Payments, liquidity and digital solutions with GTS Westpac’s Nish Dharmaratne

Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our global content resource examining big themes that will impact the C-suite and executive boardrooms worldwide. Today, we’re exploring the future of money, and I’m happy to be joined by Nish Dharmaratne, Managing Director, Global Head of Product (Payments, Liquidity, and Digital Solutions) for GTS Westpac. She also is a board member for the Australian Payments Network and an advisory board member for Women in Payments. I’m pleased to hand off interviewing duties today to my Protiviti colleagues, Director Ruby Chen and Senior Director Rupesh Mahto. Rupesh, I’ll turn it over to you to begin.

Rupesh Mahto: Nish, so good to meet you again. It’s always a pleasure to talk to you about what’s happening in the payments world. Thanks for doing this for us.

Nish Dharmaratne: Thank you, Rupesh. Thanks for the opportunity to join you and Ruby today.

Mahto: So, Nish, as you are at the center of payments, there has been so much impactful changes in the payments landscape over the past few years in Australia. I can name a few. Like real-time payments, using NPP, Osko, and now PayTo. There have been strong advancements of mobile app payments. There have been great developments in open banking and how to make payments frictionless using the infrastructures that we have developed over the years in Australia. My question to you is, what’s next? What’s going to change in the next three to five years?

Dharmaratne: That’s really a good question. I’ll break that into a couple of parts. In terms of trends, clearly, there are trend-setters and trend-setting, and opportunities that’s plenty. What is really interesting, Rupesh, is in general the payment volumes have been growing. As we all know, the way in which the Australians are making payments have changed, but the most important point is the way in which consumers, particularly individuals, the way they have started adopting into the new payment solutions. What is most interesting is also younger consumers, between, say, age 18 to 29, are the highest adopters of mobile devices. So, the demographic and the flavors are changing, which is also, obviously, helping to set the trend.

I think we are also picking up a number of global trends. Obviously, the wallet usage of mobile wallets has picked up. It’s part of a very tech savvy consumer who wants to make the payments. Whether you make a payment here in the Australian market or overseas. What is also interesting to see is the decline in cash. So, there has been a 90% plus decline in the cash usage in the last—again, in the last decade also and very small population of institutions using cash for various very specific payments now. So, if you will think about it, the overall trend is people are becoming more and more savvy with payments, which wasn’t the case in the past, because average consumer would walk into a bank branch most likely and discuss their payment methods. If they are making a payment overseas or if they are making a payment to buy a house, there are very specific requirements to meet. Now things have become extremely merged into a very, very digital experience. So, the Australian Banking Association, they prepared a report around digital wallets. One of the points that came up in that is about 746 million was the usage of digital wallet total usage in 2018. It has gone to a staggering 93 billion by 2022. So, a lot of these were based on people are registering their cards into the digital wallet which is now standing to be about 15.3 million registrations of mobile wallets. So, that’s clearly one trend which is—I feel that the consumer choice and consumers are making decisions.

The second one is payments going real-time really, really, really fast. We make about 650 billion worth of payments every day. Most of you, and Rupesh, you mentioned, is that the Australian real-time payment system, which is also called New Payments Platform, NPP, it has grown since its launch back in 2018. Today, this payment process is about 1.3 billion transactions and $1.5 trillion worth of transactions. It is still not at the 100% usage. If you compare with the 650 billion we make, it’s still—only a fraction of it has moved to NPP. As you rightly called out, the new functionalities or overlay service that are getting built on top of real-time payments. Things like PayTo, which is equivalent of a request to pay service in other markets, is actually going to change the game really, really quickly next year. We feel that there are not only banks at play anymore because usually we have four major banks and about 20 other tier two, tier three banks, and then there’s about hundreds of credit unions and smaller agencies that provide banking services. But when you look at the NPP there are a hundred payment providers connected with NPP. They vary between fintechs, new ventures, up and upcoming companies that are providing different parts of the payment value chain. So, the reach is higher because it reaches about 90 million customer accounts, and the depth is getting better because of the different types of solutions. All these hundred providers are wanting to provide to the market. So, I feel that the second trend, as I mentioned, is how fast can real-time go, it’s going to go really, really fast.

Mahto: I totally agree. The payments which was quite invisible in the ecosystem has started becoming quite visible to our end user. My question to you is, from you, wearing a Westpac hat, how are you taking care of end user experience as a key differentiator in your role?

