopefully this model will be adapted to allow for instant international transfers.

How secure is PayID?

In terms of security, the first thing you should keep in mind with PayID and the NPP is that you can only use it to pay other people. No one can use your PayID to access your account or withdraw your money.

Further, when you want to make a payment you will now see the name of the person you are sending money to (registered through their PayID) before you approve the transaction. This will mean that unlike using a BSB or account number, payments on the NPP using PayID will now give you peace of mind that you’re sending money to the right person.

As payments will now reach accounts in under a minute, there is the risk that your bank, credit union or building society may be slower to catch any scamming or fraud on your account. Luckily banks currently protect their customers in real-time through tools that monitor your payments, and these tools will be extended to cover the New Payments Platform.

You should always be wary of scammers when it comes to online banking. Read ASIC’s Money Smart handy guide to reporting a scam.

What other changes can we expect with the NPP?

  1. Pay with emojis

On a fun note, the NPP will now allow you include emojis in your payment descriptions! However it’s up to you how you decipher what emojis are for which transactions.

  1. Sent documents 

When you make a transaction through PayID, you will now be given the option to attach documents to the payment, including invoices and receipts. 

  1. Never have an awkward bill moment at dinner again

Instant payments through PayID means that no longer will Aussies have to awkwardly chase up their friends for the dinner bill. All you’ll need to do is provide your fellow diners with your PayID (mobile number, email address) and the money will be instantly back into your account.

New Payments Platform Explained:

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Learn more about bank accounts

Do I need to open a business bank account?

Just because you’re in business doesn’t necessarily mean you need a business bank account. You could be a sole trader not registered for GST, and use your personal bank account for business.

If you do want a business account, there are plenty of benefits attached to business transaction and savings accounts, as well as business term deposits.

There are business bank accounts designed for businesses with a high volume of transactions, and those for start-ups with a small amount of trade. You could also include an EFTPOS service with your account.

Some business bank accounts charge for the number of transactions per month, while others offer a pay-as-you-go fee structure, where you only pay fees for transactions you make.

It’s up to you whether your priority is mainly transactions, or earning the maximum amount of interest on your principal. There’s a business banking solution for you if you need one.

How do I close a bank account?

Closing a bank account is one of those tasks that’s easy to put in the too-hard basket. There are quite a few steps involved, some which may require you to hang on the phone for a while.  

Here’s a handy checklist of items to tick off, so the job gets done quicker. If you don’t do your banking online, the following steps can also be done at a branch.   

  • Cancel any scheduled or recurring payments
  • Update your direct debit details (such as loan repayments) with creditors
  • Export your payee address book (to keep a record of saved third-party bank account details)
  • Transfer the balance of your account (to the new bank account)
  • Close your account online, or by calling the bank or visiting a branch

Can you deposit money into somebody else's bank account?

One of the easiest banking tasks in the world is depositing money. You can even deposit money into someone else’s bank account if you wish.

The basic information you need to deposit money into a third-party bank account is:

  • Payee’s name
  • Bank, building society or credit union (though this isn’t necessary)
  • BSB (or bank code, which is the branch identifier)
  • Account number

Including the name of the financial institution isn’t necessary – particularly with online banking – because the BSB will identify this for you.

A handy tip is to record yourself (or add a personal message) in the transaction description or reference. This will show up on the recipients account, letting them know who’s paid them the money.

Can I link a bank account to Paypal?

Paypal is a safe and convenient way to pay online without the need to share your financial details. You can send and receive money or accept credit and debit cards as a seller using Paypal.

It’s easy to link your bank account to a Paypal account and start making transactions within minutes.

To start, you first need a Paypal account (it’s free to join). When setting up your Paypal account, you will be prompted to link a credit card or bank account (or both if you wish).

PayPal works without a balance; you can use Paypal to shop or send money when your balance is zero.

When your Paypal balance is zero, Paypal will ask you to choose your preferred payment method at the checkout.

This could be either your linked bank account or credit card. Your bank details can be updated if you change banks or credit cards.

