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How CDR is solving Australia’s perennial payments problems

PayTo will pave the way for open banking to meet payments – and solve the perennial issues facing the industry.

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19 May 2022
The payments infrastructure in Australia has been long plagued by problems including delays, bounce backs, and failed payments at significant cost to businesses.This is about to change with the federal government supported New Payments Platform’s PayTo capability to go live on June 30, 2022. PayTo is a major upgrade to the payments system which will herald a new era of fast, real-time payments and beyond that introduce a range of new innovations including the ability for pre-authorisation of one-off or recurring payments.

So what happens when CDR meets PayTo?

The result is data-enabled payments and solutions for these perennial issues.TrueLayer is working with leading payments platform Monoova to enable data-enabled payments using the Consumer Data Right (CDR) to access open banking data in Australia. The benefits of combining CDR data with payments start when onboarding customers and continue through the procure-to-pay process at the time of invoicing. They are especially powerful when setting up recurring payments for regular periodical subscriptions or an ongoing commercial supply arrangement. Facilitated by TrueLayer, Monoova’s clients will benefit from customer-permissioned bank data obtained in accordance with the CDR Rules to empower payments.Together with Monoova, TrueLayer will enable innovative use cases for CDR data plus payments, including: faster customer onboarding, account verification, balance checks, and verified instant payouts and withdrawals for ecommerce, wealth and gaming apps. Here are some of those perennial problems that CDR data-enabled payments will solve:Accurate, safe customer informationFor businesses, the better the information they have about their customers, the better they can serve them through reducing friction in payments.This means knowing the identity of the payer and payee, having the correct bank account information, checking the balance is sufficient, and understanding insights into financial behaviour. Put simply, CDR is the best way to get all this information – it’s real-time, secure and permissioned, with strict privacy controls in place.Human errorMistakes happen, and a common one is that people get the BSB or Account Number wrong when transferring money. The legacy fix for this has been to send a 1 cent payment and see if it goes through or bounces. Something that is often responsible for delays in onboarding a customer.Account verification using CDR is a much better solution at this early stage in the customer journey. Insufficient fundsPayments will typically bounce or fail if there are insufficient funds in the account. It means businesses are forced to guess when, or if, there will be enough money to try to take the payment again. To try to prevent a dishonour, some businesses have been using insecure screen scraping to log in to the payer's online banking and check the balance before taking the payment. The problem with this clunky work-around is that the information may not be accurate in real time, plus sharing online banking credentials with a third party is a cyber security nightmare.PayTo will provide a notification in real time of a failed payment … but no one wants a fast failed payment! The CDR solution is to perform a real-time open banking API call to check the bank balance before taking the payment. The benefit for businesses in combining CDR and PayTo will be the ability to use TrueLayer’s secure APIs to do a secure and permissioned balance check in real time using open banking. By including this simple check in the payments workflow, CDR data can reduce the risk of these failures altogether, saving businesses valuable time and money.Account owner name checksIt’s important to know the identity of the person you are making a payment to – it’s part of KYC and KYB – and helps to prevent fraud. The clunky work-around for this problem has been for businesses to request a bank letter, bank statement, deposit slip or cheque, to match the name of a payee to their BSB and Account Number. The better solution is to use CDR – with the payee's permission – to confirm the name of the account owner. With additional permission, you can also gain insights into financial behaviour to really understand your customer's needs. While PayID does confirm the name of the payee when you are in the process of making a payment, it’s not yet widely used by businesses, and by the time you are making a payment, you’ve already onboarded the customer. The advantage of CDR is that you can use it much earlier in the customer journey and your payments workflows, plus it works for all Australian bank accounts. Using CDR to confirm the account is in fact held in the name of the intended payee will also help to reduce fraud from, for example, business email compromise.

A new era begins for Australian businesses and consumers – CDR data-enabled payments

We are at the beginning of a new era in payments. Combining CDR with PayTo for data-enabled payments will profoundly change the landscape by removing the need for clunky work-arounds and unsafe screen scraping.To learn more about open banking, the CDR and TrueLayer, visit our website or reach out to us using the contact form.

About the author

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CEO – TrueLayer Australia & New Zealand
Brenton Charnley leads TrueLayer's Australia and New Zealand business, where he is responsible for operations, supporting our global partners to launch in Australia and onboarding new partners to integrate with the TrueLayer platform.

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