Australian Payments Plus (AP+), which oversees Australia’s real-time payment rails the New Payments Platform, has laid out its program of works to progress its and Australian businesses’ transition from the nation’s legacy payments transaction infrastructure, the Bulk Electronic Clearing System (BECS).

BECS, which began life in 1989 and is mooted for decommissioning in 2030, was designed to process low-value, bulk transactions domestically.

Transfers through BECS are restricted to business days, with payments receivers (often businesses), in many cases, only receiving confirmation three days after the initiation of a direct debit payment.

The system supports ‘direct entry’ for businesses – that is, enabling them to collect authorised payments automatically and directly from customers’ bank accounts. This includes business-to-business transactions and direct debit payments, that are processed as batch files, as well as salary payments.

BECS currently carries an average yearly value of more than $15 trillion – more than seven times the current annual value transferred through the NPP.

The NPP will eventually take on all transfers currently made through BECS post-decommissioning.

Noting the reasons behind the decommissioning of BECS, AP+ wrote: “As a legacy system, BECS is difficult to improve or alter. Its messaging format shares limited data, preventing automating the reconciliation of payments and making it harder to screen for financial crimes.

“BECS”, it added, “does not meet the needs of Australia’s digital economy into the future”.

Meanwhile, AP+ notes that migration to the NPP will deliver multiple benefits for “businesses of all kinds… [including] greater efficiency and productivity in payments processes, improved fraud and audit controls, richer data, and automated straight-through processing and reconciliation”.

According to Reserve Bank Australia (RBA) data, the NPP currently processes more than one-third of account-to-account payments. NPP payment volume also grew 20 per cent in 2023, with month on month growth also at 20 per cent.

AP+ notes, however, that there is a significant amount of work ahead for it and the industry to meet the 2030 target date for the decommissioning of BECS.

The path ahead

AP+ laid out four priority focus areas to support the migration of BECS-processed transactions onto the NPP. The payments authority notes that it currently has around 40 staff working on the migration program.

• Bulk payments support:

AP+ notes that the NPP is designed to facilitate single payment instructions rather than bulk files, which enables real-time payments and allows for the isolation of payment issues.

Based on feedback from industry participants, to facilitate migration to the NPP, AP+ said it is working on an approach to create a “standard process for managing large bulk files”.

AP+ added: “In migrating bulk payments to the NPP, businesses can work with their financial institution on ‘debulking’ their payment files or they can use alternative methods such as submitting payments via APIs. We’re seeing a combination of both approaches to migration.”

• Upping transaction capacity on NPP

AP+ said it will continue to implement capacity uplifts well ahead of the scheduled BECS retirement date to ensure it can meet demand. The direct entry system currently supports more than double the number of transactions made on the NPP.

It notes: “The NPP already has the capacity to support more than double current payment volumes.”

• Helping participants realise cost and value of the NPP.

The costs of operating the NPP are largely fixed, AP+ says. As the volume of payments processed by the NPP continues to grow, the per-transaction cost will continue to decline. The implied average wholesale transaction cost at the scheme level has decreased from $0.39 in 2019 to $0.04 in FY25.

“NPP transaction costs cannot be assessed in isolation. It’s important to recognise the less visible efficiency savings that the NPP delivers such as major reductions in manual reconciliation and reduction in failed or mistaken payments,” AP+ writes.

• Uplifting the technical infrastructure capability of the NPP platform.

AP+ said it is working on two parallel projects to uplift the technical infrastructure capability of the NPP platform.

One of these projects is an upgrade to the most recent ISO 20022 payments messaging standards. ISO 20022 will be the common language of the global financial industry, introducing many new data fields for the transmission of payments, strengthening operational resilience in payments and enhancing straight-through processing.

The second project, SWIFT cloud enablement, will facilitate participants moving their own infrastructure to cloud environments to take advantage of reduced costs and more efficient use of technology.

AP+ said it is also working with current payments scheme participants to connect accounts to the NPP that currently send and receive payments via BECS.

“At present, the NPP reaches 90 per cent of all BECS reachable accounts. NPP participants have plans in place to connect nearly all the remaining accounts well before the retirement of BECS.”

AP+ said it will also work with financial institutions to drive improvements to the reliability of their NPP services, noting it has recorded “planned and unplanned outages for individual participants” despite the high resilience and “zero failures” of the central NPP infrastructure.

“All NPP Participants must meet stringent availability requirements of no more than two minutes outage per month. The consequences for failure to meet these requirements include non-compliance charges which range into millions of dollar penalties.

“AP+ will continue to work with NPP participants to drive improvements in resilience.”