Fast, safe, smart: the potential business and customer benefits of PayTo

PayTo is a payment method that makes payments potentially faster, safer and more seamless, resulting in a better experience for both businesses and their customers. In a pilot program led by CommBank, two Australian businesses – a telco and an education provider – adopted the tech, finding business benefits that offer a positive outlook for their respective industries.

The technology allows businesses to securely obtain authorisation for recurring or one-off payments directly from customers’ bank accounts via the customers’ banking apps or online banking.

Authorisation for PayTo withdrawals can be established digitally with the paying customers’ account details verified in near real-time, paving the way for near instant funds collection and settlement.

PayTo in practice

CommBank is piloting PayTo with Australian businesses More Telecom and Dymocks Education to make PayTo available to their customers. PayTo helps reduce the administrative burden for these businesses, and gives their customers greater security, transparency of payment status and control over their payments than what they currently have.

Alison Chang, General Manager, Real Time Payments and Payments as a Service, CommBank, says PayTo supports several use cases and can be used where a business receives recurring or one-off payments in varying amounts, which in the past have been made using direct debit or cards. “PayTo can be integrated into a business for their end customers to pay for utilities, fund a digital wallet, transfer funds in me-to-me transactions, buy things in an app, online or instore, as well as subscribing to services,” she says.

The security advantage

PayTo has several advantages over existing payment methods such as direct debit, including better security, instant visibility over the status of payments, and easier reconciliation and back office functions.

Firstly, because the payment is authorised through the customer’s online or mobile banking app, both the customer and business benefit from the secure authentication practices used by banks.

PayTo can be integrated into a business for their end customers to pay for utilities, fund a digital wallet, transfer funds in me-to-me transactions, buy things in an app, online or instore, as well as subscribing to services.
– Alison Chang, General Manager, Real Time Payments and Payments as a Service, CommBank

Secondly, there is an additional layer of protection when payments are made using the New Payments Platform (NPP), Australia’s fast payment infrastructure, which centrally stores within a secure and encrypted database details of the PayTo agreements. This helps to safeguard banking details from unauthorised parties that attempt to decode the information.

Thirdly, PayTo supports almost instant confirmation of customer account details and funds availability at the time of payment.

These all help to reduce the likelihood of failed transactions, chargebacks or disputes that can arise due to fraud, insufficient funds or incorrect account details.

The payments have automated transaction reconciliation with payments tied to the PayTo agreement, making for easier payment reconciliation. There are also flexible payment fields and additional data that help to reduce payer errors.

Businesses can reduce their administrative burden by replacing paper direct debit agreements with PayTo’s digital and data-rich alternative. This, in turn, makes PayTo payments easier to establish, amend and reconcile.

PayTo also supports payer customer self-service, as payer customers can view and manage their PayTo agreements through their banking app. Payer experiences are also improved with the option to use PayID, making it easier for customers to provide their payment details without having to share their BSB and account number.

While PayTo improves payments security and user experience, it is important that businesses and payers remain vigilant for scams and frauds. PayTo payments are processed in near real-time and do not have consumer protections like card schemes, which can make it difficult to recover funds for payers.

Case study 1: Faster tuition payments

Dymocks Education, a Sydney provider of in-person and online tutoring to school students, is piloting PayTo to collect fees for recurring weekly and full term tuition as well as one-off payments for self-paced courses or holiday programs. Dymocks Education’s current bank transfer payment collection method could take up to one week to clear before it knows whether or not there has been an issue with the payment.

“This makes it difficult to onboard the customer effectively and without delay,” says Mark Buckland, CEO, Dymocks Education. “As PayTo is a near real-time payment solution, it dramatically reduces the delays caused by our current bank direct debit solution.”

Buckland says PayTo allows Dymocks Education to set up a digital PayTo payment arrangement on the spot and know when it has been accepted. By integrating through Application Programming Interfaces (APIs) which is a set of routines, protocols, and tools for building software applications¹, Dymocks Education would know when a PayTo agreement has been suspended or cancelled, or when a payment has failed.

"As PayTo is a near real-time payment solution, it dramatically reduces the delays caused by our current bank direct debit solution”
– Mark Buckland, CEO, Dymocks Education

Improving payments experience 

As the PayTo payment is tied into the business payment architecture, API flags enable Dymocks Education to almost immediately update and reconcile enrolment and accounting records, which significantly reduces manual handling.

PayTo’s near real-time payments also provide a better experience for Dymocks Education customers — no delay with enrolments once they have paid, almost immediate debit of funds so they have certainty the payment has been made, and the ability to authorise PayTo agreements and manage them online or from the convenience of their banking app.

“One of our motivators has been an increasing concern from customers about the security of their data and payment details,” says Buckland. “In an era of ever-increasing data breaches, customers are understandably hesitant to provide payment identifiers and want to be more in control of their financial arrangements. We see PayTo as a perfect way to give customers the control and certainty they seek all through a system they already have confidence in.”

Case study 2: Giving telco customers transparency

More Telecom, an Australian telecommunications company, also sees significant benefits to their customers from the PayTo payment service. “PayTo is the latest innovation for us in our continued journey to offer Australians more time back at home and at work, particularly for small business, instead of them spending hours trying to stay connected and pay their bills,” says Ryan Marks, Chief Innovation Officer, More Telecom.

More Telecom plans to eventually replace its direct debit payment facilities with PayTo. It also intends to offer PayTo at online checkout as an alternative to credit card payments to new customers signing up to its services. Currently, new customers need a credit card to sign up. More Telecom intends to make PayTo available to customers without credit cards, giving customers reassurance that they’re not providing credit card details online.

With PayTo, the business customers will receive notification of when payments are made and any pause or cancellation of payments, which improves transparency and efficiency for business customers using PayTo. “This efficiency also enables More to provide a better experience for the customer in relation to payment queries and billing issues, in a faster and easier way,” says Marks.

“PayTo is the latest innovation for us in our continued journey to offer Australians more time back at home and at work, particularly for small business, instead of them spending hours trying to stay connected and pay their bills.”
– Ryan Marks, Chief Innovation Officer, More Telecom

A national payments ecosystem

PayTo was developed by Australian Payments Plus (AP+), a member-owned organisation comprising Australian banks, some of Australia’s largest retail merchants, payment providers and payment processors. PayTo is a key component of a broader initiative to transition all payments to the NPP. AP+ has a dedicated team of nearly 40 people driving this effort, supported by a structured program to facilitate the industry's transition.

The initiative supports NPP participants and other financial institutions in migrating direct-entry payments to the NPP. It also focuses on broader industry readiness, providing education and change management support.

Beyond direct debits

Along with replacing direct debit payments, Oli Mitchell, Product Management Lead, AP+, says, “PayTo can be used by businesses to manage disbursements such as payroll, dividends and accounts receivables, by employers sending superannuation payments, and by purchasers completing property transactions”.

“The product is inherently flexible,” says Mitchell. “It can be used with multiple frequencies — one-off, periodic or ad hoc — and with multiple amounts — fixed usage-based or capped — and so the use cases are similarly diverse.” 

Because PayTo agreements can effectively be used as “payment authorities”, they can also be used by businesses to outsource routine payment processes, Mitchell says. For example, a business might set up a PayTo agreement with their payroll provider for the payroll provider to handle payroll up to a pre-approved limit, or their accountant to handle invoice payments.