Comment | Goodbye cash as faster e-payments on the way

It's one of the most important pieces of public infrastructure so far this century, but most people haven't heard of it.

It's one of the most important pieces of public infrastructure so far this century, but most people haven't heard of it.

It's one of the most important pieces of public infrastructure so far this century, but most people haven't heard of it.

It's called the National Payments Platform or NPP and, after several years in the making, it's finally going live soon after Australia Day.

When it does, you'll be able to make "real-time" electronic payments to other Australian bank accounts – meaning the funds arrive within minutes. You won't even need to know the recipient's BSB and account number, just an email address, mobile number or their "PayID".

When politicians talk about infrastructure, they usually mean projects requiring physical construction – roads, railways, bridges, tunnels, airports, stadiums, convention centres, the NBN, Snowy Hydro...

But for my money, the NPP will be far more transformative for the Australian economy than most physical infrastructure.

For starters, faster payments will reduce a lot of the friction with transactions, not only between businesses and their customers but also between individuals.

Currently it usually takes about two days to transfer money to an account at a different institution, which is a huge disincentive.

Fast payments between institutions should reduce our need for cash, and put the final nail in the coffin for cheques. 

On a night out with friends, you'll no longer have to go out of your way to get cash to pay for your share of dinner or the babysitter back home.

You'll be able to buy secondhand goods, including big purchases such as a car, or pay tradies with far greater confidence and convenience for both buyer and seller, even on weekends. Eventually even house hunters may be able to ditch the chequebook – currently they need one handy in case they want to bid at an auction.

That greater efficiency should have an economic pay-off.

Second, the NPP should enable innovation in financial services. That's an overused word, but bear with me.

The platform was specifically designed to allow multiple, competing products and services – something that sets it apart from preceding, international fast-payment gateways.

The first product on the platform is Osko, which has been developed by BPAY to facilitate fast electronic payments – the core purpose of the NPP.

But there'll be more over time. I expect an array of new products and services using the platform to proliferate, from both existing players and start-up companies in the "fintech" (financial technology) space. If that ain't innovation, I don't know what is.

Automation in accounting is likely to be one area ripe for innovation. Currently you can only send a few characters of extra information with a transaction. The NPP will allow far more information to be recorded with each transaction, such as longer descriptions or attachments such as invoices or receipts.

The final way the NPP will benefit the Australian economy is because it will boost competition and help break the stranglehold of the big four banks.

Customers can already make real-time payments to customers of the same bank, which is a powerful incentive to stay with a big institution. 

But if payments only take a few minutes regardless of who you bank with, that's one less reason not to shop around and find better deals with smaller banks or credit unions.​

Caitlin Fitzsimmons, Fairfax Media.