Dharmaratne: There are literally two camps as far as the Australian market is concerned. The larger institutions, banks like ourselves, and then there are institutions that are—that have been investing through various investments into fintechs, financial technology. Now, there’s a lot of collaborations going around, but at the same time, we are all used to batch-based payment systems. What it means is we accept the file from a customer and we process two times a day and we are done by the end of the day if possible. The customer then gets the money in day two or day three. Now, that really has changed in the last few years anyway because of the introduction of APIs and host-to-host systems being in a mature stage anyway. What is really interesting about the technology is if you look at the way in which the banks themselves, put together just the banks, invested 28.5 billion from 2005 to 2022, and this is also ABS statistics I’m sharing with you. What that means is, banks have invested eight times over to their technology. So, that clearly says that if you are an institution which is not cloud native, not on cloud, has legacy infrastructure, you got to move and you have a plan to move to cloud. If you haven’t started using latest technologies like APIs and now AI, et cetera, you’re going to be lagging behind.

So, all of that investment is really going to make the customer experience better, because the customer is looking at a lifestyle choice when it comes to payments. They don’t want to make a different decision when it comes to a payment like—a good example we all know, ride-hailing through an Uber or through any other service provider. You do not want to be able to think about their payments. You just want to get to—from point A to point B. Get out from the taxi. Someone else is going to take care of the payments. What is really important for the consumer is, what does that mean from a loyalty and rewards perspective? So, consumer experience on one side. The more digital it is, the better off we will all be. But also, how that’s going to get connected to something that’s going to monetize for the consumer? It’s going to be really interesting because not everyone will be able and has the economics to be able to provide a reward or a loyalty every time you use a service. But consumers, and especially the demographics I mentioned earlier, the 18-to-29-year-olds that are entering the workforce and spending, will expect that user friendliness, will expect that reward, and will expect to be loyal to the brand if everything works fine.

The other part of your question, Rupesh, was around—I want to share an experience and an example with the new feature we are building on a New Payments Platform called PayTo. PayTo for payers is already live. That’s a request to pay service for those who are not familiar with the market. That’s going to be end-to-end digital. What it means is you literally walking into a merchant or let’s say your gym. You request—the gym wants you to pay $50.00 a month. There will be an electronically or digitally created mandate that gets accepted right across from the merchant’s bank to your bank, and then you will accept through the banking app or through the banking channels. That’s going to happen within two to three seconds. True, it hasn’t come into the market fully yet. We are all launching that in the coming year. It will reach some maturing because we are working with a number of institutions, particularly the biller organizations to help them to understand this is going to be the new way of collecting your receivables. This is going to be the new way of collecting—faster collection. So, let’s work together. That’s going to be a really, really interesting customer experience, end-to-end digital.

Ruby Chen: Hi, Nish. It’s so great to be able to interview you. You talked about emerging trends, somewhat the user experience. I was so mesmerized by the new PayTo, which sounds so fascinating. Now, we’re moving on to risk and governance, a topic which is equally as important, I think. So, as we move into new and enhanced digital experiences around payments and the transfer of money, what type of risk, governance, and regulatory standards do you think is necessary?

Dharmaratne: Good question, Ruby. I will take the question in reverse order because I think it’s important to set the context in terms of regulatory, then governance, and then I’ll talk a little bit about the risk. So, regulatory standards. The Australian system or legislation has not been reviewed for the last 15, 20 years. The Check Act goes back to the 1980s, 1990s. The Payment Systems Regulatory Act, which talks about payment systems regulation was back to 1998. There hasn’t been any revision of these legislations for a very long time. Now, this really links back to the announcement and the strategic payment modernization plan that the government and the treasury is keen to implement in Australia. What we’ve actually done is we already started consultancy on the payment systems regulatory act, and there are a couple of discussions happening in terms of feedback of how to go about this change.

What does that mean? As you know, with the plan, we are looking at phasing out checks in 2030 and also looking at a way to reduce the batch-based system called BECS which is a batch-based exchange system for low value transactions. We’re thinking of looking at an organized way of phasing that out as well into the future, quite similar to the checks timeline as well. So, I feel 2023 and 2024 is going to be a very, very exciting time for us with the changes that are proposed through these legislative reviews that are taking place now.

The second part of the governance and regulatory standards is, we will expect also some level of payment standards body to be set up and that will then take care of some of the work we are doing today on enriching messages, ISO 20022 standards, and the things we need to do even around fraud, et cetera, is all going to be part of the standards that we expect through a standards body. That’s going to be a piece of work that the industry is going to work towards.

