What’s on
“Should you be scared or embrace them?”
Key Topics
- Instant Payments – What is the New Payments Platform (NPP) and how does it work?
- PayID & PayTo – Understanding aliases and request-to-pay services
- Insurance Use Cases – Claims payments, premium collection, and excess recovery
- Security & Fraud – How real-time payments can reduce risk
- Adoption Benefits – Customer experience, cost savings, and competitive advantage
Transcript
Tetiana: Welcome. This is the Curium webinar series. We’ve been running these for over a year now on different topics. I’ll do quick introductions, so I’ll start with myself. My name is Tetiana George. I’m the CEO and co-founder of Curium. We are primarily a technology platform specialising in all questions, claims, and compliance in insurance. But recently found ourselves big advocates of general technology innovation and solving problems that relate primarily to compliance and claims. Today, with us, we’ve got the representatives of the ANZ Bank, Darren and Michael, and I will pass the mic to them to introduce themselves. Darren?
Darren: Hi. My name is Darren Ellison. I’ve been with ANZ for just over 13 years now, have travelled around Australia’s banks for quite a bit, and spent some time in mainland Europe working with large multinationals. I’ve found a niche working with insurance customers, and part of that is helping insurance customers adapt to the existing and new ways of managing liquidity and cash.
Tetiana: Thank you, Darren. Michael?
Michael: Hi, Michael Dukovic. I look after payment development within the product business within institutional. I’ve been at the bank a little bit longer than Darren, 23 years, so almost up to the quarter century, spending time across retail, commercial, institutional, and also spent some time up in Hong Kong across various disciplines, being channel product strategy and business management.
Tetiana: Thank you so much. We wanted this webinar to demystify some of the potentially technical aspects from the point of view of technology and implementation and getting on board with instant payments. There are a few or a couple of myths in the insurance industry, specifically, the insurance industry not being famous for embracing knowledge among the first ones. But we believe today if you walk out with a good understanding of what instant payments are and what they mean for the insurance industry, but also the broader economy in Australia, I think it would be a good outcome.
Instant Payments
Tetiana: So, on that note, let’s start with you, Michael. Just tell us, in very simple terms, what is the New Payments Platform, and what is an instant payment?
Michael: Sure. Thank you, Tetiana. So, NPP is probably what your audience has heard a lot about in an Australian context, and what that stands for is the New Payments Platform. It is a central infrastructure that facilitates near-to-real-time payments and has been in Australia for about five and a half years. It was launched back in February 2018. So, I’m not sure if it’s so new anymore. I’ll let you and your audience decide. However, the genesis of the NPP goes back to about 2013 in Australia when the Reserve Bank released its strategic view to the banker. And what they sought from that review was a data-rich 24 x seven. So, they always have a highly available and near-to-real-time payment system as part of their core recommendations.
Michael: So as I mentioned, the NPP facilitates near-to-real-time payments here in Australia on a 24 x seven basis. So whether it is during the day, whether it’s 03:00 a.m., in the morning, at weekends, or on public holidays, the NPP works, sending and receiving payments in near to real-time. The two key brands that define the NPP experience from a customer perspective, which perhaps some of your audience have heard of, are Osko, which relates to the payment experience and Pay ID, which relates to the ability to send payments to aliases such as mobile numbers, email addresses, or ABNs.
Michael: Now, in the case of Osko and Pay ID, the near-to-real-time experience is defined as, and this is across the entire ecosystem here in Australia to which the subscribers of these services sign up, is that 99% of payments are processed within 60 seconds end to end, within 15 seconds end to end. And what I mean by end to end is from the point that I press a button, or you press a button, or any of your audience press a button to send a payment, that that payment is received in the beneficiary’s account and has funds ready to be used within that 15 to 32nd time frame.
Michael: So, interestingly, in the consumer world of these Osko near-to-real-time payments, everyone here has probably been sending them for many years now but may not have known that they’ve been sending them or is aware that they were sending them and they were being received in close to real-time. And the reason for that is that most banks and financial institutions have defaulted their pay.
