There is a clear demand from markets for payment services that offer “speed, convenience, ubiquity, safety and value for money.” This is one of the main findings of a Swift report on global real-time payments landscape, which it refers to specifically as “real-time retail payment systems” (RT-RPS).
The development of the RT-RPS has been growing at different paces in different countries. As the report notes: “The seemingly straightforward process of debiting one bank account and crediting another often takes longer than the physical movement of the goods.” Only 18 countries have ‘live’ RT-RPS systems in place, a further 12 are in the ‘exploring/planning/building’ phase, and the Eurozone countries are ‘exploring’ a pan-European initiative.
Most RT-RPS systems currently live have common characteristics, such as instant clearing confirmation to support instant or near-real-time posting by the banks, full (or very near) 24/7/365 operation and a drive for a richer data standard such as ISO20022, the universal financial industry message scheme – yet different communities make different implementation choices. Swift is busy building a real-time payments system in Australia, which should go live by 2017. It aims to use this experience to develop a replicable solution that could be deployed in a standardised way across multiple markets.
Banks may be starting to lose customers to new sexy apps like Apple Pay. Juliette Kennel, Swift
Thus far, the major push for RT-RPS has come from regulatory reform, which sees faster payments as a way to accelerate economic growth, as it could speed up access to capital and attract foreign investment. This would particularly benefit SMEs who need immediate access to payment.
For the banks, the RT-RPS proposition may seem less attractive, as it bears many costs and an “uncertain revenue potential”, as the Swift report says. The report however invites banks to consider strategic factors fulfilling their commercial needs as incentive to providing RT-RPS, such as customer expectation and responding to competitive threats from new entrants – in short, if banks won’t offer real-time payments, someone else will: “Banks may be starting to lose customers to new sexy apps like Apple Pay” warns Juliette Kennel, Swift’s head of market infrastructures.
The potential of RT-RPS in affecting the payment industry was highlighted in the closing panel at the Swift Business forum in London last week. In looking at the strategies for real-time payments success, a point of concern was the additional operational risk involved in monitoring transactions and screening for sanctions in real-time. Another major challenge would be to turn real-time payments into “a commercially valuable proposition”, said Michael Muller, MD global head of cash management at Barclays, noting how the market is increasingly demanding free services.
The clear winners of a wider RT-RPS adoption would be consumers, panellists agreed, but there are opportunities for banks too, if they manage to innovate.