
Real-time Payments - a digital frontrunner in digital services banking go global
Today's online and mobile channels are so far mainly focused on simple transactions and less on providing
sufficiently actionable information.
At large, new digital capabilities to provide banking customers with a new level of access to their money,
information, insight, advice, and the opportunity to acquire new products and services across its core banking,
payments and digital platforms.
We're now seeing Faster Payments moving into United States of America (USA) and Europe as economy moves into
faster payment. What are some of the key factors, you may ask?
Consumers across the globe are adopting a 24/7 mobile lifestyle, evidenced by the fact that m-Commerce is
growing 10 times faster than e-Commerce.
It is critical that the underlying payments infrastructure is fit for purpose and capable of meeting the
technological demands of overlay services in the digital age.
Using the Faster Payments Service as a blueprint, we expect to see more markets embracing real-time payments
There are some really important key factors that need to be look at when considering how to implement national
and actually cross-border real-time payment services.
Faster Payments Service and Immediate Payments
The Faster Payments Service (FPS) is a person-to-person payments network in the United Kingdom (UK) designed for high volume,
low value payments between personal and business account holders at participating banks.
The "faster" part of the name refers to the reduction in transfer time from 3 days to "immediate" -
a huge improvement on the previous standard for low value payments.
The UK launch its real time faster payment services (FPS) back in May 2008 and
have been some major steps changes in the payment landscape since then. This was innovative for its time, it became a reference for many
other banking markets.
So, when considering how to implement real time payments services, you first of all need to understand and
agree the need for ubiquitous and collaboration.
Competitive payment processing, happens above the rails so to speak but is very important that the rails
themselves are accessible to everybody or at least the majority of all consumer and corporates.
Otherwise, it's very hard to launch services which are favoured by the consumer and usable by the corporates.
Secondary, in this day of age you have to consider interoperability, it's no longer enough to implement
real time payments in your nation.
If you look at Europe, it's going to be a cross-border SEPA services. If you look at some of the Middle Eastern
initiative, they are certainly looking at the cross border payments.
The consumer are actually demands literally to be able to pay any time and anywhere not just in their own country
but the wants to use real time payments and they wants to use their mobile to pay when they are abroad,
Or when they're on holiday or business and you need to take that into consideration.
You need to be very careful about how you consider chess support for payment channels, clearly mobile has come
a long way since faster payments launch in the UK.
And recently successful launch of a payments end service which enable mobile payments from consumer-to-consumer
in real time.
And is one of those situations where again consumer is leading in terms of their expectations - my kids,
they expects to do everything in real time on their mobile phone, and you have to be able to enable that early
on, in order to promote innovations.
And you have to think about what are the channels of the future, because in ten year's time they have to be
paying in ways we could not possibly be thinking of now.
So, you have to think of in an open flexible architecture in terms of solutions.
You need to think about time frames as well as we no longer have the luxury of spending multiple years thinking of
implementing national infrastructure, its need to be done quickly and safely.
So, you need to think - am I going to build from ground up and develop something or am I going to implement solutions
that proven and seen to be scalable and safe.
Singapore's fast service - Fast And Secure Transfers (Fast) - was unveiled by the Association of Banks
in Singapore (ABS) today. It will operate 24 hours a day, seven days a week.
There is an important difference in Fast service in Singapore to UK Faster payments services,
in that we've seen the growth and rise of ISO 20022 as a payment format.
ISO 20022 wasn't really mature when faster payments was launch in UK and has now become the de facto standard
for payments.
Singapore has based their Fast service payments on ISO 20022, which allow them to deliver and launch more complex
and interesting corporate products. Because corporates are now expecting to be transact in ISO 20022 and it position
them well into regional interoperability.
The other important difference is that Faster payments in UK you can push money in real time, so payments are
made in seconds.
So, but in Singapore not only you can push money in real time but you can also pull it, so debit requests
actually went live recently in Singapore.
So, when you considering e-Payments, e-Voicing, Electronic Bill Payments, a corporate can now requests money in
real time along side of sending a electronic bill.
So my telephone bill can now be sent to my mobile with request for payments, you can validate it and make the payment
in real time quick and easy convenience, rather than take that piece of paper you put in a pile and forget.
So, there are important differences with Singapore fast services. There is evidence in some of the products and
services that banks are launching in a competitive space.