Tetiana: I might pause here and bring it back to the context of where we are. So, in insurance, there’s a lot of money going in and out of insurers into bank accounts of suppliers, people who are insured and so on. Typically, it does not apply to the entire industry end to end. But I like to take use case by use case. One of the things for example, insurers pay billions of dollars a year in claims, right? This is the biggest payout on their PNL. And so, when we look deeper into how it is done and what the customer gets, we do find that the processing of the payment out from the claim system into the payment system, into the bank, and then back reconciling from that’s been paid, not bounced back, received or paid, and then reconciled back to the claim. This process can take about two to ten days, depending on the size of the operation and how often those payarounds are done.
Tetiana: So what does that mean for the person at the other end, the one receiving? And I’d like to move to Darren and give us a background from today where people need to wait from two to potentially sometimes ten days to get paid to the new world where we’re in already. What’s the impact of this?
Darren: Yeah, the impact of this for insurers is the ability to understand who they’re paying and get an immediate response when it gets executed. So what we’re trying to attempt to do with several insurers is work with APIs to deliver that payment directly to the claimant, whether it’s a refund or an emergency payment. And if there is a bounce back for some particular reason, they’ve got that information immediately and can address that on the phone. And that could be anything from an incorrect payment to an account. It could be the pay ID may have been entered incorrectly and may have an incorrect character within the email field. Still, ultimately, it’s about getting the funds to the beneficiary. And if it does bounce back, they’re aware of that immediately and can rectify the situation without having to wait for banks for two to three days, if not more, to receive their reply files as to whether it’s bounced back.
Darren: So, in the context of it, you can remediate immediately and give us a broader context. Socioeconomically, what does that mean in the new world? Well, in the new world, let’s say you’ve got, let’s talk about internal displacement monitoring and some of the information and figures that have come out. So, between 2008 and 2015 in Australia, 55,000 people were displaced in Australia from their accommodation. Between 2016 and 2022, that figure jumped to 188,000 people displaced, 81,000 from wildfires, 68,000 from floods, and 39,000 from storms. In many cases, they’ve been able to pack information, pack as much of their personal belongings into a car, run out the door, maybe with their mobile phone in their pocket, and try to escape where they are.
Darren: Now, if we’re talking about more statistics, 48.4% of Australians live day to day, sorry, live paycheck week to week. So a lot of Australians, while insurance is almost mandatory these days to cover a lot of their assets, there’s a lot of the Australian population who require the support of banks, the support of government, and the support of insurance companies to be able to go and find accommodation. And to be able to do that, they need money to go and pay for that accommodation while they’re out and while assessors are taking time to get in and assess the damage that has happened from those events.
Tetiana: Yes, and I can also attest that many suppliers to insurers are family-run or small businesses. And I would say they would fall into the bucket of living cheques, paycheck to paycheck, in terms of being paid by the large suppliers.
Tetiana: So, if it takes a week or ten days to receive the money for the job that you did two months ago, it can significantly strain the survival of that small business. The consequences are big and significant. And I guess the message we are trying to convey to you today is that while instant payments seem like a thing of the future, they’re actually a thing of the present. They’re already here. As both Michael and Darren were saying, we probably have been using them for a while without knowing it. In other spheres of life for insurers and the insurance industry, it does come with a bit of a change in thinking about how to implement and how to think about them.
Risks and Security
Tetiana: Now, there are also a lot of concerns as we evolve in the digital world about security and cyber. And I would like to ask both Darren and Michael, given that we are relying on technology pretty heavily here, what do you reckon are the risks, and do you think they’re greater than what we face now and cyber think about security fraud, all of these, what can go wrong about the process?
Darren: From an insurance angle, I’d say that we have witnessed an uptick in fraud lately. There are a lot more scams out there. There are a lot more compromises of accounts. There are situations where direct debit is being compromised, for instance, and direct debit is one of the largest collection methods for insurers to be able to collect their premiums.
