My earlier blog on the top 5 payments trends in 2015 listed the second key trend over the past year as related to real-time payments. It’s worth understanding why and where we are in the process:
The move to faster payments had been going on for over a decade with the development of the high-value payments system in Mexico and the UK Faster Payments scheme. It’s safe to say that the UK system wasn’t driven by customer demand for faster transactions and all the use cases supported by them, but by the regulatory need to eradicate “float” on ACH payments. It’s therefore good to see that recent immediate payment schemes are going back to understand the benefits to customers.
There is now certainly customer demand to make payments quickly. Fuelled by the rise in internet and smartphone usage, the requirement to make a payment as quickly as you can make an internet transaction has grown in importance. Australia the USA, Sri-Lanka and Europe have all taken steps forward with their faster or immediate payments project this year. The US in particular has set up a working group to understand the needs and challenges for all stakeholders to move to immediate payments.
One particular issue has arisen with some earlier systems, including UK Faster Payments and PRIEURO: historically systems that have been reliant on deferred settlement models have inherently been assessed as less stable in the case of failure of a bank. Some countries, such as Australia, have therefore now opted for their instant payment schemes to settle each transaction in real time in a similar way to that used by TARGET2 and CHAPS. In the UK where the Faster Payments Scheme has been in operation for a number of years, this issue has been tackled by requiring funding of transactions before they are accepted by the system. It’s clear that the new schemes seem to be quite different and there will therefore not be a common set of standards
As these projects move forwards it will be interesting to see how the different approaches develop and whether an overall model for best practice and set of standards can be established. But there is hope: at least all the new schemes plan to use ISO20022 XML.