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How PayTo prepares the way for open banking payments

PayTo can be combined with CDR data sharing, as a forerunner to open banking payments.

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23 Feb 2022
Australians increasingly expect that payments should be instantaneous. Yet T3 – that three day wait for money to come through – is an unwelcome reminder that bank account to account payments are lagging behind and need to catch up with modern life. PayTo is an exciting development in Australian payments that is expected to go live in mid 2022. It's a new method of third party payment initiation that will allow merchants to request real-time payments from customer bank accounts and it will also give customers better visibility and control of their upcoming payments. It's set to become a forerunner of open banking payments, giving Australian businesses and consumers a taste of the benefits that are already available in the UK and Europe.

What is PayTo?

PayTo builds on Australia’s existing fast payments infrastructure, the New Payments Platform (NPP), which created PayID, a system that swaps in an email address, mobile phone number or ABN as an account alias, rather than needing BSB and account numbers. The new framework takes this a step further by allowing merchants to initiate real-time payments from a customer’s bank account. PayTo and PayID will work together so consumers can easily set up new payments without needing to remember bank account details. PayTo can be used for one-off or recurring payments. It’s a new, efficient way for your customers to pre-authorise real-time payments from their bank account directly into yours.

What are the benefits of PayTo?

Consumers will have more visibility and control over their payments, because they can view and manage their PayTo arrangements easily from inside their bank’s internet or mobile banking channel. They can also see exactly when money is due to come out of their account for phone bills, flights and music subscriptions – to name just a few possibilities. Where PayTo gets really powerful though, for merchants and consumers, is the use case of variable recurring payments – for example, energy bills, which are regular payments for a different amount each time (unlike, say, gym subscriptions). Here, a PayTo arrangement can be put in place to take money out up to a maximum amount and on fixed dates. PayTo bridges the gap from clunky three day bank transfers to seamless merchant-directed payments. It's setting the stage for open banking payments to be launched in Australia under the Consumer Data Right (CDR), an ecosystem that will connect all of the moving parts of payments and data under one secure umbrella.In the interim, our focus at TrueLayer will be taking the complexity out of requesting a payment from your customer – what's called the "mandate" in PayTo – and making the payments process very simple for merchants.

How is PayTo a forerunner to open banking payments in Australia?

PayTo is bank account to account payment, initiated by a third party, like an open banking payment – except PayTo is not governed by the CDR rules. That means that by itself, PayTo can’t open up the benefits of secure data sharing.While we wait for the new CDR rules to be developed to enable action initiation, including open banking payments, companies like TrueLayer can use PayTo to give Australian businesses and consumers early access to many of the benefits of open banking payments, while we wait for the full benefits to come in the future. To find out more about how we expect open banking payments to work in Australia, read our guide here.As TrueLayer is an active Accredited Data Recipient (ADR), we can combine CDR data sharing and PayTo payment services under a single API, powering a realm of new use cases for our clients and their customers. We're launching our data API first, then we will launch our payments API when PayTo is switched on.Just one example of the potential of combining PayTo with CDR data is reducing payment failure rates. TrueLayer will offer merchants a more consumer-centric product that reduces payment failure rates when a customer doesn't have enough money in their account, or tries to use a fraudulent account. We already know from our international experience that this powerful combination can reduce failure rates by up to 20%.By combining PayTo with CDR data sharing, TrueLayer can power innovative open banking use cases, for example, in personal financial management, wealth, and lending.To find out more about how you can harness the combined power of PayTo and CDR data, contact us here.

About the author

Author profile

Product Manager
Pratik leads the payment product for TrueLayer’s Australia and New Zealand business. He previously held roles at BPAY where he worked on the near real-time account-to-account payments product Osko.

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