Banking: Michelle Baltazar
Online payments are virtually instant now, but users must stay vigilant
Back in 2006, Commonwealth Bank became the first Australian bank to trial a new technology by Mastercard called “tap-n-go”.
The label is self-explanatory: all the cardholder had to do was tap the card onto a Mastercard PayPass terminal, wait for the beep and voila! – the transaction would be completed.
Today contactless payments are the norm. A retail shop that can’t offer tap-n-go would lose a lot of business.
A similar phenomenon is happening in the area of online interbank payments. It’s hard to imagine that only two years ago you had to wait at least one to two business days to receive a payment transferred to your bank from another bank. A payment made on a Friday afternoon wouldn’t appear in your account until the following week. This seemed odd when tap-n-go was ubiquitous.
But the new payments platform (NPP) called Osko changed that. When I saw the Osko logo in the “pay anyone” tab of my online banking app, I didn’t think anything of it. There was no fanfare nor elaborate explanation from my bank about what it meant when it first appeared. It was as if someone assumed I would figure it out. Like deciphering foreign road signs when you’re travelling overseas.
It is intuitive enough to use and beneficial enough to be adopted widely (who doesn’t want real-time payments?).
From a standing start in February 2018, 187.57 million Osko payments with a combined value of just under $186 billion have been sent between banks.
If you are unfamiliar with Osko, here are its key features:
• Transferred funds are available to use within a minute of the payment being made. Before Osko, some payments would appear in your account but didn’t clear for another day or two.
• There are no cut-off times. In the past, payments made after close of business wouldn’t be processed until the next day. With Osko, the transaction is completed instantaneously. That’s why the payment is called “real time” or “near real time”.
• Account holders have the option to set up their own PayID, which could be a mobile number, for easier payments transfer. That way, the person making the transfer doesn’t have to memorise or write down BSB and account numbers. A mobile number also contains fewer digits, which reduces the chances of data errors.
• Banks like to describe this new kind of real-time payment as “data rich”. In the past, the payer or the payee had a maximum of 18 characters to provide a payment description. This can limit the information to the name of the payment recipient or a code for the reason for payment. With Osko (or any other NPP application), the account holder can provide information in up to 280 characters. You can even add emojis if you want. Allowing for more information is a boon for small business owners and opens up this type of transaction to data analytics that couldn’t be done before.
While real-time payments has its perks, it also poses new risks. In August, around 90,000 accounts from various banks, including Westpac, ANZ, Commonwealth Bank and NAB, were compromised. Cyber criminals accessed the banking details of customers using their PayID, which is usually linked to their mobile phone number. While withdrawals couldn’t be made without the account holders verifying the transaction first, they were left exposed to phishing attacks. Banks are now on the alert to detect fraud risk before it affects customers.
Osko is just the first of many future applications using NPP. Despite the obvious benefits of real-time processing, some financial institutions aren’t offering it to their customers, while some only offer it to selected segments. More should be done for wider adoption and better security controls. Check if your bank (or non-bank) offers Osko payments.