The concept of real-time payments is something that the UK has become increasingly familiar with over the last six years. This is thanks to the implementation of the Faster Payments Service in 2008, which has successfully put the bank account back at the heart of the payments process.
Demand for the Faster Payments Service in the UK has grown, with more than one billion payments securely processed in 2013, as more consumers and businesses appreciate the benefits of real-time payments. As a result of its success, other countries have been prompted to review their processes and adopt new payment methods.
At present, global economic communities find themselves at varying levels of development. Some parts of the world are spearheading change and leading the way in real-time payments, while others are falling behind.
The UK in particular is advanced in terms of its innovative front-end payments initiation and central real-time infrastructure for low-value payments. This has helped to meet the needs of consumers, merchants, businesses and government, while generating lucrative revenues for commercial banks.
Elsewhere, South Korea is advanced in terms of maturity of mobile-initiated payments services, while countries in the Middle East, which have a strong reputation for innovation, still have some way to go to overcome a fragmented payments ecosystem, with high cash volumes, some closed-loop payments innovations and a number of legacy payment infrastructures. Australia is looking to implement a new payments platform and the United States recently announced it is in the industry consultation phase.
As consumers across the globe adopt a 24/7 mobile lifestyle, it is critical that the underlying payments infrastructure is capable of meeting the technological demands of the digital age
As more countries share their experiences and learning, it is becoming increasingly clear that regulatory, association or central-bank driven initiatives are required to ensure that payment infrastructures and services meet end-user needs in a cost-effective manner, striking the balance between industry collaboration and competition.
In order to be successful, improvements are also required in central payment infrastructures and access to these for all users, predominately using digital technologies.
CREATING THE BLUEPRINT
VocaLink, the UK-based international payment systems provider that developed the UK’s Faster Payments Service, believes that countries looking to adopt a real-time payments solution should, in the first instance, look to implement a payments roadmap to provide a clear guide on how they plan to offer payment services to consumers, businesses, merchants and government.
In addition, any plan should ensure that the core principles of a payments system are adhered to, namely that they are convenient, secure, 24/7, cost effective and electronic. There should also be consideration given to initiatives that provide an alternative to cash and cheque usage.
Creating a single blueprint for implementing such a programme is not easy, but we can look at economies that have introduced such systems and learn from their experiences, for example Singapore.
The Monetary Authority of Singapore started a process to introduce a real-time domestic payments system similar to that of the UK’s Faster Payments Service, which would meet the needs of the digital age and shed its reliance on paper.
VocaLink, in partnership with BCS Information Systems (BCSIS), the Singapore-based leading payments solution provider, were chosen to overhaul the payments landscape in Singapore by supplying a new and innovative real-time payments platform, known as FAST.
Keen to deliver rapid change to the payments landscape, Singapore’s implementation of such a system was mapped out against a very tight deadline. There were also multiple stakeholders and sets of requirements in the Singaporean project, including 24/7 service availability and the adoption of the ISO 20022 messaging standard.
The latter was particularly important as it demonstrated a tacit acceptance that the payments standard is becoming global, providing a solid foundation to drive innovation, including customer-centric product innovation. Just as importantly, this adoption of an international messaging standard provides a platform with regional interoperability.
The project has been an overwhelming success due to meticulous planning, careful co-ordination and regular communication with the many stakeholders, including the central payments provider and individual members of the financial services community. The new payments system received the backing of the majority of the leading financial institutions in Singapore – 14 banks in total – and was implemented in under two years.
Looking back on the project, Ricky Lim, managing director at BCSIS, comments: “It is encouraging to see that so many transactions have already been processed using the technology. There is also enormous scope to grow digital services within the parameters of ISO 20022 which FAST uses.”
Singapore has become the new benchmark, a blueprint for how real-time payment systems such as FAST can, and should, be implemented around the world.
WHAT DOES THE FUTURE LOOK LIKE?
As demand increases and global economies explore the benefits of real-time, many will look to Singapore as an example of how to effectively implement a modern payment system.
However, there is still much more that can be done, such as exploring how economies and their individual real-time payment systems can communicate with each other to speed up global transactions.
A correlation between the development of payment infrastructures and personal access to technology is also a key consideration. Mobile technology continues to develop at a rapid pace, creating consumer demand for alternative ways to pay. Maintaining this close association will have its challenges, but also offers long-term advantages.
So, as consumers across the globe adopt a 24/7 mobile lifestyle, evidenced by the fact that m-commerce is growing ten 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 the digital age. Using the Faster Payments Service and FAST as blueprints, we expect to see more markets embracing real-time payments.
To find out more, please contact Deborah Souter, head of external communications at VocaLink: 0870 920 8651 or Deborah.Souter@vocalink.com