Facebook payments is one of those which is launch by the banks and where excited by that level of innovation.
It's kind of obvious definitely that the future is real time payments and is what the consumer wants, and is
what banks and economy is obviously wants.
You may wonder what are the real benefits of real time payments?
The benefits can be look at in a number of ways. First of all there are the general economic benefits that is
gain by the increase in speed of money, the speedy of transactions.
But, ultimately these thing only works if they benefits everybody in the chain of stakeholders, so the consumers
will need wants to use the products and in a long term, not only mobile, watches etc...
And whatever the next big thing that comes along is going to be, will use those channels to transact.
Governments will realize the benefits of real time payments, not only how they make payments but real time
decisioning that goes along with payments.
So, how much is this pension I should be paying? how much is this benefits that I should be paying? How can
I make emergency payments?
So data can be analysed in real time and decisions made in real time and payments made based on that analysis.
Corporates will expects to transact in real time, cross borders, interoperability will not only become regional
but global. With Global schemes, utilizing regional real time payments services.
Mobile Payment with Zapp
enables real-time payments
Mobile payments with Zapp is what VocaLink (the firm behind the tech) in UK hope will help enables
real time payments. VocaLink hope Zapp will become more the a local schemes than just in a UK market.
Five UK lenders (HSBC, First Direct, Nationwide, Santander and Metro Bank) have added a mobile payment
facility called Zapp to their smart phone and tablet apps.
Zapp will allow their customers to pay for goods or services in shops or online without the need for cash or
a credit card.
The maturity of real time payments in the UK is encouraging new customer propositions from innovative
suppliers such as Barclay's pingit, Zapp, PayPal, O2, Ovum, Orange Quick Tap, Moneto, a person-to-business and
person-to-merchant, or possible by any-to-any connections service.
Zapp, a person-to-business and person-to-merchant digital payments initiation service using a real-time
infrastructure, begins to capitalise on the benefits for the economy.
Zapp will enable consumers to benefit from real time payments on their mobile phone banking applications, allowing
secure payments between consumers and merchants.
Zapp will be integrated into the mobile banking applications of participating banks, providing a seamless
real time payment choice to customers as the shop.
Consumers will be able to see their account balances before they pay and choose different accounts to pay from,
thereby staying more in control of their finances.
With Zapp, money moves instantly from a customer account to merchant account.
Looking ahead, in ten years time the payments space will be different as it is today. You can sure that
real time payments will be at the core of it.
Of course payments are international and everyone makes international payments. Yes! remember that historically,
international payments have been card driven.
Whereas if people become use to use their mobile devices to make payments they would be expecting to do same
when they go on a holidays or travelling.
And mobile device coupled with real time will become a very ubiquitous payment methods.
What is real-time payments?
Real-time payments systems mean different things to different people.
The emerging trend over the past decade has been towards low value real-time payments systems,
Which enable an interbank account-to-account payment that is posted and confirmed to the originating
bank within one minute (so the payee receives and can use the value instantly and the payer has
confirmation of the status of the transaction).
Real-time payments can be made using any payment instrument to deliver instant, secure and inexpensive
payments directly between two accounts anywhere in the world.
These payments are low cost and without the complexity of today's environment. This works by having a
direct connection between a biller or retailer and financial institution.
The major variations occur with the frequency of settlement, which can be in real-time or
periodically throughout the day.
Three ways to view
real-time payment systems today
1) Authentication: A promise to pay, well known in the world of retail payments and card transactions
2) Posting: Funds are made available to the beneficiary account in real-time. A synchronous transfer of irrevocable funds
3) Settlement: Instant settlement of outstanding obligations between financial institutions
The bank becomes the central part of the consumer's financial and payments world, creating efficiency, trust and peace of mind
Stakeholders
- Real Time Payment Benefits
Consumers
- Real time access to funds
- Secure access to trusted funding source
- Intuitive, easy to use
- Brand is front and center in the consumer mind
- New revenue streams
Financial Institutions
- Efficient payment process
- Less risk
- Bank account becomes the center of the payments experience
- Lower costs
Retailers
- Less payment risk
- Faster funds availability
- Platform that can be leveraged
Billers
- Lower costs
- Settled funds in real time
- Deeper customer relationships
Governments
- Less payments friction
- Consumer choice
- Less risk from new money pools
Disintermediation payments
Disintermediation payments is a very popular topics at the moment in payments systems - one that rings a lots of
alarm bells for people.
