The New Payments Platform (NPP) has confirmed that a small group of payment service providers have now started offering PayTo to merchants and business customers.

PayTo — which has been developed in collaboration with financial institutions, fintechs and payment service providers — will allow customers to view and manage their direct debits through online or mobile banking and enable businesses to accept direct debit payments in real time .

The Commonwealth Bank (CBA) will be among the first financial institutions to activate payer customer accounts over the next few months alongside BankWest, Bendigo Bank, Great Southern Bank, People’s Choice Credit Union, RACQ and the RBA’s banking department.

None of the other big four were included in the original announcement. The RBA previously indicated that "several of the big banks" would not be ready to start in July as planned.

"We recognize the significant effort and investment required to develop PayTo, as well as the challenge of delivering multiple key payment initiatives at the same time," the RBA's head of payments, Ellis Connolly, said in May.

"However, these delays will significantly limit the availability of the service and the realization of the benefits to end users."

Billed as a modern digital alternative to the existing direct debit system, PayTo is expected to emerge as a payment option for online payments, in-app payments and recurring payments in the coming months.

Azupay, Ezypay, Monoova, Paypa Plane, Zai and Zepto will be the first payment service providers to offer PayTo to merchants and businesses. NPP Australia MD Katrina Stewart said the new service would revolutionize the way bank accounts are used for payments.

"PayTo removes uncertainty from the payment process and removes inefficiencies such as dishonor and disputes, as well as significantly reducing the risk of fraud," she said.

"For consumers, PayTo brings much better visibility and control over their payment arrangements, providing a much better digital experience than the already outdated direct debit system."

Ms Stewart explained that PayTo will allow organizations to receive fast and secure payments from customer bank accounts as an alternative to cards or online payment options.

The new service works by allowing a merchant or business to enter into an agreement with a customer outlining how much and when they agree to pay for goods and services.

This agreement is authorized through the customer's internet or mobile banking where it can then be viewed and managed. Businesses also benefit from a pre-verification that the customer's account details are correct.

"PayTo is a multi-year program of work requiring significant changes to existing back-office processes, technical systems and customer-facing digital channels," Ms Stewart said.

"Seeing innovators use NPP's real-time capabilities to bring to life improved digital payment experiences and the efficiency of a truly digital economy is exactly why NPP was built and launched by the industry."

John Bragg

John Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.