Transcript: PayTo in action: how smart payments are transforming the customer experience

00:00 Dave: Welcome to the Australian Payments Plus Point of View podcast, where we explore the theme of trust from many different angles. Today we'll be exploring the business case for the NPP, and I'm joined by two guests here, Alison Chan and Mark Buckland, so welcome to both of you. 

00:22 Alison: Thanks. 

00:23 Mark: Thank you. 

00:23 Dave: Alison is the GM of payments for CBA, where she oversees real-time payments and payments as a service. She's held a number of senior payments roles across Australia and the USA. She's led a number of major innovations, including real-time payments and digital wallets. 

And Mark is the CEO of Dymocks Education. Welcome, Mark. Dymocks Education is a startup division within the 146-year-old Dymocks Group. Mark oversees its expansion in grade three to 12 tutoring market. He has 16 years of experience on boards and 19 years in senior management roles across retail, franchising, and education. So, welcome to both of you. 

01:03 Alison and Mark: Thank you. 

01:03 Dave: So the theme of the podcast series, as you know, is trust. So, I'm interested to know for both of you, what does trust mean to you personally? Maybe we start with you, Alison?

01:12 Alison: I think it's a great question. So trust to me is doing what you say, transparency and reliability over time. I think it's the same for both with your customers, but also in your personal relationships. And trust is so important to payments because businesses, consumers are relying on us to pay and get paid. And real-time payments is really critical to that as well.

01:34 Dave: And Mark, what about yourself?

01:37 Mark: Trust, I'd agree with Alison. I think trust really is about doing what you say you're going to do. So there's transparency, there's integrity to the process that people can rely on, bank on, if you like, what you say you're going to do.

01:53 Dave: I'm going to move now into kind of talking about payments and particularly the NPP. So, one of the areas the industry has been working on is around the adoption of PayTo. Can you explain what it is and what it's for?

02:07 Alison: Yes. So, PayTo is a relatively new digital payment method. It allows customers to authorise a payment agreement directly from their banking channel, digital banking channel. And it supports one or four reoccurring payments. And interestingly, we were talking about this when we were thinking about PayTo and multi-credit transfers. And PayTo was initially developed for direct debit replacement. 

But in a lot of good ways, we've seen innovation bubble up in leveraging PayTo. And now it's being used to top up wallets for e-commerce and CBA, we see 65% inbound PayTo agreements. So we're the largest in terms of the received share. And so we see a lot of those innovations and trends really early on, which is great to see. And we see PayTo as being a key capability to make sure that we're able to migrate off BEX in the future.

02:57 Dave: Yeah. And Mark, I'm interested from your perspective, obviously end user are critical for moving to the NPP. So, what drove you to move to the NPP? What were you looking to address and how has the NPP and CBA helped?

03:12 Mark: Look, I think there's both a customer and a business aspect to us looking at the NPP. I think the funny thing was we became aware of it and reached out to CBA from an experience I had as a consumer where an airline was using PayTo in order to pay for a membership. And it's the first time I came across it and it was transformative for me. This is amazing. I didn't have to enter my card. I scanned a QR. It paid from my bank account. 

And so we reached out to the CBA and said, “We want this.” In our education business, we have hundreds of weekly direct debits going through for one-to-one tutoring. And then on a quarterly basis, we have over a thousand of them going through. And they're all the traditional direct debit and they're quite a pain point. So, when we're looking at our customer journey, we're always looking at ways to streamline it, to try and take the friction points out of it. 

04:12 So much as possible the administrative elements of the transaction are seamless for them in fact we'd like to delight them so I thought PayTo could be a great way to do that. So, from a business perspective it's equally compelling, it's for us the traditional direct debits we have that we're phasing out right now take up to five days to clear, so that's money not in our bank account which is a real pain, but it's worse because it causes a bunch of operational delay.

We have to wait for payments to clear before we know whether a customer is truly on boarded, we can't start other processes that are triggered by an enrollment like printing their notes, getting their materials ready, getting them into a room, all of that's poor both from a customer, but from a business perspective too. So, getting near real-time payments will allow us to onboard a customer at a speed much greater than we could do in the past.

05:04 And even better, it takes a lot of labor out of the process so a lot of that manual reconciliation that happens in the back end as our accountants go through to see whether a payments gone through determine whether the payment was delayed or failed, all of that can be done through the API and our systems update in real-time to tell us whether a payments received so I think we're very excited about it, both from the customer and the business perspective.

