In 2022, the way Australians pay is being upgraded, and for all fast-moving businesses, account-to-account payments are going to be an essential part of their financial infrastructure. So what do you need to know and how will it impact your business?

Account-to-account payments move funds directly between accounts without the need for intermediaries or additional payment instruments. This payment method is common in Australia and is used in a range of common life administrator-type activities, such as businesses using direct debit platforms like GoCardless to collect recurring payments, or individuals transferring money. money to a friend using standalone banking services like Osko to reimburse them for a meal.

Although these payment methods have been around for some time and are accepted as the norm, there are a number of drawbacks that often see expensive credit card transactions used as an alternative. For direct debits and bank transfers, payments can take some time – up to two business days – to process, meaning the business or other party has to wait to access and use their funds . The alternative, credit cards, are subject to high transaction fees, increased risk of fraud, and some of the highest defective payment rates; enough to keep any CFO awake at night.

But all of that is about to change, and we’re committed to enabling our customers to be the first to tap on the latest payment technology.

New platforms such as NPP’s PayTo technology are emerging and evolving to address these drawbacks and ensure individuals and businesses have access to a fast, secure and reliable payment infrastructure.

What is PayTo?

Developed in partnership by NPP (New Payments Platform) Australia and the financial services industry, PayTo is a new digital and mandatory way for merchants and businesses to initiate real-time payments from customers’ bank accounts.

The platform’s infrastructure goes beyond a simple direct debit alternative by enabling linking of bank accounts for in-app purchases, account-on-file agreements for e-commerce and subscription services, and funding digital wallets and other payment options, including buy-it-now. -pay services later. While a preferred method, current direct debit rails aren’t best suited for this range of payment types, which often require instant authorization and visibility.

PayTo payment agreements have been developed with flexibility in mind, offering a range of data fields available. Account holder credentials and terms of agreement are standard, but businesses also have the ability to add optional data fields, depending on the needs of the customer and party initiating payments .

PayTo’s rich data capability will also improve accounting matching and easy business reconciliation, which means even simpler accounting administration.

For business

PayTo allows businesses to initiate real-time payments from customers’ bank accounts. The payment infrastructure was developed to address common issues associated with late payments and insufficient data visibility to keep businesses running smoothly.

Business benefits include:

• Real-time customer account validation

• Real-time funds verification and payment confirmation, at the time of payment

• The platform infrastructure will be supported by APIs to ensure a seamless process

• Secure storage of data needed for reconciliations – payment reference and mandate details – in one place.

• Notifications that alert the business when a customer cancels, suspends, or makes changes to their payment agreement.

• The ability for third parties to make payments on behalf of a business, such as payroll and accounts payable

These features will be a game-changer for finance teams as, for the first time, businesses have the ability to completely tailor their payment strategy to meet their business goals. For certain market segments, including GoCardless customers, businesses will be able to offer PayTo instant payments and traditional Direct Debit payment rails side-by-side, giving merchants the ability to optimize and scale the payment infrastructure based on safety, speed or cost.

For example, a telecommunications company can use PayTo rails to authenticate a new customer while receiving instant payment notification so they onboard the customer seamlessly. They will collect both setup fees or hardware costs upfront while allowing monthly billing. If a payment fails due to insufficient funds, the telco can leverage a smart retry product like Success+ or opt for a PayTo transaction to immediately recover the outstanding amount when the recipient knows that he has sufficient funds in the account.

In another example, a ride-sharing app might use PayTo as an alternative to credit cards and is often the default payment method for businesses that keep customer cards on file. Credit cards offer instant payment notification which makes them suitable for this type of transaction, but can also be costly for merchants and consumers, who also increasingly want to avoid the pitfalls of debt. PayTo offers the same instant payment notification benefits as credit cards, but for lower costs, payment transparency and increased security.

For your customers?

PayTo gives your customers more control over on-time and scheduled account-to-account payments, simplifying transactions with your business and improving their overall user experience. Customers can pre-authorize real-time payments from their bank accounts, ensuring efficiency and security while reducing the incidences of failed payments due to insufficient balances as well as incorrect account information and fraud blocking by banks. PayTo makes it a little easier to manage the daily life of customers, while optimizing the payment strategy of merchants.

Benefits for individuals include:

• A smoother payment experience for payers with the ability to set and forget while viewing and managing payments from users’ bank accounts, all in one central location

• A choice between a PayID or traditional account and a BSB number, simplifying the entire payment process from start to finish

• The ability to pause, cancel or authorize new payment arrangements with the swipe of a finger in their banking app

Although simple in theory, PayTo’s infrastructure has been developed for foundational capabilities that will enable a wide range of use cases in the future, providing a springboard for future innovation. The infrastructure is currently in the construction and implementation phase and is expected to start rolling out from mid-2022.