PayTo: A comprehensive guide to PayTo payments

Whether you need to increase successful payments, accelerate payment speed or reduce payment fees, PayTo is a powerful payment solution for modern businesses.

What is PayTo?

PayTo is an exciting payments modernisation solution that allows you to set up agreements with your customers to pull payments directly from their participating bank account. 

It’s faster and provides richer data and better payment visibility than direct debit and other payment types, simplifying reconciliations. It increases successful payments and the speed of payments. Plus, PayTo can validate funds are available before processing payments, so you’ll avoid a payment submission charge. And the account details won’t expire periodically, like a credit card does.

PayTo is a relatively new payment overlay built into the Australian New Payments Platform (NPP). It can be a modern replacement for BECS Direct Debit rail. 

How does PayTo work?

PayTo streamlines payments in four steps:

• A PayTo agreement (sometimes called a mandate) is created and authorised by your customer in their participating banking platform. The agreement defines the terms - value, frequency and any limits on payments. 

• Once the agreement is in place, you can request debits (‘pull payments’).

• Payments are handled via NPP, usually in near real time.

• Your customer can view, manage, pause and cancel agreements in their banking platform.

Who can use PayTo? 

Prerequisites for using PayTo

To use PayTo you’ll need to:

• Have an Australian bank account

• Have an ABN - this will be used to identify your business in NPP and in PayTo agreements with customers

• Partner with a Payments Service Provider (PSP) or bank that supports PayTo compliant onboarding, consent capture, disclosure and audit trails. GoCardless is a licensed Payment Service Provider and is fully integrated with the NPP.

Read more about prerequisites on the PayTo University.

What are the benefits of using PayTo for your business?

PayTo is a next generation payments platform, it’s worthwhile exploring how it can improve your business processes, cash flow and customer experience.

Businesses who use PayTo often benefit from: 

• Reduction in failed payments Because PayTo debits a bank account and funds can be validated in real time before initiating the debit, payments payments are more likely to be successful. As credit cards aren’t used there is much lower risk of details expiring. 

• Faster payments Payments appear in your account in near real-time, improving cash flow.

• Better data PayTo syncs richer data, so you can reconcile payments easily.

• Lower payment costs PayTo payments attract lower costs compared with credit cards and are less likely to be dishonoured and incur payment failure fees. 

• Enhanced customer experience Customers can easily set up PayTo agreements, with less effort than setting up direct debit, and see and control their PayTo agreements in their participating banking platform. Fraud risk is lowered and payments are made swiftly, allowing them to keep track of their funds.  

Is PayTo safe?

PayTo is as safe or more safe than other payment types. Compared with direct debit and credit card payments, PayTo reduces risks for your business and your customers. 

Because customers authorise PayTo agreements within their participating banking platform, which already has robust security mechanisms embedded, it’s less likely that fraudulent transaction attempts are successful. Your business doesn’t need to store sensitive account details as the NPP manages agreements. The customer will complete a one-off authorisation with your business and receive a notification from their bank for approval.

As with any digital payment platform, there are still bad actors who can attempt fraud. You can help decrease the likelihood of fraudulent attacks being successful. Here are some tips: 

• Agreement design and management Limit the terms of your PayTo agreements to keep frequency, limits and date ranges appropriate. Ensure you have strong access controls and audit logs for changes, pauses and cancellations to agreements. Reduce the number of people within your organisation who can process payments. Use secure APIs and consider having third-party security audits. Have a protocol for suspected fraudulent transactions. 

• Appropriate bank support If you notice banks have poor UX, or don’t support full PayTo flows, assess what risk this presents and consider recommending customers use an alternate bank. 

• Customer onboarding and education Help customers understand when you’re sending an approval request - you could send an email or SMS verifying the business name which will be included on the request. You might include education for users about phishing in other communications, reminding them of the risks of phishing and scams, so they take care to only provide authorisation for legitimate payments, and decline and alert their bank of any unexpected requests for authorisation. 

• Monitor for anomalies Leverage machine learning or rule-based detection to identify unusual patterns, for example many new agreements from the same user, users from an unusual region or unusual volumes of transactions. 

• Select a reliable partner Use a partner that enables strong authentication, encryption and access controls. Look for security certifications and proactive improvements of APIs and other protections. GoCardless Protect+ adds an additional layer of protection. 

PayTo integration roadmap

Ready to implement PayTo? Here are six steps to get started.

1. Scope

Take a look at the payments you currently receive and any you anticipate receiving in future. Document: 

• Which payments you would move to PayTo - these might include subscriptions, regular invoices and ad-hoc fees

• Estimate volumes, value and current decline rates

• Estimate which customers have banks that support PayTo

• Consider which other payment types you’ll continue to support and for how long

2. Select a payments partner

A payments partner like GoCardless can support you in your transition to PayTo and provide robust infrastructure. When evaluating platforms, consider:

• Which banks they connect to

• Onboarding timelines and API maturity

• Security certifications

• Fees and support for retries, and whether they have intelligent retry protocols like GoCardless Success+

• Platform support and reliability.

3. Complete technical integration

Once you’ve outlined scope and selected a partner like GoCardless, you can start technical integration.

