Australia: Direct Debits Face New Competition

PayTo is expected to become a digital alternative to periodic payments and other similar arrangements.

Australia’s first payment service providers have started offering PayTo to merchant and business customers. PayTo is expected to become a digital alternative to direct debit for retail customers and to add certainty to B2B transactions.

The service was developed over several years by Australia’s real-time national payments infrastructure provider, the New Payments Platform (NPP), and a consortium of financial services firms.

PayTo is expected to become a digital alternative to periodic payments and other similar arrangements.

To succeed, it will need to remove uncertainty from the payment process, reduce inefficiencies and greatly reduce the risk of fraud, according to Katrina Stuart, managing director of NPP Australia. “For consumers, PayTo brings much better visibility and control over their payment arrangements, providing a far superior digital experience compared to the now outdated direct debit system.”

Companies benefit from the upfront validation that the customer’s account details are correct when a PayTo Agreement is authorized.

It works by enabling a merchant or business to establish a ‘PayTo Agreement’ with users. These agreements are then stored within a customer’s internet banking or mobile banking app, where they can be viewed and managed, making it a secure option for the customer.

PayTo checks upfront for adequate funds in the paying customer’s account when a payment is initiated, reducing rejected payments and manual exception handling.

“Businesses and corporates will also be able to use PayTo to authorize a third party to facilitate real-time payments on their behalf, such as payroll and accounts payable,” says Stuart.

She confirms that the earliest adopters will include specialist merchant payments firms and fintechs: Azupay, Ezypay, Monoova, Paypa Plane and Zai–all sponsored by NPP participant Cuscal–and Zepto that will offer PayTo services as an NPP connected institution.

The list of banks Stuart expects to offer PayTo options to their customers “in coming months” includes the country’s largest bank, Commonwealth Bank of Australia and its subsidiary BankWest, along with Australia’s fifth largest, Bendigo Bank, and large mutuals Great Southern Bank, People’s Choice Credit Union and RACQ.

Most remaining customers will have PayTo enabled on their accounts by April 2023.