What is the threat of being disintermediated in payments by third party providers or companies?
The threat is increasing on the consumer payments world as we've already seen the like of Paypal, now
Apple Pay will recently starts to take parts in the value chains that traditionally banks provided.
In transaction world, the risks exists as well. The keys for the banks is to look at their business
models and understand where they wants to be and the roles they wants to play.
Banks should really ensure that they have all the necessary infrastructure to supports that business models.
And where they haven't got the necessary infrastructure, they have the choice to either invests or look for
partners to fulfil the delivery of those services.
So Apply pay or Google payments or Facebook Payments or Paypal are not a threat to banking per se, but more
likely to be a leverage partner. It's warfare between the Banks, Card processors and PayPal.
What's next for the faster payments initiative and the threat of disintermediation from third party companies?
Immediate payment on a transaction
Disintermediation payments is the outcome of the disruption opportunity taken place in the payments worldwide which
by accident gives the consumer or the user direct access to financial transaction data information that with no
manual effort required and cutting out of intermediaries in a supply chain, or cutting out the middlemen.
Instead of going through traditional distribution channels, like going to the banks or login which had some
type of intermediate such as a agent, broker, distributor or wholesaler, companies may now deal with every
customer directly, for example via the Internet.
Real time Payment System
The majority of consumers who have used contactless payments are impressed with contactless technology and
wants more with the appetite for real time payment system.
One key reasons is that nowadays the technology permits this. Right? Right.
In order to permit this, it is pushing for usage of real time payment system. As an example, the usage of mobile
device.
Not only a simple mobile device but the very sophisticates mobile device that enable you to do all sorts of stuff.
Buying or surfing internet or checking your banks accounts etc... that push people willing to have all kinds
of access to interactive payment system. Also, the physical supply chain allow and permits this.
When you buy something on the internet and you pay. It is likely that the parcel or the thing you bought will
arrive before the payment reach the seller of the goods you bought.
That is why all of that is pushing for an environment over time for real time payments system. Also, everyone
is looking for an interactive system nowadays because of internet, where everything is easier accessible.
Therefore, everyone really could not understand nowadays why it will take a few hours or few days why it takes
to make a payment.
Even domestic payment should be seen by people especially the one the using this technology as very much
interactive.
Overview of real time payment strategy
They are all more the same. But from technical architecture view point, the real time payment strategy may be
different. Some of them are not really real time payments in terms of settlements.
However, the one being offered in Australia is the real time payments where it have clearing and settlements.
Which have real time clearing and settlements of transaction by transaction, which could move to hour-by-hour of
clearing and settlements.
The payments is not really finalized in real time. The system is more centralized, but
in essence they are looking at the same thing.
Standard will play an important role in all this. Standards are all about data and exchange of data in a
similar way.
And when it comes to interactive payments, or any type of transactions - financial transactions.
Data are more important and rich data are far more more important.
Therefore, moving forward to the standard like ISO 20022 are very much more critical, because
20022 allows for rich data than we have before.
Another important points is that standard enable interoperability, so today you can imagine
having a real time payments faster payment systems you have in the UK.
But, tomorrow you may think that all these payment systems may some way have to be connected with each
other, and therefore,
You need to make sure that from standard point of view, data point of view
what is being exchange is interoperability. That is why standards are clearly very important.
Real time Payments cards enthusiastic given right to refuse cash payment?
Some real time payments cards enthusiastic would wants their governments to help
usher in the long-awaited cashless society by giving restaurants and some shops the option to refuse
notes and coins.
The real time payments enthusiastic would like some selected retailers, including restaurants,
clothing stores and gas stations, would like to disobey the law forcing them to accept cash.
For example, real time payments cards enthusiastic may wants Grocery stores, post offices,
places selling prescription pharmacy drugs, doctors and dentists, would still have to accept physical
money.
Because accepting cash puts a considerable administrative and financial burden on merchant service retailers.
Arguing that it is better, easier and convince for people to use debit cards and other electronic payment options.
As a result, it will make it cheaper and easier for many companies, if in the future they can choose to
receive payment via card or mobile.
Real time Paye Software
Real time Paye Software is a Basic PAYE Tools which is free payroll software from HM Revenue and Customs (HMRC)