05:28 Dave: I love the fact that it started with him as a consumer. I mean, that's brilliant, like you seeing it as a consumer and then thinking about what that means from a business perspective. But for other end users like yourself, can you maybe just talk a bit about the process you went through, the resources needed and how CBA supported with that kind of onboarding process to the NPP?

05:47 Mark: Yes, certainly. I think we started off with just a chat with the CBA to say, look, we have a pain point here and what can you do to help with that? And the CBA were great. They identified PayTo as a solution. We moved into solutioning with their team and it was very transparent. 

We had clarity on what it would involve, how it had advantages against the current system and where some of the limitations might be currently until the feature rollout is complete. We then moved into from solutioning into the technical deployment and we had great access to the CBA technical teams, their developers talked to our developers to make sure that the APIs were calibrated correctly and were returning all the information from that data rich environment that would benefit our business. 

06:33 And I think that's probably been an amazing experience for us, that ability to understand what can we do with the data that's coming in, data that we previously didn't have or would have to manually enter. So yes, the process of the transition itself was like any other tech project, just made easier because we had a great partner.

06:57 Dave: Great. And there's probably a few end users like yourself looking at this saying, there's a 2030 date. Do I start now or do I wait? I'm interested, what would you say to those end users thinking about, do I plan this in and start the work now or maybe think about in the future?

07:11 Mark: I would say it's short-sighted to think for that it's a 2030 date and that you can put it off. I think, like you said, David, I looked at it as a consumer and it was an amazing experience for me. It overcame my concerns about, not that I had concerns with this airline, but I'm always looking at things from a customer's perspective. 

And I'm like, wow, if I was hesitant to give details on the web at the moment in an era of data breaches. this was perfect, fully controllable within my own ecosystem, limited permissions, et cetera. And I think more and more customers are going to be demanding solutions from businesses that are seamless, that give them control and trust. 

07:51 And I think if you wait, you're going to see your competitors implementing solutions that solve a customer need that you may not even know exists at the moment because you're so used to the legacy system. So unless you start experimenting now, you won't see the benefit, but your competitors might. 

And I think Alison's point earlier about people experimenting with the systems is a really interesting one because there are a range of uses I could see PayTo being used in our business, even beyond replacing the traditional direct debits. We could use those for one-off payments to buy textbooks in our location. So, there's a lot of use cases we want to start playing with in the future. But all of that comes from a willingness to do something right now.

08:37 Dave: Yeah. I mean, I think it's, you know, really interesting, that perspective, and I think people will look at it in two different ways. But what I've heard from both of you is actually just starting, just getting on with it actually creates innovation and new use cases in itself, which creates new commercial opportunities potentially as well for businesses.

08:53 Alison: Yeah, exactly. 

08:54 Mark: Absolutely. 

08:55 Dave: And Alison, I'm interested, obviously, you're speaking to a lot of end-users out in the market and we got that date we've just talked about. So what are some of the challenges and opportunities you see from end-users moving across the NPP?

09:08 Alison: Yeah. And Mark touched on a few of them, but as we've seen clients transition to NPP or to PayTo, we've seen, firstly, that it's very important to map out those operational impacts, look at everything that wraps the payment, how that might change, and then how is your liquidity also managed off the back of that? I think, secondly, you know, Mark raised a great point. You start with a use case, potentially, rather than doing everything in big bang, although that works for some businesses, experimentation is a better way maybe to move to the NPP so that you're making the most of all the capabilities that will now be available. 

So, for example, with PayTo, we've seen a lot of our clients migrate their front book first, new agreements, and then move to their back book. I think as well, starting now so that you can gain the competitive advantage and then using that time to check the capabilities actually work with the operational context and all the different use cases that it can be used for is really critical to making sure that you're building for success.

10:07 Dave: And just expand a bit for me in terms of customers, why do they focus on the front book first? Is that so that they kind of test and learn and then prove it works and then go back and do the back book, is that?

10:15 Alison: Well as an example, you could have direct debits for your customers that exist already and you don't want to interrupt that. So, starting with your front book, brand new customer coming in the door, hey, do you want to use PayTo? 

10:25 Dave: Yep. 

10:25 Alison: And then once you have understood how that end-to-end process works live, end-to-end production, then you can then move over your direct debit customers that you've already got in your back book.

10:37 Dave: Mark, was that a similar thing for yourself?

10:38 Mark: That's exactly what we're doing right now. So we cut over to PayTo and we take new bank transactions through that. That'll have a great benefit because any new customer joining us will only have experience PayTo, and that'll be a positive experience. So we're looking forward to it. And then in the next quarter, with the benefit of time to communicate with the customer, we're able to migrate them from their legacy direct debit.

