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Is your Tech ready for Real-time Payments?


Allan Spalding, EMEA Partners Director at Volante Technologies writes for Instapay about the adoption of instant payments and some of the issues involved

Real-time payments schemes are taking off rapidly around the globe, particularly at this time in the US where this is a relatively new area for banks and corporates. The real-time payment movement is largely driven by customer demand for “instant,” as well as pressure from corporates wanting to get value from real-time suppliers. Likewise, buyers want the certainty of funds between themselves in trading activities. Because of this, banks must have the ability to make payments via new methods in order to accommodate consumer demand, better manage cash flow and remain competitive.

Taking a closer look at the US, we currently see two major initiatives taking place – the first is the real-time payments scheme by The Clearing House (TCH) which will support the sending and receiving of credit transfers, requests, remittance advices and messages across the network in real-time in a 24x7x365 processing environment. The second initiative is the Faster Payments Task Force, which is being led by the Federal Reserve. As the US speeds towards real-time payments, with several initiatives happening simultaneously, it’s important to take a view of what is also happening in the UK and Europe. (Editor’s note: See the InstaPay Tracker for more details)

Real-time payments services have been around for many years in the UK, but as the services continue to grow and evolve, big changes are taking place that firms will need to address, particularly from a technological perspective. At the moment, the standard traditionally used in real-time payments is ISO 8583. This, however, is likely to change as new instant payment schemes make use of the ISO 20022 standard in order to align with other banking initiatives based on this messaging standard.

In Europe, the uptake of real-time payments schemes has been somewhat slower than in the UK, as attitudes differ towards this type of service. Many European countries have taken the view of real-time payments being an added service that they can charge the customer for, and as a result there are far less instant payment schemes in operation. However, banks are starting to realise that if they don’t offer these services to their clients, there is a very real risk of losing market share as new firms enter this space and lure their precious customers away.

The European Central Bank is currently working on a standard instant transfer scheme, however, they are not stopping people implementing their own platforms and versions of real-time payments. While in the UK, the ISO 20022 Real-Time Payments Group is working on ISO standards for messages that may be adopted by other countries, or maybe not. So even if each scheme uses the same standard, firms within Europe and the UK will still have to address the technical side of real-time payments in order to be interoperable with the disparate solutions available.

The new real-time payment initiatives require innovative, modular, agile solutions with high degrees of automation that can be deployed rapidly and seamlessly and that won’t require a complete systems overhaul. If banks are successful at addressing these challenges, their end users will be able to realise the fundamental benefit of real-time payments anytime, anywhere and to anyone, and banks will remain competitive in an increasingly fast-moving, fragmented market.

Author: Art Division