The globalisation of immediate payments – rolling out faster transactions
Kris Kubiena is Consulting International Sales Director at VocaLink.
The way we pay is evolving, with changing consumer attitudes and new technologies combining to usher in a new era of payments and banking, writes Kris Kubiena.
The proliferation of smartphones, for example, has created a society that is locked into the internet whenever and wherever, with constant and immediate access to a huge array of services and 24/7 communication. The subsequent demand for immediacy and convenience has fundamentally changed the expectations customers have of service providers – and this extends to banking and payments. The growth of online and mobile banking has seen reliance on traditional bank branches fall dramatically, with customers instead choosing to conduct their financial affairs on the move and at their own convenience.
In May 2008 the Faster Payments Service was launched in the UK – the largest real time payment system in the world, operating 24 hours a day, 7 days a week. Born from recognition of the need for a faster alternative to the existing ACH processing system, the Faster Payments Service has now been supporting businesses and customers alike with real time bank to bank transfers for five years. The system has played a significant role in influencing consumer attitudes towards payments, making immediate payments the norm. This is evident from the significant growth in immediate payment transactions experienced in the UK – the service has been growing steadily since its launch 5 years ago, with significant year on year growth leading to an overall transaction number of over 2.5 billion since 2008.
Customers and corporates alike have illustrated a clear desire for immediate payments and this phenomenon is not unique to the UK. In the same way that UK customers have been influenced by smartphone ubiquity and the lure of convenient mobile services, the same forces are attracting customers across the globe to immediate payments. It is unsurprising then that the success of Faster Payments in the UK has been noted by other markets. Both the Reserve Bank of Australia and the US Federal Reserve have expressed a wish to introduce faster payments systems, with Australian authorities setting a deadline of 2016 for the implementation of immediate payments. Banks in the ASEAN region and Asia Pac are also showing a desire for payment processing innovation. Singapore in particular, is a driving force for real time payment technology.
The drivers for immediate payments vary from market to market, but generally speaking we see the influence of mobile technology on banks as a key element. The role that mobile devices play in a customer’s relationship with their banking facilities is crucial– for many customers mobile banking might be their only interaction with their bank. What’s more, against a backdrop of economic difficulties, mobile payments represent a strong revenue generator and valuable tool for customer retention. With this in mind, it is perhaps to be expected that banks around the world are pushing for immediate payments. The convenience of a digital payment on the move is somewhat lost if it takes three to five days for the payment to come through.
The growth of online commerce has also had an impact on demand for immediate payments. Gen Y customers, growing up with unlimited access to the Internet and the ‘one-click’ purchases of online shopping, expect immediate payment power. There is also the strong argument that immediate payments greatly benefit SMEs by freeing up cash flow – local banks in Asia Pacific for example, believe real time capabilities coupled with mobile and e-invoicing could be a compelling proposition for their SME community.
Ultimately, immediate payments act as a springboard for innovation – mobile, e-invoicing and e-commerce payment solutions are all enabled by immediate payment systems. At a time when banks around the world are struggling against increased competition from new financial services players, the leading edge gained by banks and other players which embrace immediate payments cannot be underestimated. New market entrants, free of the shackles of complex legacy IT systems, are agile and responsive to consumer demands. If banks are to avoid becoming marginalised in the payments market by these new kids on the block, and maintain hold of potentially valuable revenue sources, they need to step up to the immediate payments table.
The Faster Payments Service in the UK is a success story for immediate payments. Against a difficult economic environment, the service has gone from strength-to-strength, attracting customers and corporates, increasing transaction growth every year and enabling innovative payment solutions. As customers across the globe become ever-more digitally demanding, we expect to see more markets embracing immediate payments, using the Faster Payments Service as the blueprint.