So it's a matter of staging it so that you don't end up with a revenue hit at an inopportune time. And it will take some time for customers to understand the benefits of the new system.

11:15 Dave: I know it's early days, but how's it kind of performing so far?

11:19 Mark: It is very early days, so its initial signs are promising. I think we are going to start to see customers, once they get over that, what is this? And there's a bit of education from our perspective as well, to say you may have noticed it cropping up in your bank app, because certainly as a user of multiple bank apps, I see that happening in the past year. A number of banks have deployed and you can see it coming into the menu systems.

So it's just a matter of educating the customers that, hey, this is a new system that will give you much more control over your own agreement with us, and you definitely should be using it. And then using both that, plus some nudging in the way we want the transactions to go, to also migrate them to the new world in a way that gives them all the benefit.

12:07 Dave: So, I mean, I heard from both of you, get going now, start planning. There's a lot of innovation there to happen. But I'm interested, as we kind of cast our thoughts to the future and we think about account-to-account payments, and I started this podcast with a question about what's happening globally. So, I'm interested in your perspectives and if you look to the next five years into the future, what do you think about account-to-account payments and the role it will play?

12:31 Alison: Yeah, I think the future for account-to-account payments is really bright. Not just saying, and kind of to answer your question earlier more directly, Australia's performing quite favourably versus other jurisdictions and we're seeing the demand even for interlinking of real-time payment systems across the globe starting to proliferate. And so I see, especially with the BECS decommission and acceleration of legacy payment systems, that really we need to, as an industry, address some of the key areas of feedback that could potentially be blockers to the transition together. 

And then from a business standpoint, Mark articulated it really well, but having businesses embrace the real-time capabilities earlier allows them to have a competitive advantage. And we're seeing growth already of new innovative use cases that can actually deliver real benefits to end customers that businesses serve.

13:25 Dave: Great, Mark? 

13:26 Mark: Look, I think, like Alison, the future of account-to-account payments is really bright here. I think the interesting thing for the industry that we're in is that there's a large demograph of user that are familiar with account-to-account payments from a lot of our customers, about 70%, either come from South Asia or Southeast Asia, where there are super apps. 

In China, for instance, where account-to-account payment is possible, and in India the same, they're looking for that experience to be replicated in Australia, and to them it's a much more personal way of doing business. So, I think as they begin to realise that PayTo and the NPP is permitting that, we'll see an enthusiastic uptake, and that will lead to a bunch of other use cases, which I think will be really exciting for us and the consumer.

14:15 Dave: When you think about card payments versus account-to-account payments, how do you think about that? Do you think there's different use cases depending on the customer, or one will be more proliferated than the other in the future?

14:30 Mark: I think even from our current customer feedback there is this hesitancy and perhaps it's just industry-specific so can't speak more broadly, but there is a hesitancy in our customer base to even use cards because there is still this fear, who are you, what is that reader, where does it tie to, what control do I have once it's been tapped and yes there are digital wallets that tokenize, etc, but the customer is still concerned. 

That level of concern I think will just not be present in account-to-account and given that a lot of our users are used to those systems and the controls that come with it and how it empowers them I think we will see an increasing proliferation of account-to-account payments and a declining, at least in our business, a declining use of card payments.

15:19 Dave: Yeah. 

15:20 Alison: I might add, so I think number one you have to provide customers choice. So if a customer wants to use card they should be able to use card, but if they want to use account-to-account they should have that option because there's multiple reasons why you also use card. But secondly the great thing about the NPP is they have all these new layers of security like you can use your email and your mobile instead or you know you've got confirmation of payee and then we've got CBA, for example, is innovating with Namecheck to add security and a level of comfort and trust over the top of the payments. So I think that will also support the growth into account-to-account payments.

15:57 Dave: I totally agree. I mean, that's interesting because I think the cards industry has had a lot of trust and security around that from a consumer perspective, and I think some of the things you just referenced there, Alison, I think it's what we're doing at the industry to build trust around account-to-account so that consumers feel more confident to go to that because they want to use that alternative payment type. And I think that's kind of what we're seeing from an industry perspective, and you both talked to that today. 

So, I just wanted to lastly say thank you to both of you for coming along today and sharing your perspective both from a CBA perspective and from a Dymocks perspective. It's really great to hear your views, so thank you.

16:31 Alison: Thank you. 

16:31 Mark: Thank you.

16:33 Alison: Great to be here.