Memorandum of Understanding between RBA and NPP Australia Limited

The Reserve Bank of Australia (RBA) and NPP Australia Limited (NPPA) have in place a Memorandum of Understanding (MOU) that was originally signed in 2019 and updated in April 2021.

The New Payments Platform (NPP) is open-access infrastructure for fast payments in Australia that was launched in early 2018. The NPP was developed via industry collaboration, including with the RBA, to enable households, businesses and government agencies to make simply-addressed payments, with near real-time funds availability to the recipient, on a 24/7 basis. The NPP is owned and operated by NPPA, a public company limited by shares. The RBA is a shareholder of NPPA along with 12 initial participating financial institutions.

Aside from being a shareholder in NPPA, the RBA has an ongoing involvement in the NPP from both an operational and policy perspective:

  • The RBA operates the Fast Settlement Service (FSS), which provides real-time settlement of NPP transactions between financial institutions on a 24/7 basis. The RBA's Payments Settlements Department has responsibility for this function.
  • The RBA is a direct participant in the NPP in its capacity as a transactional banker to the Australian Government and its Departments and agencies. The RBA is making NPP services available to its government clients, including the ability to make real-time payments and collect public monies via NPP payments to government accounts. These services are provided by the RBA's Banking Department. The RBA does not offer any banking or related services, including NPP-related services, to the public or non-government commercial entities.
  • The RBA is the primary regulator of the payments system through the Payments System Board. Under the Payment Systems (Regulation) Act 1998 (PSRA), the RBA has the power to designate payment systems as being subject to its regulation and then to impose standards and access regimes on those systems or on participants in those systems on public interest grounds. The RBA's Payments Policy Department has responsibility for providing advice to the Payments System Board.

In recognition of the importance of the FSS to the operation of the NPP, the NPPA Shareholders' Agreement gives the RBA the right to appoint the Head of its Payments Settlements Department, or a suitably qualified senior member of Payments Settlements Department, as a director of NPPA. The RBA may also choose not to appoint a director, or to withdraw its appointment of a sitting director. During any period when there is no RBA-appointed director on the NPPA Board, the RBA has the right to appoint an observer, who may attend NPPA Board meetings but would not have a vote. As of September 2021, the Bank has chosen to no longer appoint a director of NPPA.

Given the various responsibilities of the RBA, there are benefits from the RBA being closely involved with NPPA. However, this could raise actual or perceived conflicts between the duties of the RBA as regulator of the payments system and its involvement in the NPP from an operational perspective. The arrangements set out in the MOU for how the RBA interacts with NPPA, including sharing of information, are designed to address any actual or perceived conflicts.