PayTo is here, but this is just the beginning: Here’s what the industry needs to know

A new payments system, PayTo, has just begun its rollout in Australia. Over the upcoming months, payment providers will be coming online, with all major banks committed to providing PayTo by March 2023. 

It’s important to remember that, although the introduction of PayTo is historic, there is still a lot to do behind the scenes before all of Australia is “PayTo-ready”.

This is just the beginning of the future of payments in Australia and while PayTo is significant, it is also one piece of a broader payment puzzle.

Based on our discussions with the market over the past year, here are three things we believe merchants should know as PayTo rolls out:

1. PayTo has very clear use cases, and others will emerge with adoption

There is no one-size-fits-all payments strategy, but we know that the introduction of PayTo will be a game-changer for Australians.

PayTo will support a range of use-cases – and one thing we are already hearing from the market is that this technology is capable of solving both individual aspects of a merchant’s payment puzzle (such as migrating customers away from one method of payment) or it can be offered as an entirely new way to pay altogether (e.g. e-commerce businesses).

In this way, the PayTo journey might begin as solving one issue in a business’ infrastructure but expand further into the organisation over time as PayTo coverage and adoption increases.

This technology will significantly impact merchants with challenges they need to address that could not previously be solved by other payment methods. 

For example: for companies where instant customer verification is needed, PayTo will allow insurance, B2C financial companies, and media & entertainment companies to access bank-to-bank payments. For many, this will be the first time this feature will be available and could facilitate not only a reduction in costs but also fraud.

Previously, credit cards were the only option for subscription box businesses or telcos, where instant payment notification is required before they can send a physical item out to the customer.

PayTo will now offer the instant payment notification needed to be able to provide a more secure solution that bypasses expensive fees – and potentially reduces failed payments in the future as bank accounts, unlike credit cards, don’t get lost, stolen or expire. 

This will be a game-changer for e-commerce and payment-on-file businesses as they can now – for the first time in Australia, offer a bank-to-bank alternative that is cheaper and more secure.

It has the added benefit of appealing to a new generation of customers increasingly averse to credit cards.

For other merchants, we’ve found PayTo has a strong appeal for those wanting to move customers away from different payment methods with high fees, high customer errors, high failure rates and services requiring large amounts of manual processing and reconciliation. 

A longstanding pain point in automotive finance has been processing the final payment (balloon payment) on a vehicle. Typically, BPAY or EFT has been used to pay these, but these services take days to process. PayTo solves this entirely by enabling real-time payments, something that has never been able to be done on this scale.

One merchant has even stated that using PayTo while collecting payments in their call centre could reduce their call times by over nine minutes! 

Merchants can find out more via our PayTo explainer page.

2. Education and awareness are vital in driving uptake.

For PayTo to be successful, Aussies must choose to use it. They are the key stakeholders that must be on board. 

Why? PayTo is a customer-initiated payment that must be authorised using their banking app. They must see the value for it to become a preferred way to pay, and driving awareness of PayTo starts with bank readiness and infrastructure availability. 

While the banks’ deadline to be PayTo-ready is March 2023, the sooner banks are online, the sooner more bank accounts will be PayTo enabled - and the sooner more consumers can use it. It also means the banks will need to communicate to the public the purpose of PayTo, how to use it, and its benefits.

The other side of the equation is merchant awareness. We’ve had many discussions with organisations of all kinds, and they tell us that PayTo is not yet a well-known concept, and more education is needed. 

Payment providers have a responsibility to equip their merchants with the knowledge to harness PayTo’s benefits and provide guidance on its deployment and use in-market.

We wanted to make sure our merchants have the best possible PayTo experience and that's why we've developed PayTo University. This free online course walks you through everything you need to know about PayTo. We’re releasing beta API documentation for interested merchants, followed by a Sandbox environment to support PayTo integrations. But we’re also available to consult on how to best leverage PayTo as part of your overall payments strategy. 

The New Payments Platform Australia (NPPA) also has resources available to access here.

3. PayTo is part of a big-picture market shift.

Assessing current financial strategies is high on the priority list for business decision-makers. We’ve found that PayTo has been the excuse for them to stop and consider how they might improve and future-proof their payment strategy. It’s been the catalyst for many to dive deeper into the areas of the organisation where payments occur and consider if, how, and when to make improvements.

We’ve taken a consultative and collaborative approach to PayTo and have sought feedback from merchants on how they would use it. This consultative approach is helping us shape our PayTo offering to ensure it's a “user lead” solution.

But while PayTo is important, it is really just one piece of the puzzle.

Globally, we see that businesses are recognising the best way to collect payments is from a bank account. PayTo in Australia will be instrumental in enabling this. Still, it will take time until every Australian has access to and is comfortable with this new technology which means Direct Debit will need to remain an important part of the payments ecosystem in the meantime.

This means that some merchants looking to roll out PayTo now may be able to continue to take direct debits as a fallback to improve coverage while the banks come online. Others may start building behind the scenes and launch PayTo once it is available to all Australians. 

Every organisation's payment strategy is different. That's why taking time to understand each merchant's business objectives while helping them find and solve payment efficiencies is so important.

4. So what does this mean for your organisation? 

Today there will be no significant changes to the way you take payments, but there could be in the next six to 12 months - and inevitable once direct debit is phased out. 

The best thing you can do right now is prepare by getting educated and getting PayTo on your roadmap.

5. But don’t worry, it’s just the beginning.

It’s important to remember that today is only the first step towards widespread integration and consumer familiarity with PayTo.

Every business must take its time in determining how PayTo can enhance its broader strategy. There is no ‘quick fix’ when it comes to managing business finance. Still, if correctly harnessed on an individual level, PayTo has the potential to eliminate age-old headaches across a swathe of industries.