Can foreigners open bank accounts in Australia?

Many Australian lenders allow foreigners to open bank accounts in Australia. Often, this can be done before you arrive in the country – with no Australian address required. When you get to Australia, you can pick up your debit card, using your passport as identification.

How do I open a bank account for a baby?

If you’ve just welcome a new baby into the world, congratulations. Opening a bank account for your child can be a wonderful first gift.

Before you can open your child an account, you’ll need to have a birth certificate or passport for your baby.

As the parent or guardian, you’ll also be listed as a joint holder on the account. This means you’ll need to have proof of your identification and address (a driver’s licence, passport, birth certificate or Medicare Card).

Many banks and credit unions offer baby banks accounts. Usually, you can apply online; otherwise you can head into a local branch or office with your documents.

Can I open a bank account in another country?

Despite having a bad rap for facilitating tax evasion, it is possible and legal to open a bank account in another country, also known as an ‘offshore account’.

Some people choose to open a bank account in another country to invest overseas, for higher interest-earning potential or to access foreign banking services.

The process for opening an offshore bank account differs depending on the financial institution and country in which you’re opening the account.

Typically, you will need to provide identification such as a passport, a local bank statement and a signed declaration proving the source of the money being used to open your account. Usually, deposits into offshore accounts can be made by international money transfer.

What do I need to open bank accounts online?

Opening a bank account online is a simple process and only takes between five to 10 minutes to complete. To get started you will need a computer or smartphone with internet access.

Information to have available when you’re ready to apply is:

  • Identification (such as driver’s licence, birth certificate, passport, proof-of-age card)
  • Tax file number
  • Residential address, email and a contact number

In some cases, you might be asked to provide employment details. If you’re not able to verify your identity online, most financial institutions let you provide this in the branch at a later date.

There are some types of bank account that you can apply for only in a branch. However, most bank accounts can be applied for conveniently online.

Can I have a PayPal account without a bank account?

You don’t need a bank account to send or receive money through PayPal. However, you do need a bank account if you want to withdraw money from your PayPal account.

Can I open bank accounts for my children?

A common question for new parents is, ‘Can I open a bank account for my child?’

The short answer is yes – as a parent you can open a bank account for your child.

Once you’ve compared your options and found a bank account that suits your needs, the process is relatively simple.

As the bank account is for your child, you’ll need to provide some documentation such as proof of ID, including your tax file number.

You will also need a copy of your child’s birth certificate, and in some cases you may also need to sign a guarantee of indemnity.

Depending on the bank and whether you’re an existing customer, you may be able to open a bank account for your child online. However, you may still need to go into a branch to prove your identity.

How to transfer money to another bank account

Transferring money to another bank is often called a bank transfer, and it can be done a few different ways.

Customers generally need three pieces of information to transfer money to another bank account. Customers need the account name, BSB and account number of the account they wish to transfer money to.

One way of transferring money to another bank account is in a branch with the help of a staff member; they will often give you a receipt as well as confirmation of the transfer.

Transfers can be also made via internet banking and phone banking.

Some banks also allow customers to make transfers via partnered ATMs, especially if the account is with the same bank.

How can I close a Commonwealth Bank account?

You can close your Commonwealth Bank account at any branch, provided you have appropriate identification. You can also close your account over the phone, by calling 132 221, 24 hours a day.

Can I close my bank account over the phone?

In most cases, you can close a personal or business bank account over the phone. In fact, this is the best way to ensure you’ve closed an account properly.

By speaking to a banking representative, you can capture and close out any pending transactions, or interest owing/payable on the account being closed.

In the instance where the account is a joint account, or you have multiple bank accounts you want to close, your bank may send you a form that you need to fill out and return.

Either way, you would be advised over the phone of the steps you need to take. Calling your bank ahead of closing an account is often a smart course of action.

Can you open a bank account at 16?

Yes, you can open a bank account at 16, or even younger. If you’re 13 or under, you will probably need a parent to accompany you to a branch.