The last part about the governance is licensing. Australia has been a very free market led by demand and supply of consumer choice, consumer rights prevail over many things. But we’ve never had—other than the standard banking licensing regime, we’ve never had a payment service provider licensing. So, you do find a lot of the global brands and global providers who are in this market doing extremely well providing the services, but there’s not much of governance going around it. So, the second part of that really, Ruby, we expect that the governance is going to get better, obviously, for the betterment of the consumer.

Now, let’s talk about risks, because I think the biggest risk at the center of all of the risk categories is fraud and scams. This is really a huge, huge area that the banks, all of the participants, including the government, is really keen to look at some solutions or enhance the existing capabilities that we built. So, the Australians put together—lost about 3.1 billion from scams last year. Mind you, that’s just the reported number. So, the common types of romance scheme scams, lottery scams, money transfer scams, even grandparent scams, who would think, right? So, consumer protection therefore is top of mind for the regulator, government, and ourselves as banks. So, the government through the federal budget, they backed a package of $86.5 million to be able to combat scams and online fraud. On top of that, major banks already established means of fraud checking, payment verifying, and we ourselves at Westpac we have payment verification service offered to the customer when they set up payers in the online banking channel. So, this risk area is a huge area for us. There’s also word that the industry bodies are looking to implement a common confirmation of payee solution that will get discussed in the coming months as well. So, there’s a lot of focus and attention. Everyone is doing their best but frauds and scams continue to be a challenge for many Australians.

The second risk, which I think is really important, is the cyber risk. That is not uncommon to any market anywhere in the world. Cybersecurity, an enhanced means of contingencies in the event of a cyber scenario, is something that the prudential regulator is very keen for all regulated entities to implement and make sure we have the contingency plans to support our customers.

Chen: Another area that is of very big interest to me is women in payments. So, you served on a few boards and you’re the advisory board member for the Women in Payments organization in Australia which reflects your passion around this area. What are you views towards the role women can play in driving the future of payments industry or ecosystem? Why do you think it is so important to have more women involved in shaping the future of the industry?

Dharmaratne: Yes. I think this is the hardest question of all of it. The others are pretty easy given—in the midst of building and delivering solutions to the market. This one I never thought as anything that is—differentiates a person as a female leader driving through changes. Actually, it’s a very good question, Ruby, because when I look back, and I’ve been in the banking for 30 years, and when I think about payments, payments were never in the forefront of banks. Banks were busy lending. Banks were busy taking deposits. I, myself, has been a balance sheet specialist for the early parts of my career. So, I became a payment nerd much later or mid-career. Maybe it’s a midlife crisis, but I moved over more towards payments on the last probably 10 years or 12 years of my career. As I said, when you look back in the banking, ages ago, payments was really—payments could be in the technology area who is just helping you with technical customer payment files or exchanges between banks, or managing when there’s a job failure on the technical side of things. Or, the other career path around payments was just in operations. Basically, there were many systems but all the systems did not talk to each other. There are a lot of manual operations. Therefore, lots of females tend to be more on the operation side as opposed to the technical side. You could almost see that a large part of the technical payment technology side was dominated by males, and I’m making a very general comparison here, but operations jobs were females.

Look around now and you could see that, if at all, equal or more participation from women in payments-related services. That’s really, really interesting because I think it’s a bit like women in technology, but women in payments itself is something that has—we have evolved over time. I think women have been much more learned, much more educated, much more willing to take risks in their career, chosen career paths. That helped to be where we are today. The other thing that is really important is the number of new ventures or financial technology company or startups that women do play a key role.

Now, I’m gender neutral around these things because all types of diversity is really, really important. Diversity brings the best of—diversity of thought, in particular, brings the best when people collaborate and it’s essential during—an area like payments which needs a lot of ideation and innovation, and people need to be working together. So, all perspectives are extremely important. If you’re passionate and you want to do something, now there are many more tools and organizations and support groups particularly for women. I do mentor a couple of female talent in the market. They are very, very excited of what payment services and payments combined with technology together is going to create even more, bigger opportunities. So, a whole lot more to see.

Chen: Thank you so much, Nish. That concludes our interview questions. It’s so great to have you with us today.

Dharmaratne: Thank you, Ruby. Thank you for having me. I really enjoyed this conversation.

Chen: Great. Thanks, Nish. Now, back to you, Joe.

Kornik: Thanks, Ruby and Rupesh, and thank you, Nish, for those insights. Thanks for watching the VISION by Protiviti interview. For Nish, Ruby, and Rupesh, I’m Joe Kornik. We’ll see you next time.