Darren: So this is where real-time payments and, particularly, PayTo, which is the request-to-pay mechanism, will actually create a little bit more value on your collection of premiums. So, what it will do is the ability to send a mandate to a customer’s bank account, and that mandate would need to be approved by the actual customer within their secure banking environment. They will see it, they’ll authorise it, and then they will allow you to draw premiums, whether it’s cycled based on fortnightly, monthly, quarterly, yearly, or it could be variable amounts, flexible amounts, and it’s structured across various industries. So PayTo will give validation that the recipient is actually the one signing up for the policy, and you’ll be able to draw those funds out of that account based on what’s been agreed. It’ll eliminate the need for things like direct debit request forms and direct debit service agreements. You’ll get validation of the person you’re trying to debit. It won’t completely eliminate the potential for fraud, but it does help mitigate a lot of it.
Michael: I’ll just say I agree, Darren. I’d add to that, probably two points we think about NPP and how it differs from the perspective of existing payment infrastructure, and then we put a cyber and fraud lens over the top of that. Where we see most of the fraud is actually scams and social engineering. It’s not necessarily a flaw in the infrastructure itself, the banking app, or the piece that sits behind that. It’s often good old social engineering that tends to be the major cause of fraud in a PayTo context.
Pay ID and PayTo
Tetiana: Now, Darren mentioned, and we did exchange these things: PayID, PayTo. Maybe just a brief understanding from Michael, so we did mention that, but just give us the definitions. What is a Pay ID, and what is PayTo, and what do they do, and how are they different?
Michael: Sure. So, a PayID is an alias or a different way for a payment to be sent compared to a BSB and account today. If we rewind before MPP, there was only a BSB and account that someone could send a payment to. Fast forward to the NPP context, and we can now send payments to a mobile phone number, an email address, or an ABN still linked to a BSB and account in the background. But we’re actually addressing payments in a different way. That’s what a Pay D is.
Michael: PayTo is the next evolution of the new payments platform, which I mentioned kicked off in 2018, and it introduces, as Darren said earlier a request-to-pay type service. What I mean by that is up until today, only push payments were possible over the NPP framework. So I could push a payment outwards to you, Tetiana, Darren, or anyone on this call. PayTo introduces the ability for someone to go and collect funds, to pull funds, and that is done based on an authority being sought first for that money to be pulled.
Adoption
Tetiana: Now, I would like to ask Darren, we’re advocating that it’s great for you to adopt this. What happens if you don’t adopt it?
Darren: Well, there’s no “if you don’t adopt it, you’re going to fall behind” kind of scenario. You can still process payments; the direct entry network is still available, albeit a bit slower. However, when you consider the context of claims and receiving premiums, for instance, let’s say you have a claim and you want to make that payment promptly, or you have a refund due to a total loss, or you need to make an emergency payment without real-time capabilities. In such cases, you won’t provide the same level of customer experience as your competitors.
Darren: When you think about the customer’s experience, especially during a stressful event, getting the money to them as quickly as possible sends a strong message that your organisation is there to support and help them. While the goal is to minimise claims, a positive customer experience reduces churn, which is crucial in the insurance industry.
Darren: Another development worth mentioning is e-invoicing. The ATO has mandated e-invoicing for all contracts under a million dollars with the federal government. Small businesses dealing with the federal government must accept e-invoices. E-invoicing is also accepted by access points like MYOB or Xero. The ATO is looking at integrating PayTo with e-invoicing, creating an ecosystem where invoices are sent directly to PayTo, and a PayTo agreement is established simultaneously. This isn’t just about individuals; it extends to B2B transactions, streamlining and improving efficiency.
Darren: We may start seeing the PayTo button on the payment gateway or payment page options provided by companies like Adyen, Worldline, Stripe, and others. This gives consumers more choices, and they may choose PayTo for its cost-effectiveness.
Tetiana: Thank you all for joining this webinar. We value your time, and we try to adhere to the schedule. If you have further questions for our participants, please contact them directly. They will be happy to address your inquiries. We look forward to seeing you at our next webinar. Thank you, Darren. Thank you, Michael. And thank you to everyone who attended today.
