Faster Payments: Making Real Time a Reality

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What’s the really hot topic at all the payments conferences at the moment? Faster payments. It is the topic of conversation everywhere and some countries are doing more than just talking– they are making moves to turn it into a reality. The UK has the Faster Payments service, Singapore has G3 and Australia the New Payments Platform, to name a few. Many countries already have domestic real-time systems for high-value payments, though they are yet to facilitate ones for faster low-value payments. We are still a way off from having faster payments in place across the board, across the globe, but we are getting closer.

The U.S. took a big step in this direction recently when the Federal Reserve announced the formation of a taskforce to get faster payments underway. This move really set the wires buzzing.

So what is driving all of this activity? Demand largely. In today’s 24/7 world, the general feeling is that faster payments should have happened already. Given the innovations in global technology, the general consensus is that if there was enough willing on the part of banks and governments, then faster payments would happen a lot faster.

Admittedly, the legacy infrastructure of payment systems was not designed to be scalable and there is the issue of standardising and interoperability across different countries, as this is also part of the ambition of faster payments. These are challenges to overcome. The technology largely exists to make these initiatives into reality and ultimately, it is a matter of time before faster payments is realised globally. The groundswell in demand and expectation will soon bring about a tipping point when banks can hold off no longer.

The ever-burgeoning e-commerce activity, which is 24/7 in nature, is a driving force for quicker settlement times in order to achieve order fulfilment. There is also an increase in the volumes of peer-to-peer lower value online transactions, driven by mobile payment services.

Corporates too are pushing for better payment related services from their banks. They want payments cleared in narrower reliable time frames. Certainly, what is behind this motivation is better visibility on cash at hand, a key concern for the corporate treasurer. Banks benefit too, because there is a potential reduction in risk exposure because of more frequent settlements.

However, it may not be the banks or government taskforces that take this debate to its logical conclusion. There is a strong likelihood that one or more FinTech firms will end up disrupting the traditional banking model of payments, moving the game onto real time. The current availability of new technologies, including the use of public ledger/blockchain that facilitate real-time settlement, means that there are already alternatives to traditional bank settlement services. Real-time payments is not intimidating to these innovators.

It is not a matter of if we will have faster payments, but when and how. That’s what needs to be the focus in the payment conferences.

Accuity helps banks and businesses to instantly find and validate payment codes, improve the certainty of settlement, shorten processing cycles and reduce settlement risk for better rates of straight through processing. The suite of payments solutions from Accuity provide accurate and verified settlement data helping clients to resolve disputes and handle payment exceptions effectively to avoid expensive payment repair and rejection fees.

Next in this blog series:

Post 2. Faster Payments: Establishing Standards

Post 3. Faster Payments: The American Dream

Post 4. Faster Payments: The Challenges