• Implement APIs so you can create agreements, query status, initiate pull requests and receive real-time notifications

• Implement logic to streamline reconciliations, capture incoming payments and handle errors 

• Document error handling. Map out how you’ll approach insufficient funds, out of scope values, revoked agreements and error codes

• Conduct sandbox testing with banks popular with your customers.

4. Soft launch

Now it’s time to start testing with customers

• Validate your PayTo processes with a small test group. Monitor failure rates and collect customer feedback. You may wish to compare failure/success of payments with existing (non PayTo) payments

• Monitor metrics including agreement acceptance, transaction failure, customer support impact, speed of payment and cost per transaction.

5. Invite all customers to use PayTo

You might choose to invite all of your existing customers to use PayTo, or just customers who use high-cost or high-failure-rate payment types.

• Share the benefits of PayTo with your customers: better visibility and control; faster payments; lower fraud risk; less paperwork compared to direct debit. Invite them to authorise with PayTo.

• Maintain direct debit and other legacy payment methods until customers have migrated and any bugs in your processes have been ironed out.

6. Monitor and optimise

• Monitor key metrics and optimise processes as required

• Regularly audit and delete expired or inactive agreements

• Monitor customer support queries and make appropriate customer communications, technical or support modifications

• Stay up to date with PayTo and NPP rules, new banks offering PayTo and regulatory updates.

What’s next? PayTo in the evolving Australian payment landscape

Australian payment regulators recommend migrating to NPP and real time payments. Although direct debit payments remain popular, new regulations and changes strongly encourage adoption of more secure solutions like PayTo, PayTo and Osko.

Here’s a high-level overview of payment types and the features they support.

Apart from the regulatory preference for PayTo, the cost savings and anti-fraud benefits are compelling to most businesses. Are you ready to migrate to PayTo or optimise your processes?

FAQs

What is NAB PayTo?

NAB PayTo is the National Australia Bank’s offering in the NAB app and NAB Internet Banking for customers and businesses to use PayTo.

What’s the difference between PayTo and PayID?

At a high level, PayID is a simple addressing system to transfer funds, whilst PayTo is a regulator-encouraged authorised payment system with agreements for ad-hoc or regular ongoing payments.

What is Amazon PayTo?

Amazon Australia offers PayTo for cardless checkout.

What is Westpac PayTo?

Westpac PayTo is the Westpac bank’s PayTo offering in the bank’s platforms.

What is Stripe PayTo?

Stripe PayTo refers to Stripe’s offer of PayTo as a payment method.

Is there a PayTo API?

Yes, for more information take a look at our GoCardless Developer Docs.

What is ING PayTo?

ING PayTo refers to ING’s offering to use PayTo in their platform.

What is ANZ PayTo?

ANZ PayTo refers to ANZ’s offering to use PayTo in their platform.

What is CBA PayTo?

CBA or CommBank PayTo refers to the Commonwealth Bank of Australia’s offering to use PayTo in their platform.

How much will PayTo cost?

If you use GoCardless on a Standard, Advanced, or Pro plan, PayTo transactions are included in the transaction fee (which varies depending on the plan you’re on). Depending on your location, PayTo may be charged as an international payment. If you are on Custom Pricing, please get in touch with us at hello@gocardless.com or reach out to your Customer Success Manager.

How long does it take for a payment to settle in my bank account?

PayTo settlement times are up to eight times faster than traditional BECS payments. One main advantage of PayTo is that it offers almost real-time payment confirmation. This means that if a payment is confirmed before 8-10 pm AU time, (depending on the time of year) on a given day between Monday-Friday, funds will be received the next business day. If a payment is confirmed after this, funds will be received two business days later.

What is the maximum limit per transaction when using PayTo?

The maximum limit is $25,000 per transaction. GoCardless customers can reach out to help@gocardless.com so that we can assist.

Will my customers incur any fees when completing a payment through PayTo?

Unlike credit card payments, there are no transaction fees for consumers paying via PayTo.

Is PayTo the same as Osko?

PayTo is often summarised as ‘Osko-but-for-business’ and that’s partially true. The difference is Osko is an infrastructure that enables an individual to send money to another individual without the need for a financial intermediary. This is a push-payment. With PayTo, the infrastructure allows a merchant to ‘pull’ money from an account with the account-holder’s consent.

Does my organisation need to be connected directly to NPP in order to use PayTo?

You don’t need direct access to the New Payments Platform in order to use PayTo. All you need is an account at one of the many participating organisations that offer NPP services to their clients, such as GoCardless.

What is a PayTo agreement?

As defined in AusPay+ PayTo Service Overview, 2021 a PayTo Agreement is:

“An agreement between a payer (your customer) and a business (the payee) that defines the terms under which the business can initiate payments from the payer’s bank account.”

It’s stored and managed centrally within the NPP and can be viewed, paused, or cancelled by the customer in their bank’s app or online banking — adding transparency and control.

It details: 

• Who the payer is including their account details

• Who the payee is - your business or PSP details

• Purpose - for example subscription, invoice payment, donation etc

• Authorised amount including whether it’s fixed or variable and a maximum value per payment

• Frequency or schedule 

• Start and end dates

• Notifications - outlining whether the payer is notified of changes or new payments

• Authorisation record - digital signature, audit trail and time stamps.